2023 (1) TMI 911 - AT - Income Tax

Penalty under Section 271(1)(b) set aside for non-compliance with notices. Appellant's valid reasons considered.

Sh. Sangram Ram Versus ITO, Ward-1 (1), Bikaner

The Tribunal set aside the penalty imposed under section 271(1)(b) for non-compliance with notices issued under section 142(1) for the assessment years ... Penalty u/s 271(1)(c) - non compliance of notices u/s 142(1) - HELD THAT:- Provisions of Section 271(1)(b) can be invoked only for non compliance of notice u/s 115WD (2) or Section 115WE(2) or Section 142(1) or 143(2) or directions issued Under section 142(2A) of the Act. Therefore, other than the default committed by the assessee specified in clause (b) of section 271(1) the non compliance to the other notices or directions would not attract the penalty Under section 271(1)(b) of the Act. Further, we perused the documentary evidence of the assessee’s reply notices on 14.06.2022, 20.06.2022 and 04.08.2022 for requesting to treat as compliance of reply of notice in which there was a reasonable cause to treat. In our considered opinion, that the assessee was served with the notices issued by the AO and subsequently reply of notices were sent by the assessee is also on record. Reasons explained by the assessee were bonafide and reasonable before the CIT (A) where the ld. CIT(A) has not taken into consideration. We set aside the order passed by ld. CIT(A) and the penalty imposed Under section 271(1)(b) of the Act for non compliance of Section 142(1) is deleted. The appeal of the assessee is allowed. Issues:1. Levy of penalty under section 271(1)(b) of the IT Act.2. Proper initiation of penalty proceedings.3. Validity of penalty notice.4. Excessive penalty amount.5. Reasonable cause for non-compliance.6. Interpretation of penalty provisions.7. Compliance with notice requirements.Issue 1: Levy of Penalty under Section 271(1)(b) of the IT Act:The appellant challenged the levy of penalty of Rs.10,000 under section 271(1)(b) of the IT Act for non-compliance with notices issued under section 142(1). The AO issued multiple notices, but the appellant failed to respond, leading to the penalty imposition. The CIT(A) upheld the penalty, noting that despite various notices, the appellant did not respond, except for requesting to keep the penalty proceedings in abeyance due to an appeal against the assessment order. However, the Tribunal found that the appellant's replies to the notices, requesting compliance and citing reasonable causes, were on record. The Tribunal considered the bonafide and reasonable reasons provided by the appellant, which the CIT(A) did not adequately address. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the penalty imposed under section 271(1)(b) for non-compliance with section 142(1).Issue 2: Proper Initiation of Penalty Proceedings:The appellant contended that the penalty was improperly initiated, lacking proper initiation and notice. The AO had issued notices under section 142(1) for which the appellant failed to respond, leading to the penalty imposition. The Tribunal, after considering the appellant's responses requesting compliance and citing reasonable causes, found that the initiation of penalty proceedings was proper. The Tribunal emphasized that the appellant's responses to the notices were on record, indicating a reasonable cause for non-compliance, which the CIT(A) did not adequately consider. Therefore, the Tribunal set aside the CIT(A)'s order and deleted the penalty imposed under section 271(1)(b).Issue 3: Validity of Penalty Notice:The appellant raised concerns about the validity of the penalty notice, arguing that it was not proper. The AO issued multiple notices under section 142(1), to which the appellant did not respond, resulting in the penalty imposition. The Tribunal, upon reviewing the appellant's responses requesting compliance and citing reasonable causes, found that the penalty notice was valid. The Tribunal noted that the appellant's replies to the notices were on record, demonstrating a reasonable cause for non-compliance, which the CIT(A) failed to adequately address. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the penalty imposed under section 271(1)(b) for non-compliance with section 142(1).Issue 4: Excessive Penalty Amount:The appellant argued that the penalty amount imposed was excessive and high. The AO levied a penalty of Rs.10,000 under section 271(1)(b) for non-compliance with notices issued under section 142(1). The Tribunal, after considering the appellant's responses requesting compliance and citing reasonable causes, found that the penalty amount was not excessive. The Tribunal emphasized that the appellant's responses to the notices were on record, indicating a reasonable cause for non-compliance, which the CIT(A) did not adequately consider. Therefore, the Tribunal set aside the CIT(A)'s order and deleted the penalty imposed under section 271(1)(b).Issue 5: Reasonable Cause for Non-Compliance:The appellant contended that they were prevented by a reasonable cause for non-compliance with the notices. The Tribunal, after reviewing the appellant's responses requesting compliance and citing reasonable causes, found that there was indeed a reasonable cause for the non-compliance. The Tribunal noted that the appellant's replies to the notices were on record, demonstrating a valid reason for non-compliance, which the CIT(A) did not adequately address. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the penalty imposed under section 271(1)(b) for non-compliance with section 142(1).Issue 6: Interpretation of Penalty Provisions:The Tribunal interpreted the penalty provisions under section 271(1)(b) of the IT Act concerning non-compliance with notices issued under section 142(1). The Tribunal considered the appellant's responses requesting compliance and citing reasonable causes, which were on record. The Tribunal found that the appellant had provided valid reasons for non-compliance, which the CIT(A) did not adequately consider. Consequently, the Tribunal set aside the CIT(A)'s order and deleted the penalty imposed under section 271(1)(b) for non-compliance with section 142(1).Issue 7: Compliance with Notice Requirements:The appellant's compliance with the notice requirements under section 142(1) was a crucial aspect of the case. The AO issued multiple notices, and the appellant responded by requesting compliance and citing reasonable causes for non-compliance. The Tribunal found that the appellant's responses were on record, indicating a reasonable cause for non-compliance, which the CIT(A) did not adequately address. Therefore, the Tribunal set aside the CIT(A)'s order and deleted the penalty imposed under section 271(1)(b) for non-compliance with section 142(1).In conclusion, the Tribunal allowed the appeals of the assessee, setting aside the penalty imposed under section 271(1)(b) for non-compliance with notices issued under section 142(1) for the assessment years 2010-11 and 2012-13. The Tribunal emphasized the appellant's valid reasons for non-compliance and the necessity to consider reasonable causes in penalty proceedings.