2023 (9) TMI 320 - AT - Income Tax

Appeal allowed by ITAT, penalty under Income Tax Act set aside for non-compliance

The ITAT allowed the appeal, setting aside the penalty imposed under section 272A(1)(d) of the Income Tax Act for non-compliance with the notice during ... Penalty u/s. 272A(1)(d) - non compliance to notice u/s. 142(1) - addition u/s. 68 on the ground that the assessee has failed to substantiate the source for purchase of property treating the same to be ‘unexplained credit’ - HELD THAT:- AO shall levy a penalty for each default or failure to comply with the notice u/s. 142(1) of the Act or section 143(2) of the Act or fails to comply with the direction u/s. 142(2A). Here in the present case, the A.O. has issued notice u/s. 142(1) on five occasions for furnishing the details and the documents called for by the A.O. The assessee, on the other hand, contends that he was non compliant to the said notices as it was during the Pandemic period and due to which the assessee himself was hospitalized. It is also observed that the assessee vide letter dated 03.03.2021 has furnished copies of purchase deed dated 29.09.2017 and had also made written submission subsequently. A.O. has passed the assessment order u/s. 143(3) r.w.s. 143(3A) and 143(3B) and not u/s. 144 i.e., the best judgment assessment. It is evident that the assessee has made some compliance before the A.O. and it is not a case of the complete non compliance. As it is observed that when there is a reasonable cause for the said failure, the penalty imposed u/s. 272A sub section (1) of the Act is protected as per the provision of section 273B where the penalty shall not be imposed when the assessee has substantiated reasonable cause for such failure. In the present case in hand, the notice issued u/s. 142(1) of the Act was during the Covid Pandemic period which is a justifiable cause for the non compliance before the A.O. We, therefore, deem it fit to delete the impugned penalty levied by the A.O. and, therefore, the grounds raised by the assessee are allowed. Issues involved:The judgment involves the challenge to a penalty imposed under section 272A(1)(d) of the Income Tax Act, 1961 for non-compliance with a notice during the Assessment Year 2018-19.Details of Judgment:1. Background and Assessment Order:The individual assessee filed a return of income for the year 2018-19, declaring total income. The Assessing Officer (AO) initiated penalty proceedings under section 272A(1)(d) for non-compliance with a notice under section 142(1) of the Act. The AO levied a penalty of Rs. 50,000, which was upheld by the Commissioner of Income Tax (Appeals) (CIT(A)).2. Grounds of Appeal and CIT(A) Decision:The assessee challenged the penalty before the CIT(A), who upheld it on the grounds of the assessee's failure to provide a valid reason for non-compliance with the AO.3. Arguments and Decision by ITAT:During the appeal before the ITAT, the Revenue argued that the assessee's claim of non-compliance due to the Covid-19 pandemic was unsubstantiated as no medical evidence was provided. The ITAT observed that the assessee had purchased a property, leading to the addition under section 68 of the Act. However, the ITAT noted that the assessee had provided some compliance by submitting documents and explanations during the assessment process.4. Legal Analysis and Decision:The ITAT referred to section 272A(1)(d) of the Act, which imposes a penalty for failure to comply with notices. The ITAT highlighted that the penalty of Rs. 10,000 per default is applicable. Considering the circumstances, including the pandemic period and the partial compliance by the assessee, the ITAT found a reasonable cause for the non-compliance with the notice under section 142(1). Therefore, the ITAT decided to delete the penalty levied by the AO.5. Conclusion:The ITAT allowed the appeal filed by the assessee, setting aside the penalty imposed under section 272A(1)(d) of the Income Tax Act for non-compliance with the notice. The decision was pronounced in the open court on 28.08.2023.