2025 (2) TMI 1396 - AT - Income Tax

Penalty under section 271(1)(b) for non-compliance with section 142(1) notice limited to first default only

Assessee's repeated non-appearance in response to notices under section 142(1) was held to lack reasonable cause; accordingly, penalty under section ... Penalty levied u/s 271(1)(b) - default of the assessee in not complying with the notice u/s 142(1) - HELD THAT:- We find that there was no reasonable cause on the part of the assessee for not appearing on the different dates of hearing before the AO in response to notice issued u/s 142(1). Default is same and, therefore, penalty of ₹ 10,000/- could be imposed for the first default made by the assessee in this regard. The penalty u/s 271(1)(b) could not be imposed for each and every notice issued u/s 142(1) which remained not complied with the assessee. We restrict the penalty levied u/s 271(1)(b) to the first default of the assessee in not complying with the notice u/s 142(1) - Decided partly in favour of assessee. Issues: Whether the penalty under section 271(1)(b) and section 271(1)(d) of the Income-tax Act, 1961 can be imposed for each notice issued under section 142(1) of the Act where the default is the same, or whether the penalty must be restricted to the first default.Analysis: The appeals concern penalties levied for non-compliance with notices issued under section 142(1) of the Income-tax Act, 1961. The Assessing Officer imposed penalty for two instances of non-compliance arising from notices issued on different dates; the Tribunal examined whether those defaults constituted separate failures attracting separate penalties under sections 271(1)(b) and 271(1)(d) respectively, or whether they were manifestations of the same default. The Tribunal considered that where the default is identical in substance, multiple notices of the same species do not give rise to distinct penal liabilities for each notice.Conclusion: The penalty under section 271(1)(b) and section 271(1)(d) is restricted to the first default and reduced from Rs. 20,000 to Rs. 10,000 for each assessment year. The appeals are partly allowed.Ratio Decidendi: Where non-compliance arises from the same substantive default in response to notices of the same nature, penalty under sections 271(1)(b) or 271(1)(d) of the Income-tax Act, 1961 is leviable only for the first default and not for each notice of the same species.