Carreen Builders & Developers Pvt. Ltd. Vs DCIT (ITAT Delhi)
Income Tax Appellate Tribunal (ITAT) Delhi Bench has set aside a penalty of Rs. 10,000 imposed on Carreen Builders & Developers Pvt. Ltd. by the Deputy Commissioner of Income Tax (DCIT) for the Assessment Year 2012-13. The penalty, levied under Section 271(1)(b) of the Income Tax Act, 1961, was for alleged non-compliance during assessment proceedings. The ITAT’s decision, pronounced on September 20, 2017, hinged on the assessee’s cooperation throughout the assessment and the final completion of the assessment under Section 143(3) of the Act, rather than Section 144.
The appeal was filed by Carreen Builders against the order of the Commissioner of Income Tax (Appeals)-2, New Delhi, dated July 21, 2015, which had upheld the penalty. The assessee contended that the penalty was “bad in law and wrong on facts” and that the CIT(A) erred in upholding it.
During the hearing, the department sought an adjournment due to the absence of the Senior Departmental Representative, but the ITAT rejected the application and proceeded ex parte against the department.
The authorized representative for Carreen Builders argued that the company had regularly participated in the assessment proceedings, furnishing required details in a timely manner. It was submitted that any delays were minor and not indicative of a deliberate intention to avoid hearings, especially given the short intervals between assessment dates. The representative highlighted that the assessment was ultimately completed under Section 143(3) of the Act. This, it was argued, signified full cooperation from the assessee, as a Section 143(3) assessment implies the Assessing Officer was satisfied with the information provided, as opposed to a best judgment assessment under Section 144.
Judicial Precedents Cited
The assessee’s counsel relied on two key judicial precedents to support their arguments:
1.Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs. ACIT (115 TTJ 419 (Del) / 5 DTR 429 (Delhi Tribunal)): This case, decided by an ITAT Delhi Bench, was presented as a direct precedent. The tribunal in that case had held that when an assessment order is finally passed under Section 143(3) of the Act and not Section 144, it indicates that subsequent compliance during the assessment proceedings was considered satisfactory, and any prior defaults were effectively overlooked by the Assessing Officer. The Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust case further emphasized that mere initiation of penalty proceedings does not amount to “satisfaction” for imposing a penalty, and the absence of recorded satisfaction in the assessment order itself would not confer jurisdiction on the Assessing Officer to levy the penalty. It specifically stated that if the final order is under Section 143(3), it implies no willful default.
2. Globus Inforcom Limited vs. DCIT (ITA No. 738/Del/2014): This was another ruling by an ITAT Delhi Bench that had followed the principle established in the Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust case, further strengthening the assessee’s position.
ITAT’s Decision
After considering the submissions and the material on record, the ITAT Delhi Bench found that the present appeal was “squarely covered” by the decision in the Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust case. The Tribunal reiterated the principle that when an assessment is completed under Section 143(3), it implies that the Assessing Officer deemed subsequent compliance as good and ignored any earlier defaults. Therefore, the ITAT concluded that there was no basis to assume a willful default on the part of Carreen Builders.
Consequently, the ITAT held that the imposition of the penalty under Section 271(1)(b) was “patently wrong,” particularly given that the assessment order was issued under Section 143(3). The tribunal set aside the order upholding the penalty and directed the Assessing Officer to delete the penalty.
The appeal of Carreen Builders & Developers Pvt. Ltd. was thus allowed.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal filed by the assessee is directed against the order passed by the Ld. CIT(A)-2, New Delhi vide order dated 21.07.2015 for Assessment Year 2012-13 wherein he has upheld the imposition of penalty of Rs. 10,000/- imposed u/s 271(1)(b)of the Income Tax Act, 1961 (the Act).
2. The grounds of appeal read as under:-
“1. That the impugned order dated 21.07.2015 passed u/s 271(1)(b) by the learned Commissioner of Income-tax (Appeals) 2, New Delhi is bad in law and wrong on facts.
2. That on the facts and in the circumstances of the case, the Learned Commissioner of Income Tax -Appeals 2 erred in law in upholding the penalty of Rs. 10,000 levied by the Ld. Assessing Officer under section 271(1) (b) of the Act, for the reasons stated in the impugned Order.
3. That the appellant, craves, leave to add, alter, amend, substitute, forgo, any or all the grounds of appeal before or at the time of hearing.”
3. An application was received on behalf of the Ld. Senior DR stating that the Ld. Senior DR was absent and adjournment was sought by the department on this ground. However, looking into the facts of the case, we reject the adjournment application and proceed to hear the case ex parte qua the department.
4. The Ld. Authorised Representative submitted that the assessee had been regularly attending the assessment proceedings and had filed the required details from time to time and had no intention whatsoever to avoid the hearings. It was also submitted that as the assessment proceedings were at short intervals, the delay in furnishing required details could have happened but there was no non-compliance on the part of the assessee. Our attention was also drawn to page 1 and 2 of the penalty order dated 14.1.2015 wherein the assessee’s reply to the penalty notice issued on 9.1.2015 has been reproduced. It was also submitted that the assessment was completed u/s 143(3) of the Act which was proof enough that the assessee had duly cooperated during the course of assessment proceedings. Reliance was placed on the order of the ITAT Delhi Bench in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs ACIT 115 TTJ 419 (Del) for the proposition that when the order is finally passed u/s 143(3) of the Act and not u/s 144 of the Act, it would mean that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the Assessing Officer. Reliance was also placed on another order of the ITAT Delhi Bench in Globus Inforcom Limited vs DCIT in ITA No. 738/Del/2014 wherein the decision of the Coordinate Bench of ITAT Delhi in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs ACIT had been followed. It was prayed that the penalty imposed may kindly be deleted.
5. We have heard the submissions of the Ld. Authorised Representative and have also perused the relevant material placed on record. We find that the instant appeal is squarely covered by the decision of the Co-ordinate Bench of ITAT Delhi in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan trust vs ACIT 5 DTR 429 (Delhi Tribunal) wherein the Coordinate Bench in paras 2.4 and 2.5 has held as under:-
“2.4 Coming to the issue of recording of satisfaction, it may be mentioned that mere initiation of penalty does not amount to satisfaction as held by Hon’ble Delhi High Court in the case of CIT vs. Ram Commercial Enterprises Ltd. (2001) 167 CTR (Del) 321 : (2000) 246 ITR 568 (Del). In absence of recording of the satisfaction in the assessment order, mere initiation of penalty will not confer jurisdiction on the AO to levy the penalty.
2.5 We also find that finally the order was passed under s. 143(3) and not under s. 144 of the Act. This means that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was willful.”
6. As the facts of this case are identical, we hold that the imposition of penalty u/s 271(1)(b) of the Act was patently wrong, especially in view of the fact that the impugned assessment order has been passed u/s 143(3). While setting aside the impugned order, we direct the Assessing Officer to delete the penalty.
7. In the result, the appeal of the assessee is allowed.
The order is pronounced in the open court on 20th September,
