ITAT deletes penalty under section 272A(1)(d) for unreasonable notice compliance demands on public holiday

ITAT Chandigarh allowed the assessee's appeal against penalty u/s 272A(1)(d) for non-compliance with assessment notices. The AO issued three notices on a public holiday requiring response within two hours, which the tribunal found unreasonable. The tribunal held that while assessees must cooperate with assessment proceedings, the expectation must meet reasonableness test. Given substantial compliance by the assessee and completion of assessment u/s 143(3), no justifiable basis existed for penalty levy. The penalty was directed to be deleted.

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Issues:
The judgment involves the sustenance of penalty under section 272A(1)(d) of the Act based on non-compliance with notices issued during assessment proceedings.

Details of Judgment:

1. Assessee's Challenge:
The assessee challenged the levy of penalty amounting to Rs. 60,000 under section 272A(1)(d) of the Act, contending that the penalty notice did not specify the specific charge against the assessee, leading to a failure on the part of the NFAC to provide a clear basis for the penalty.

2. Assessee's Compliance:
The assessee submitted that it had complied with the various notices issued during the assessment proceedings, providing details of responses to each notice issued by the AO, emphasizing that the penalty notice lacked specificity regarding the alleged non-compliance.

3. Violation of Natural Justice:
The assessee highlighted that it was granted less than two days to respond to several notices, which was deemed a violation of the principle of natural justice. Reference was made to court decisions emphasizing the importance of providing reasonable time for responses in line with natural justice principles.

4. AO's Actions:
The AO issued three notices on a public holiday, asking for responses within a very short period, indicating a violation of natural justice principles by not granting sufficient time for the assessee to comply with the notices.

5. Legal Precedent:
Citing the Hindustan Steel Ltd. case, it was argued that penalty imposition should be based on deliberate defiance of law or contumacious conduct. Given the substantial compliance by the assessee despite inadequate response time, it was contended that the penalty should be deleted.

6. Revenue's Position:
The Revenue argued that the assessee failed to respond to the notices issued during the assessment proceedings and did not establish any reasonable cause for non-compliance, leading to the imposition of penalty amounting to Rs. 60,000, which was upheld by the Ld. CIT(A).

7. Judgment and Decision:
Upon review, it was found that the assessee had indeed responded to the notices by furnishing necessary information and documentation during the assessment proceedings. The issuance of multiple notices on a public holiday with very short response times was deemed unreasonable. As substantial compliance was evident, and the assessment was completed, the penalty under section 272A(1)(d) was deemed unjustified and directed to be deleted. Consequently, the appeal of the assessee was allowed.

Separate Judgment:
The judgment was delivered by Shri. Vikram Singh Yadav, AM.

Order pronounced in the open Court on 05/03/2024.

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