2025 (11) TMI 1000 - AT - Income Tax

Penalty under section 271(1)(b) deleted as COVID-19 lockdowns justified non-response to section 142(1); section 273B applied

ITAT PUNE - AT deleted penalty under section 271(1)(b), finding that failure to respond to section 142(1) notices arose from COVID-19 pandemic ... Penalty u/s. 271(1)(b) - not responding to the notices issued u/s. 142(1) of the Act during covid-19 pandemic restrictions - HELD THAT:- We notice that identical issue of delay in filing of appeal and facts of the case have been dealt by this Tribunal in assessee’s own case [2025 (11) TMI 904 - ITAT PUNE] as held that alleged non compliance is due to Covid-19 pandemic restrictions but considering the extraordinary circumstances of the Covid-19 pandemic, lockdowns, and the suffering caused, ld.CIT(A) ought to have taken a liberal view in condoning the default. In my view in such circumstances, section 273B of the Act comes to the rescue of the assessee as the assessee has successfully demonstrated that ‘reasonable cause’ prevented him from complying to the notices issued u/s. 142(1). We notice that for the instant A.Y. 2014-15 also notices u/s. 142(1) of the Act were issued on 23.11.2021, 27.01.2022, 03,02,2022, 28.02.2022 and 04.03.2022. Ostensibly, all the above notices fall during covid-19 pandemic restrictions. Penalty deleted - Decided in favour of assessee. ISSUES PRESENTED AND CONSIDERED 1. Whether delay of 306 days in filing the appeal before the Tribunal constitutes 'sufficient cause'/'reasonable cause' warranting condonation of delay. 2. Whether penalty under section 271(1)(b) of the Income-tax Act can be sustained for alleged non-compliance with notices issued under section 142(1) where the non-compliance occurred during the Covid-19 pandemic restrictions. 3. Whether section 273B (or analogous equitable considerations) and judicial precedents on extension/condonation of limitation during the pandemic apply to relieve the assessee from penalty liability under section 271(1)(b). ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay of 306 days in filing appeal Legal framework: Appeals to the Tribunal are subject to statutory limitation; courts/tribunals may condone delay where sufficient or reasonable cause is shown. Principles from administrative and constitutional jurisprudence govern what amounts to 'reasonable cause'. Precedent treatment: The Court applied established jurisprudence allowing condonation where delay is not deliberate and genuine cause is demonstrated (citing the principles in Collector, Land Acquisition, Anantnag & Ors. v. Mst. Katiji and subsequent authorities referenced in the judgment). Interpretation and reasoning: The assessee filed an affidavit explaining reliance on contemporaneous advice (waiting for quantum appeal outcome and consultant's guidance), rural location with limited professional guidance, and pandemic-era constraints. The Tribunal examined the affidavit and surrounding facts and concluded the delay was not intentional nor motivated by gain. The Tribunal treated the explanation as constituting 'reasonable cause' and held that pandemic-related difficulties and reliance on professional advice justified condonation. Ratio vs. Obiter: Ratio - Where delay arises from bona fide reliance on professional advice, pandemic-related restrictions, and absence of deliberate default, such explanation can amount to 'reasonable cause' to condone delay in filing an appeal before the Tribunal. The observations applying specific pandemic relief are ratio in this context. Obiter - Generalized statements about rural lack of guidance as a category may be persuasive but are not necessary to the core holding. Conclusion: Delay of 306 days in instituting the appeal was condoned as reasonable cause was established. Issue 2 - Deletion of penalty under section 271(1)(b) for non-response to section 142(1) notices during Covid-19 restrictions Legal framework: Section 271(1)(b) allows levy of penalty for failure to comply with provisions of the Act, including non-compliance with notices; however, statutory and equitable relief (including section 273B and judicial precedents) permit relief where reasonable cause prevented compliance. The Tribunal also considered judicial directions and orders addressing limitation and procedural difficulties during the Covid-19 pandemic. Precedent treatment: The Tribunal relied on its own contemporaneous decision in the assessee's own case for a different assessment year where identical facts (notices dated during the pandemic) led to deletion of penalty. The Tribunal also referred to higher court rulings that excused limitation/extended relief in pandemic circumstances (notably the in-re Cognizance for Extension of Limitation matter) and applied principles from Collector, Land Acquisition v. Katiji regarding sufficient cause. Interpretation and reasoning: The Tribunal noted that notices under section 142(1) were issued during the period of Covid-19 restrictions. It accepted that non-compliance with those notices was attributable to the extraordinary circumstances of the pandemic (lockdowns, restricted movement) and that the assessee had taken steps (filing an appeal against assessment, seeking abeyance) indicating there was no wilful default. Relying on the Tribunal's earlier reasoning in the assessee's own case and on pandemic-specific relief jurisprudence, the Tribunal concluded that section 273B principles (or equitable relief grounded in reasonable cause) apply and that the penalty should be deleted. Ratio vs. Obiter: Ratio - Where non-compliance with statutory notices occurred during Covid-19 pandemic restrictions and the assessee demonstrates that reasonable cause prevented compliance, penalty under section 271(1)(b) should be deleted. Obiter - Observations about the automatic deletion of penalty following deletion of quantum additions are ancillary and not essential to the core holding. Conclusion: The penalty of Rs. 50,000 levied under section 271(1)(b) for failure to respond to notices issued under section 142(1) during the pandemic is deleted; grounds on merit are allowed. Issue 3 - Applicability of pandemic-period relief, section 273B and precedential consistency Legal framework: Relief doctrines (statutory such as section 273B and equitable/administrative relief) permit mitigation of penalties where reasonable cause exists; exceptional public emergencies may justify broader application of these doctrines. Precedent treatment: The Tribunal expressly followed its prior decision in the assessee's own case for a subsequent assessment year, and relied on higher-court guidance that recognized removal/extension of limitation in view of pandemic hardships (the Cognizance extension of limitation authority). The Tribunal treated those authorities as controlling and applicable to the facts. Interpretation and reasoning: The Tribunal found factual parity between the matters (identical notice dates during the pandemic) and therefore applied the same legal outcome. It held that pandemic-era judicial recognition of limitation relief and the principle of reasonable cause under section 273B justified both condonation of delay and deletion of penalty. The Tribunal emphasized that the relief was not to be treated as encouraging indifference but as an equitable response to extraordinary circumstances. Ratio vs. Obiter: Ratio - Pandemic-specific relief and established precedent on reasonable cause are applicable to condone procedural defaults and to delete penalties where factual parity exists. Obiter - Broader policy statements about pandemic relief's future scope beyond materially similar facts are persuasive but not binding. Conclusion: Pandemic-era jurisprudence and section 273B principles apply; the Tribunal followed its prior decision and higher-court guidance and granted relief on both limitation and merits. Disposition The Tribunal condoned the delay in filing the appeal and, on merits, set aside the penalty under section 271(1)(b), allowing the appeal.