Penalty u/s 271(1)(b) limited to single default despite five identical notices u/s 142(1), s.273B applied

ITAT Indore partly allowed the assessee's appeal against penalty imposed u/s 271(1)(b) for alleged non-compliance with five notices u/s 142(1). It held that where successive notices are issued by the AO on the same subject matter seeking identical information, non-compliance constitutes a single default rather than multiple defaults. Applying the principle under s. 273B, the Tribunal sustained penalty of Rs. 10,000/- for the first instance of non-compliance and deleted penalty for the remaining four notices, thereby restricting the levy to one default only.

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1. ISSUES PRESENTED AND CONSIDERED

1.1 Whether delay in filing the appeal before the Tribunal against penalty imposed under section 271(1)(b) should be condoned under section 253(5) in view of the assessee's ailing condition and financial constraints.

1.2 Whether multiple non-compliances of successive notices issued under section 142(1), all seeking the same information, constitute multiple defaults attracting separate penalties under section 271(1)(b), or a single default warranting only one penalty.

1.3 To what extent the provisions of section 273B and the principle of adopting a justice-oriented approach affect the quantum and sustainment of penalty under section 271(1)(b).

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Condonation of delay in filing appeal under section 253(5)

Legal framework (as discussed): The Tribunal referred to section 253(5) of the Income-tax Act, 1961, which empowers it to admit an appeal after expiry of the prescribed time. The Tribunal also relied on the principle laid down by the Supreme Court in Collector, Land Acquisition v. Mst. Katiji and others, that where "substantial justice" and "technical considerations" are in conflict, the cause of substantial justice must prevail, and that judiciary is respected for removing injustice rather than legalizing it on technical grounds.

Interpretation and reasoning: The Court considered the assessee's condonation application/affidavit citing ailing health as the cause of delay and noted the submissions that there was no malafide intention or benefit derived from delayed filing and that the assessee was financially weak and unable to pay the penalty. The Court took into account the repeated emphasis by the assessee's representative on the assessee's ailing and financially constrained condition, and the Revenue's stand that, though the assessee was non-compliant in earlier proceedings, the matter be left to the Tribunal's discretion given the stated circumstances. Applying the justice-oriented approach mandated in the cited Supreme Court decision, the Court held that technicalities of limitation should not defeat substantial justice in the facts of the case.

Conclusions: The delay in filing the appeal was condoned under section 253(5), the appeal was admitted, and the matter was heard on merits.

Issue 2: Nature and number of defaults under section 271(1)(b) for multiple notices under section 142(1)

Legal framework (as discussed): The penalty was imposed under section 271(1)(b) for failure to comply with notices issued under section 142(1). The Court also considered section 273B, which provides that no penalty shall be imposed if the assessee proves that there was reasonable cause for the failure. The Tribunal referred to the view taken in other decisions, including a recent decision of another Bench, that multiple notices issued one after another seeking the same information do not multiply the default.

Interpretation and reasoning: The Court noted that five notices under section 142(1) were issued on different dates, all relating to the same query regarding sale of land, and that in response to one notice, the assessee's chartered accountant attended before the Assessing Officer. The assessee contended that all non-compliances should be treated as a single failure, restricting the penalty to one instance. The Court found merit in this contention and accepted the proposition that where notices are issued successively for the same information, the non-compliance does not constitute multiple independent defaults. Relying on the reasoning adopted in other Tribunal decisions and keeping in view section 273B, the Court held that penalty should be confined to the first non-compliance, and the subsequent non-compliances, being in relation to the same subject matter, should not attract separate penalties.

Conclusions: The Court held that only one default existed for the purpose of section 271(1)(b). The penalty was restricted to Rs. 10,000/- for a single default, and the balance penalty of Rs. 40,000/- for the other four alleged defaults was deleted.

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