Tribunal overturns penalty for tax non-compliance citing reasonable cause

The Tribunal allowed the appellant's appeal, setting aside the penalty imposed under section 272A(1)(d) of the Income Tax Act for non-compliance with a notice under section 142(1). The Tribunal found that the appellant had reasonable cause for the delay in responding to the electronic notice due to minimal business activities during the transition to e-assessment in 2019. The appellant cooperated promptly upon becoming aware of the assessment proceedings, leading to the completion of the assessment under section 143(3). Consequently, the penalty was deemed unsustainable, and the Tribunal directed its deletion by the Assessing Officer.

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Issues:
Levy of penalty under section 272A(1)(d) of the Income Tax Act, 1961 for non-compliance to notice under section 142(1) of the Act for Assessment Year 2017-18.

Analysis:
1. The appellant challenged the penalty imposed for non-compliance with a notice issued under section 142(1) of the Income Tax Act, 1961. The appellant argued that the notice was served electronically during a period when the company was minimally staffed and not actively engaged in business operations. The appellant contended that they were unaware of the electronic notices due to the transition to e-assessment in 2019. The appellant promptly responded to the notice upon becoming aware of it, engaging their Chartered Accountant and providing the required information to the Assessing Officer, leading to the completion of the assessment under section 143(3) of the Act. The appellant asserted that the non-compliance was not deliberate but due to genuine reasons. The appellant also relied on a Tribunal decision to support their case.

2. The Department, represented by Dr. P. Daniel, argued that the appellant deliberately failed to appear before the Assessing Officer and that the explanations provided for non-appearance were an afterthought, as no such explanation was given earlier. The Department contested the appellant's claim of unawareness of the electronic notices, emphasizing the lack of explanation for non-compliance before the Assessing Officer.

3. The Tribunal considered both sides' submissions and noted that the penalty was imposed for non-compliance with the notice under section 142(1) of the Act, which was served electronically. Given the circumstances of the transition to e-assessment in 2019 and the appellant's minimal business activities during that time, the Tribunal found that the appellant had shown a reasonable cause for not responding to the initial notice promptly. The Tribunal highlighted that the appellant had cooperated after becoming aware of the assessment proceedings, appearing before the Assessing Officer and providing the necessary details, leading to the assessment order under section 143(3) of the Act. The Tribunal disagreed with the CIT(A)'s rejection of the appellant's explanation, concluding that the non-appearance was not deliberate, especially considering the shift to digital modes in 2019. Consequently, the Tribunal directed the Assessing Officer to delete the penalty, deeming it unsustainable.

4. In conclusion, the Tribunal set aside the impugned order and allowed the appeal by the assessee, emphasizing that the penalty under section 272A(1)(d) of the Act was unwarranted given the circumstances and the appellant's actions upon becoming aware of the assessment proceedings.

Judgment: The impugned order was set aside, and the appeal by the assessee was allowed.

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