Penalty under Section 271(1)(b) cancelled despite delayed compliance with notices citing reasonable cause including Covid difficulties

ITAT Mumbai allowed the assessee's appeal against penalty u/s. 271(1)(b) for non-compliance with three notices u/s. 142(1). Though the assessee failed to respond by the specified dates, they eventually filed all required details and explanations. The tribunal found reasonable cause for the delay, including Covid-related business difficulties, lack of employees, elderly director unfamiliar with online procedures, and time needed to retrieve old records. Since the assessee ultimately complied and provided all necessary information without purposeful defiance, penalty imposition was deemed inappropriate.

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Issues involved:
The judgment involves the issue of penalty proceedings u/s. 271(1)(b) for the A.Ys. 2014-15 & 2015-16 due to non-compliance of notices u/s. 142(1).

Summary of Judgment:

Issue 1: Compliance of Notices u/s. 142(1)
The assessee filed appeals against the penalty imposed for non-compliance of three notices u/s. 142(1). The initial notice u/s. 148 was based on alleged fictitious transactions, leading to the addition of undisclosed income. The assessee responded to the notices by filing returns and details, but failed to comply with specific dates set in the notices. The penalty was confirmed by the ld. CIT (A) citing lack of compliance without plausible explanation.

Issue 2: Explanation for Delayed Response
The assessee's counsel argued that despite delayed responses, the required details were eventually submitted, including participation in video conferencing. Reasons for the delay were attributed to difficulties in data retrieval, operational challenges post-COVID, lack of technical familiarity, and reliance on elderly directors for handling affairs. The counsel contended that the delayed responses did not constitute intentional non-compliance.

Decision and Rationale
After reviewing the events and submissions, the Tribunal found that although the assessee responded late to the notices, all required details were eventually provided, justifying compliance. The Tribunal acknowledged the challenges faced by the assessee, including operational disruptions and technical limitations. Considering the reasons for the delay and the eventual submission of necessary information, the Tribunal concluded that the penalty was unjustified. Consequently, the penalty imposed by the ld. AO was revoked for both A.Y. 2014-15 and 2015-16, and the appeals of the assessee were allowed.

Separate Judgment Delivered:
No separate judgment was delivered in this case.

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