2022 (7) TMI 1258 - AT - Income Tax

Penalty u/s 271(1)(b) - default / non-compliance of notice issued under section 142(1) - reasonable cause for non-compliance of the notice under section 142(1) - HELD THAT - The assessee has clearly pointed out before the CIT(A) that the Assessing Officer has completed all the proceedings including the assessment within a period of less than four months from the date of issuing notice under section 148 without giving the assessee proper opportunity and supplying the copies of the impounded material. It is also pointed out that the AO failed in providing copies of certain documents as mentioned by the assessee in the request filed before the AO - CIT(A) though reproduced the submissions of the assessee in the impugned order however, not appreciated this crucial fact that the assessee has explained the reasonable cause for failure to comply with the notice issued u/s 142(1) by way of making the repeated requests to the Assessing Officer to supply the copies of the impounded material. AO has completely ignored the request of the assessee then the question of paying the copying charges or specifying the documents does not arise. The contention of Ld. DR on this point is devoid of merits. Therefore, the case of the assessee falls in the ambit of section 273B as the assessee has proved that there was a reasonable cause for failure to comply with the notice issued under section 142(1) - The decisions relied upon by the learned DR would not help the case of the Revenue in the specific facts of the present case. Accordingly, the penalty levied u/s 271(1)(b) is deleted. Appeal of assessee allowed.

Issues Involved:
1. Imposition of penalty under section 271(1)(b) of the Income Tax Act for non-compliance with notices issued under section 142(1).
2. Failure of the Assessing Officer to provide copies of impounded materials and recorded reasons for issuing notices under section 148.
3. Alleged procedural lapses and arbitrary actions by the Assessing Officer and CIT(A).
4. Justification of penalty imposition considering the assessee's past compliance record and reasonable cause for non-compliance.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(b):
The appeals by the assessee challenge the imposition of penalties under section 271(1)(b) for the assessment years 2014-15 to 2017-18 due to non-compliance with notices issued under section 142(1). The Assessing Officer imposed penalties of Rs. 10,000/- for each assessment year citing the assessee's failure to file returns and provide requisite details. The CIT(A) upheld these penalties.

2. Failure to Provide Copies of Impounded Materials and Recorded Reasons:
The assessee argued that the Assessing Officer failed to provide copies of documents impounded during a survey conducted on 11.9.2018, which included audited statements of accounts. The assessee made repeated requests for these documents to compile returns and comply with notices under section 142(1). The Assessing Officer ignored these requests and issued notices prematurely, before the expiry of the 30-day period allowed for filing returns under section 148.

3. Procedural Lapses and Arbitrary Actions:
The assessee contended that the Assessing Officer acted arbitrarily by not providing sufficient time and opportunity to comply with notices. Penalty orders were passed hastily, within less than two weeks of issuing show cause notices under section 271(1)(b). The CIT(A) failed to consider the assessee's submissions and the reasonable cause for non-compliance due to the non-receipt of impounded documents.

4. Justification of Penalty Considering Past Compliance Record and Reasonable Cause:
The assessee highlighted a clean compliance record over 25 years and argued that the penalties were unjustified and illegal. The Tribunal noted that the assessee had a reasonable cause for non-compliance as the necessary documents were not provided by the Assessing Officer. Citing precedents, the Tribunal emphasized that penalties should not be imposed when non-compliance is due to reasonable causes, such as the failure of the Department to supply required documents.

Judgment:
The Tribunal found that the Assessing Officer's actions were premature and arbitrary, failing to provide the necessary documents for compliance. The non-compliance was due to reasonable cause, falling under the ambit of section 273B of the Income Tax Act. The Tribunal deleted the penalties imposed under section 271(1)(b) for all assessment years 2014-15 to 2017-18, allowing the appeals of the assessee.

Conclusion:
The Tribunal concluded that the penalties were unjustified due to the Assessing Officer's failure to supply necessary documents, which constituted a reasonable cause for non-compliance. The penalties under section 271(1)(b) were deleted for all the assessment years in question.

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