2023 (2) TMI 1089 - AT - Income Tax

Assessee appeals successful, penalties deleted for non-compliance in assessment years. Proper recording crucial for fair assessments.

The Tribunal allowed all appeals of the assessee, directing the deletion of penalties for non-compliance in various assessment years. The Tribunal ... Penalty under Section 271(1)(b) - penalty under Section 272A(1)(d) - compliance with notice under Section 142(1) - assessment under Section 143(3) read with Section 153A - subsequent compliance v. earlier default - absence of recorded satisfaction in assessment not a prerequisite for levy of penaltyPenalty under Section 271(1)(b) - compliance with notice under Section 142(1) - assessment under Section 143(3) read with Section 153A - subsequent compliance v. earlier default - Sustainability of penalty under Section 271(1)(b) for non compliance with notice under Section 142(1) where assessment was completed under Section 143(3) read with Section 153A accepting returned income. - HELD THAT: - The Tribunal found that the assessment for AY 2013 14 was completed on 30/09/2021 under Section 143(3) read with Section 153A accepting the returned income without any variation. Although a penalty order dated 17/02/2021 was levied earlier for alleged non compliance with notice dated 03/02/2021, the assessment record itself records that the assessee furnished replies on e proceedings and there is no reference in the assessment order to a continuing non compliance. Reliance was placed on coordinate decisions holding that where the assessing officer passes an assessment under Section 143(3) (and not under Section 144), subsequent compliance in assessment proceedings is treated as good compliance and earlier defaults may be ignored for levy of penalty under Section 271(1)(b). Applying that principle, and noting the internal inconsistency in the assessing officer's orders (recording compliance yet levying penalty for the same notice), the Tribunal concluded that subsequent compliance made the penalty unsustainable and directed deletion of the penalty. [Paras 9, 10, 11]Penalty under Section 271(1)(b) for AY 2013 14 is deleted; appeal allowed.Penalty under Section 271(1)(b) - subsequent compliance v. earlier default - assessment under Section 143(3) read with Section 153A - Applicability of the same reasoning to penalties under Section 271(1)(b) for AYs 2014 15 to 2016 17 where facts are identical. - HELD THAT: - The Tribunal observed that the facts and reasoning in AY 2013 14 are identical to AYs 2014 15 to 2016 17, namely assessment completed under Section 143(3) r.w.s. 153A accepting returned income and penalty levied for alleged non compliance. Applying the precedent and the lead case finding, the Tribunal directed deletion of the penalties in these assessment years as well. [Paras 12]Penalties under Section 271(1)(b) for AYs 2014 15 to 2016 17 are deleted; appeals allowed.Penalty under Section 272A(1)(d) - pari materia with penalty under Section 271(1)(b) - consistency in treatment of penalties - Sustainability of penalties under Section 272A(1)(d) for AYs 2017 18 to 2019 20 in light of the findings on penalties under Section 271(1)(b). - HELD THAT: - The Tribunal noted that provisions of Section 272A(1)(d) are pari materia with Section 271(1)(b). In the assessment orders for AYs 2017 18 to 2019 20 the assessing officer allegedly levied penalty for non compliance of a notice dated 30/01/2021, but no such notice is referred in the assessment order. Applying the principle of consistency and the lead case conclusion that subsequent compliance accepted in assessment under Section 143(3) renders earlier defaults insufficient to sustain penalty, the Tribunal deleted the penalties under Section 272A(1)(d) for these years as well. [Paras 13]Penalties under Section 272A(1)(d) for AYs 2017 18 to 2019 20 are deleted; appeals allowed.Final Conclusion: All appeals for AY 2013 14 to AY 2019 20 are allowed and the impugned penalties under Sections 271(1)(b) and 272A(1)(d) are deleted, the Tribunal applying the principle that assessment completed under Section 143(3) read with Section 153A accepting returned income constitutes sufficient subsequent compliance to render the earlier defaults unsustainable as a basis for penalty. Issues:- Validity of penalty under Section 271(1)(b) for AY 2013-14 to 2016-17- Validity of penalty under Section 272A(1)(d) for AY 2017-18 to 2019-20Analysis:Validity of penalty under Section 271(1)(b) for AY 2013-14 to 2016-17:The appellant challenged the penalty levied under Section 271(1)(b) for non-compliance of a notice under Section 142(1) of the Income Tax Act. The Assessing Officer initiated the penalty citing non-compliance with the notice, leading to the appellant filing an appeal before the ld. CIT(A). The ld. CIT(A) upheld the penalty, considering the appellant a habitual defaulter. However, the appellant argued that full compliance was made during assessment, and the penalty lacked a cause of action as no variation was made in the returned income. The appellant also cited multiple decisions supporting their argument that subsequent compliance in assessment proceedings negated earlier defaults. The Tribunal agreed, noting that the penalty was levied before the assessment order, and there was no reference to non-compliance in the order. The Tribunal found that the appellant's compliance was sufficient, leading to the direction to delete the penalty.Validity of penalty under Section 272A(1)(d) for AY 2017-18 to 2019-20:For AY 2017-18 to 2019-20, the Assessing Officer levied penalties under Section 272A(1)(d) for alleged non-compliance of a notice, which was not referred to in the assessment order. The Tribunal, observing the similarity between Section 272A(1)(d) and Section 271(1)(b), deleted the penalties for these years as well. The principle of consistency was applied in deleting the penalties under Section 272A(1)(d) for both years.In conclusion, the Tribunal allowed all appeals of the assessee, directing the deletion of penalties for non-compliance in various assessment years. The Tribunal emphasized the importance of proper recording of compliance and satisfaction before levying penalties, ensuring fairness in the assessment process.