Case Law Details
Pareshbhai Harshadbhai Gohel Vs DCIT (ITAT Surat)
ITAT Surat held that penalty under section 271(1)(b) of the Income Tax Act not leviable merely because the assesse couldn’t make compliance due to some bonafide reasons.
Facts- AO initiated and levied penalty u/s. 271(1)(b) of Rs. 10,000/- vide his order dated 20/01/2021. AO while passing the penalty order u/s. 271(1)(b) recorded that the assessee failed to comply notice under Section 142(1) dated 03/12/2020 for A.Y. 2012-13. AO issued notice u/s. 274 r.w.s. 271(1)(b) of the Act dated 08/01/2021 asking the assessee as to why penalty be not levied for non-compliance of notices u/s. 142(1) of the Act. AO recorded that no reply was filed by assessee. AO levied penalty of Rs. 10,000/-, for non-compliance of notice dated 03/12/2020 u/s. 142(1) of the Act.
Feeling aggrieved by the order of Assessing Officer, in levying penalty, the assessee filed appeal before the ld. CIT(A). However, ld. CIT(A) confirmed the same. Being aggrieved, the present appeal is filed by the assessee.
Conclusion- Held that where assessee had not complied with notice under Section 142(1) but assessment order was passed under Section 143(3) and not under Section 144, that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and, therefore, penalty under Section 271(1)(b) was not justified. I further find that similar view was followed in a series of decisions as has been relied by the ld. AR for the assessee in his submission. Thus, considering the fact that assessment in the present case was completed under Section 153A/143(3) in accepting return of income, I find that it was sufficient compliance, merely because the assessee could not make compliance due to some bonafide reason, no penalty under Section 271(1)(b) of the Act could be levied on the assessee.
FULL TEXT OF THE ORDER OF ITAT SURAT
1. This set of seven appeals by the single assessee are directed against the separate orders of the learned Commissioner of Income Tax (Appeals)-4, Surat [in short, the ld. CIT(A)], all dated 13/06/2022 for the Assessment years (AY) 2012-13 to 2018-19 respectively.
2. In all these appeals, certain facts are common, the assessee has raised common grounds of appeal, therefore, with the consent of parties, all the appeals were clubbed, heard together and are decided by this consolidate order to avoid the conflicting decision. In ITA No. 424 to 428/Srt/2022 for the A.Y. 2012-13 to 2016-17, the assessee has challenged the penalty levied under Section 271(1)(b) of the Income Tax Act, 1961 (in short, the Act) and in ITA No. 429 & 430/Srt/2022 for the A.Y. 2017-18 to 2018-19, the assessee has challenged the penalty levied under Section 272A(1)(d) of the Act. For appreciation of fact, the appeal in ITA No. 424/Srt/2022 for A.Y. 2012-13 is treated as ‘lead’ case, wherein, the assessee has raised following grounds of appeal:
“1. On the facts and in the circumstances of the case as well as law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the assessing Officer in levying penalty of Rs.10,000/-U/s 271(1)(b) of the I.T. Act, 1961.
2. It is therefore prayed that the above penalty may please be deleted as learned members of the tribunal may deem it proper.
3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.”
3. Brief facts of the case are that a search and seizure action under Section 132 of the Act was carried out on 23/01/2018 in case of a group of persons dealing in Crypto-currency. The assesse was also covered in the said search action. Consequent upon such search action, notice dated 25.05.2019 under Section 153C was issued to the assessee on to file return of income for A.Y. 2012-13. In response to notice under Section 153C, the assessee filed his return of income on 27.03.2021 declaring total income of Rs. 1,76,180/-. The assessment was completed on 25.05.2021 under Section 144/153C of the Act in accepting return income.
4. The Assessing Officer initiated and levied penalty under section 271(1)(b) of Rs. 10,000/- vide his order dated 20/01/2021. The assessing officer while passing the penalty order under Section 271(1)(b) recorded that the assessee failed to comply notice under Section 142(1) dated 03/12/2020 for A.Y. 2012-13. The Assessing Officer issued notice under Section 274 r.w.s. 271(1)(b) of the Act dated 08/01/2021 asking the assessee as to why penalty be not levied for non-compliance of notices under Section 142(1) of the Act. The Assessing Officer recorded that no reply was filed by assessee. The Assessing officer levied penalty of Rs. 10,000/-, for non-compliance of notice dated 03/12/2020 under Section 142(1) of the Act.
5. Feeling aggrieved by the order of Assessing Officer, in levying penalty, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee submitted that all details were submitted from time to time to the Assessing Officer. For non-compliance for 03/12/2020, the assessee stated that there was delay due to Covid-19 pandemic due to second wave everywhere and everyone was doing work with proper safety measure. Thus, such non-compliance should not be considered as default for penalizing the assessee. Otherwise the assessee always co-operated during the assessment and finally order under Section 143(3).
6. The ld. CIT(A) after considering the submission of assessee held that it is a case where the assessee had totally ignored the notice under Section 142(1) of the Act and confirmed the penalty levied under Section 271(1)(b) of the Act for Rs. 10,000/-. Further aggrieved, the assessee has fled the present appeal before this Tribunal.
7. I have heard the submissions of the learned authorised representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) of the Revenue and have also perused the orders of the lower authorities carefully. The ld. AR of the assessee submits that assessment order was passed by Assessing Officer on 25.05.2021 by accepting return of income. The assessing officer accepted the explanation of assessee and accepted the return income. The Assessing Officer levied penalty under Section 271(1)(b) for non-compliance of notice dated 03.12.2020. The ld. AR submits that in the month of December, 2020, it was a severe period of Covid-19 infection throughout the country and the assessee could not file his explanation and sought adjournment. It is not the case of assessing officer that the assessee remained silent on various notices and response before the Assessing Officer. The assessee subsequently made full compliance, the explanation offered by assessee on various issues was not accepted and ultimately made various additions/disallowances by the Assessing Officer in final assessment order. Before the ld. CIT(A), the assessee explained that there was reasonable cause for non-filing/response and seeking time for making compliance to the notices issued by assessing officer. Though, the ld. CIT(A), not accepted that complete details filed by assessee, yet the penalty order for alleged default, was sustained to the extent of Rs. 10,000/-, however, in other similar cases the penalty was restricted to the extent of Rs. 5,000/-.
8. The ld. AR submits that the Coordinate Benches of the Tribunal in a series of decisions held that when the assessment has been made under Section 143(3) and not under Section 144, it means that subsequent compliance in the assessment proceedings was considered as a good compliance and the defaults committed earlier were ignored by the Assessing Officer and therefore, there is no cause for levying of such penalty under Section 271(1)(b) of the Act. The ld. AR of the assessee accordingly prayed for deleting the penalty of Rs. 10,000/-. To support his submission, the ld. AR has relied upon the following decisions:
♦ Akash Manganlal Patel Vs DCIT ITA No. 141 to 147/Srt/2022 order dated 26/09/2022
♦ Jayantilal Arjunbhai Patel Vs DCIT ITA No. 134 to 140/Srt/2022 order dated 26/09/2022
♦ Sanjaybhai Arjunbhai Patel Vs DCIT ITA No. 148 to 154/Srt/2022.
♦ Sanskruti Mega Structure Pvt. Ltd. Vs DCIT ITA No. 28/Srt/2018 order dated 19/05/2021,
♦ Shri Puremswarup Jethabhai Patel Vs ACIT ITA No. 2658 to 2664/Ahd/2016 order dated 19/01/2018,
♦ Smt. Devyaniben P Patel Vs ACIT ITA No. 2658 to 2664/Ahd/2016 order dated 19/01/2018,
♦ Akhil Bhartiya Prathmik Shmshak Sangh Bhagwan Trust Vs ACIT (2008) 115 TTJ 419 (Delhi),
♦ Shibani Malhotra Vs ACIT 2022 ITL 409 (Delhi Trib),
♦ Smt. Swati Jigneshjain Vs ITO ITA No. 1971/Mum/2021 order dated 14/06/2022.
9. On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR submits that acceptance of return of income has no effect on noncompliance of notice during the assessment. The penalty under Section 271(1)(b) or 272A(1)(d) is levied for noncompliance of notice issued by Assessing Officer or by ld. CIT(A). The alleged subsequent compliance was made by assessee when penalty was levied by Assessing Officer. Before levying penalty, the assessee was given full opportunity before levying penalty under Section 271(1)(b) or under Section 272A(1)(d) of the Act as the case may be. From the order of lower authorities, it is clearly discernible that assessee is in habit for non-compliance. This is a fit case for levy of penalty, as has been levied by Assessing Officer and confirmed by the ld. CIT(A).
10. I have considered the rival submissions of both the parties and have gone through the orders of lower authorities. I have also deliberated upon the various case laws relied by the ld. AR of the assessee. I find that the Assessing Officer passed the assessment order on 25.05.2021 and accepted returned income. I noted that the Assessing officer levied the penalty of Rs. 10,000/- for non-compliance of notice vide his order dated 03/12/2020, that is prior to passing the assessment order. I further find that the ld. CIT(A) has not accepted the explanation of assessee and sustained the penalty to the extent of Rs. 10,000/-. Before me the ld AR for the assessee vehemently submitted that it was severe pandemic during the period when the assessee was served first notice under section 142(1) dated 03.12.2022, thus, I find convincing force in the submission of ld. AR of the assessee that during corresponding period, wherein the assessee could not make compliance of notice issued by Assessing Officer was a severe Covid-19 pandemic period. However, thereafter the assessee made full compliance of various notices issued by Assessing officer and ultimately the explanation or submission furnished and assessment order was passed under section 143(3).
11. I further find that Division Bench of Delhi Tribunal in Akhil Bhartiya Prathmik Shmshak Sangh Bhawan Trust Vs ADIT (supra) held that where assessee had not complied with notice under Section 142(1) but assessment order was passed under Section 143(3) and not under Section 144, that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and, therefore, penalty under Section 271(1)(b) was not justified. I further find that similar view was followed in a series of decisions as has been relied by the ld. AR for the assessee in his submission. Thus, considering the fact that assessment in the present case was completed under Section 153A/143(3) in accepting return of income, I find that it was sufficient compliance, merely because the assessee could not make compliance due to some bonafide reason, no penalty under Section 271(1)(b) of the Act could be levied on the assessee.
12. In view of aforesaid factual and legal position, I direct the Assessing Officer to delete the entire remaining impugned penalty. In the result, ground of appeal raised by assessee is allowed.
13. In ITA No. 425 to 430/ Srt/2022 for the A.Y. 2013-14 to 2018-19, the facts are identical, except in AY 2018-19, the assessing officer made certain addition on the basis of seized material. In AY 2081-19, the assessing officer levied penalty of Rs. 10,000/-, however, the ld CIT(A) restricted it to Rs. 5,000/-. The Assessing Officer in all cases levied penalty either under section 271(1)(b) or under section 272 A(1)(d) with similar reasons. I noted that the provisions of Section 272A(1)(d) of the Act are pari materia with the provisions of Section 271(1)(b) of the Act. Considering our decision in ITA 424/Srt/2022 for the A.Y. 2012-13, the penalties in all the appeals are deleted.
14. In the result, all these appeals of the assessee are allowed.
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