2020 (12) TMI 82 - AT - Income Tax

Income Tax Tribunal Overturns Penalty for Late Assessment, Emphasizes Jurisdiction Limits

The Tribunal found the penalty imposed under section 271(1)(b) of the Income Tax Act for assessment years 2012-13 and 2013-14 unnecessary. It was held ... Penalty u/s 271(1)(b) - non-compliance to statutory notices - HELD THAT:- Default of non-attendance to notices was not the subject-matter in the quantum appeal and it in no way depended upon the outcome in the appeal. The penalty depends upon whether the default was willful or not. Therefore, we are of the view that the ratio of the case of Hissaria Bros. [2006 (7) TMI 163 - RAJASTHAN HIGH COURT] will be applicable in this case also. Recording of satisfaction - It may be mentioned that mere initiation of penalty does not amount to satisfaction as held in the case of CIT v. Ram Commercial Enterprises Ltd. [1998 (10) TMI 13 - DELHI HIGH COURT]. In absence of recording of the satisfaction in the assessment order, mere initiation of penalty will not confer jurisdiction on the AO to levy the penalty. The order was passed under s. 143(3) and not under s. 144 of the Act. This means that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was willful. See AKHIL BHARTIYA PRATHMIK SHIKSHAK SANGH BHAWAN TRUST. VERSUS ASSISTANT DIRECTOR OF INCOME-TAX. [2007 (8) TMI 386 - ITAT DELHI-G] - Decided in favour of assessee. Issues:Challenge to penalty under section 271(1)(b) of the Income Tax Act for assessment years 2012-13 and 2013-14.Analysis:1. Issue of Penalty Imposition:The appellant challenged the penalty imposed under section 271(1)(b) of the Income Tax Act for the assessment years 2012-13 and 2013-14. The Coordinate Bench had previously observed that penalties for non-compliance with statutory notices were not linked with assessment proceedings and were independent. The High Court distinguished between clauses (a) and (c) of sub-section (1) of section 275, stating that the penalty levy is not dependent on the findings of appellate authorities under clause (a). The penalty depends on whether the default was willful or not. It was held that the penalty order should have been passed on or before a specific date, failing which the levy would become barred by limitation.2. Recording of Satisfaction:The judgment emphasized that mere initiation of a penalty does not indicate satisfaction. The absence of recorded satisfaction in the assessment order means that the initiation of the penalty does not confer jurisdiction on the Assessing Officer (AO) to levy the penalty. The order was passed under section 143(3) and not under section 144, indicating that subsequent compliance in the assessment proceedings was considered good compliance, and earlier defaults were ignored. This led to the conclusion that there was no reason to believe the default was willful.3. Decision and Conclusion:The Tribunal found that the learned CIT(A) was not correct in upholding the penalty levy. The appeal was allowed, and the penalty was deemed unnecessary based on the facts of the case and the legal principles discussed. The Coordinate Bench decision in a similar case was followed to provide relief to the assessee. The appeals filed by the assessee were allowed, and the impugned penalty was set aside.In conclusion, the Tribunal analyzed the issues related to the penalty imposition under section 271(1)(b) of the Income Tax Act thoroughly, considering legal precedents and principles. The judgment highlighted the importance of recording satisfaction for penalty imposition and the distinction between penalties linked with assessment proceedings and those that are independent. The decision ultimately favored the appellant, setting aside the penalty based on the specific circumstances and legal interpretations provided.