Penalty under section 272A(1)(d) deleted due to Covid-19 illness preventing timely compliance with section 142(1) notice

The ITAT Ahmedabad held that penalty under section 272A(1)(d) for non-compliance with notice under section 142(1) was not justified. The assessee's accountant suffered from Covid-19 illness, preventing timely response to statutory notices. A new accountant was subsequently engaged who collected information and submitted reply to the show cause notice, resulting in regular assessment order under section 143(3). The tribunal found reasonable cause for initial non-compliance and noted that eventual compliance occurred before assessment completion. The penalty was deleted as the delay was bonafide, not deliberate, particularly considering the transition from physical to digital assessment proceedings during the pandemic.

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Issues Involved:
The appeal against the ex-parte appellate order confirming the penalty u/s 272A(1)(d) of the Income Tax Act, 1961 for the Assessment Year 2020-21.

Summary:
The Assessee, a firm engaged in Wholesale & Retail Trading, failed to respond to statutory notices u/s 142(1) of the Act due to the Accountant's Covid-19 illness. The Assessing Officer levied a penalty for non-compliance. The Assessee's appeal before the Ld. NFAC was dismissed for non-prosecution. The Assessee appealed, challenging the ex-parte order and penalty imposition.

Grounds of Appeal:
1. Lack of reasonable opportunity in passing the ex-parte order.
2. Disagreement with the penalty levied for non-compliance with notices.
3. Request for modification of appeal grounds.

Assessee's Argument:
The Assessee's counsel cited the Accountant's Covid-19 illness as the reason for non-compliance with initial notices. The Assessee responded to the final show cause notice, leading to a regular assessment order. The penalty imposition was deemed unjustified due to valid reasons beyond control.

Revenue's Argument:
The Revenue contended that no medical records were provided for the Accountant's illness. The Assessee's failure to represent before the Ld. CIT(A) resulted in an ex-parte order. The Revenue supported the penalty imposition for non-compliance with notices.

Judgment:
The Tribunal noted the Assessee's response to the final show cause notice after difficulties caused by the Accountant's illness. The Assessee's compliance before the assessment order was framed was considered valid. The delay in compliance during the transition to digital assessment was viewed as a genuine reason. Consequently, the penalty u/s 272A(1)(d) was deemed unjustified and deleted. The appeal by the Assessee was allowed.

Conclusion:
The penalty levied for non-compliance with notices was deleted, considering the valid reasons provided by the Assessee and the transition to digital assessment proceedings.

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