2021 (5) TMI 826 - AT - Income Tax

Penalty u/s.271(1)(b) - no compliance to notice u/s 142(1) - HELD THAT - Perusal of assessment order reveals that there is no reference of alleged notice dated 13.06.2016. No addition for non-compliance of information or any evidence were made by AO. The while passing the assessment order. Rather, the assessee itself suo moto offered the action which was debited on account of interest on TDS. At first appellate stage, the appeal of the assessee was dismissed in non-prosecution for non-compliance of notices. Keeping in view the smallness of issue and again in restoring the matter to the file of ld.CIT(A), it may came up on hearing after long time. There is a reference of conflicting in dates in order of penalty under section 271(1)(b) of the Act. The AO levied the penalty for non-compliance of notice dated 13.06.2016, however, there is no reference of such notice for the assessment order, therefore, the order in levying penalty under section 271(1)(b) is invalid. Even if, we assume that there was a non-compliance of notice dated 13.06.2016, by intentionally or unintentionally, the assessee ultimately in response to notice dated 11.08.2016 made honest compliance therefore, if any non-compliance committed on earlier occasions deserves to be ignored, when assessee itself offered additional income, which was debited on account of interest on TDS and the same was accepted by AO. And no other issue was identified nor was any other addition made in the assessment order. Considering the aforesaid factual documents, we are of the view that the assessee has made a bonafide compliance, therefore, no penalty under section 271(1)(b) of the Act. In the result the grounds of appeal raised by the assessee are allowed.

Summary

Issues:
1. Validity of penalty under section 271(1)(b) for noncompliance of notice under section 142(1) of the Act.
2. Dismissal of appeal by ld.CIT(A) for non-prosecution and lack of merit.

Issue 1: Validity of penalty under section 271(1)(b) for noncompliance of notice under section 142(1) of the Act:

The appeal was against the penalty levied under section 271(1)(b) of the Income Tax Act for noncompliance of a notice under section 142(1) of the Act. The Assessing Officer (AO) issued a notice on 11.08.2016 regarding interest on TDS debited by the assessee. The AO levied a penalty of ?10,000 for noncompliance of a notice dated 13.06.2016. The assessee argued that there was no mention of this notice in the assessment order and that they had made honest compliance with the notices issued. The Tribunal found that the penalty order was invalid due to conflicting dates and that the assessee had made a bona fide compliance by offering additional income. As the assessee had made honest compliance and no other issues were identified, the penalty under section 271(1)(b) of the Act was deemed unwarranted.

Issue 2: Dismissal of appeal by ld.CIT(A) for non-prosecution and lack of merit:

The ld.CIT(A) dismissed the appeal for non-prosecution as the assessee did not comply with hearing notices despite multiple opportunities. The Tribunal noted that the appeal was dismissed without adjudication on merit. The assessee argued that they should be given another opportunity to present their case before the ld.CIT(A). The Revenue suggested restoring the matter to the ld.CIT(A) for adjudication on merit. However, considering the delay in the process and the smallness of the issue, the Tribunal decided to adjudicate the appeal itself. Ultimately, the Tribunal allowed the appeal of the assessee, considering the peculiarity of the case and the honest compliance made by the assessee.

In conclusion, the Tribunal allowed the appeal of the assessee, overturning the penalty levied under section 271(1)(b) of the Income Tax Act. The Tribunal emphasized the importance of honest compliance by the assessee and the lack of merit in the penalty order due to conflicting dates and the absence of non-compliance in the assessment order.