Tribunal Cancels Penalty for Non-Compliance with Tax Notice

The Tribunal set aside the penalty imposed under section 271(1)(b) of the Income Tax Act on the assessee for non-compliance of a statutory notice. The Tribunal emphasized the assessee's cooperation during the assessment process and considered the reasonable grounds for non-compliance, ultimately canceling the penalty. The decision highlighted that subsequent compliance during assessment proceedings should be viewed favorably, leading to the allowance of the assessee's appeal.

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Issues:
Appeal against order under section 271(1)(b) of the Income Tax Act, 1961 for non-compliance of statutory notice.

Detailed Analysis:
1. Issue of Non-Compliance Penalty:
The assessee appealed against the order confirming the penalty imposed under section 271(1)(b) for alleged non-compliance of a statutory notice. The AO initiated penalty proceedings due to the non-compliance of a notice issued under section 142(1) dated 18.9.2017. The assessee argued that despite cooperating during the assessment proceedings, the time given for compliance with the notice was insufficient. The AO imposed a penalty of Rs. 10,000 under section 271(1)(b) due to the non-compliance. The assessee contended that the administrative staff was occupied with tax audit report requirements, making it challenging to comply within the short notice period.

2. Assessee's Submission and AO's Assessment:
The assessee demonstrated a detailed chart showing the issuance of notices and the time provided for compliance. It was highlighted that the assessment was completed under section 143(3) with the assessee's cooperation evident from the assessment order itself. The AO acknowledged the cooperation of the assessee during the assessment proceedings. The assessee argued that the penalty under section 271(1)(b) was unwarranted as there was no deliberate non-compliance, and compliance was eventually achieved during the assessment process.

3. Tribunal's Decision and Legal Interpretation:
The Tribunal considered the submissions of both parties and reviewed the orders of the Revenue authorities. It noted that the assessment was finalized under section 143(3) with the assessee's full cooperation. The Tribunal observed that the assessee had reasonable grounds for the non-compliance of the notice, especially considering the short time provided for compliance. Referring to previous Tribunal decisions, it was established that subsequent compliance during assessment proceedings, leading to finalization under section 143(3), should be considered as good compliance. The Tribunal concluded that the penalty under section 271(1)(b) should not be imposed merely on technical grounds, especially when the assessee eventually complied with the requirements.

4. Final Verdict and Outcome:
The Tribunal set aside the order of the ld.CIT(A) and canceled the penalty imposed under section 271(1)(b) on the assessee. The appeal of the assessee was allowed, emphasizing that the reasonable causes for non-compliance warranted a lenient view, especially considering the subsequent compliance and cooperation during the assessment process. The decision was pronounced in court on 2nd July 2021.

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