2023 (5) TMI 1432 - AT - Income Tax

Penalty u/s 271(1)(b)/272A(1)(d) - non-compliance of the terms of statutory notice - HELD THAT - As decided in case of Sanskruti Mega Structure Pvt. Ltd. 2021 (5) TMI 826 - ITAT SURAT wherein as deleted the penalty under section 271(1)(b)/272A(1)(d) as held the assessee has shown sufficient cause for non-compliance moreover such non-compliance was done by granting adjournment by the Assessing officer himself. Further considering the decision in various case laws relied by the ld. AR of the assessee wherein it was held that when the assessment was framed under Section 143(3) merely because the assessee could not make compliance for single hearing due to bonafide reason on the penalty under Section 271(1)(b) of the Act cannot be imposed on the assessee for such bonafide default due to reasons beyond his control. In view of aforesaid factual and legal position we direct the AO to delete the impugned penalty. We note that due to Covid-19 pandemic the assessee could not make sufficient compliance before the Assessing Officer. However ultimately the assessment was completed under section 143(3) of the Act by the Assessing Officer which goes to prove that the earlier absence of the assessee has been duly condoned by him. The cause shown has to be considered. The word reasonable has in law the prima facie meaning of reasonable with regard to those circumstances of which the actor called on to act reasonably knows or ought to know. The reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence acting under normal circumstances without negligence or inaction or want of bona fides Azadi Bachao Andcilan v. UOI 2001 (3) TMI 23 - DELHI HIGH COURT . The words reasonable cause in section 273B must necessarily have a relation to the failure on the part of the assessee to comply with the requirement of the law which he had failed to comply with. We note that during the assessment stage the assessee has made sufficient compliance of notices issued by the assessing officer. No penalty u/s.271(1)(b) could be levied when an assessment has been completed u/s 143(3) wherein the ld. AO is deemed to have condoned the absence of the assessee or his authorised representative on earlier occasions when subsequently the details were furnished by him and the assessments were ultimately completed u/s 143(3) of the Act. Hence we deem it fit that this is not a fit case for levy of penalty u/s.271(1)(b) of the Act. Therefore we direct the AO to delete the said penalty. Accordingly the grounds raised by the assessee are allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The core legal issue considered was whether the penalty imposed under section 271(1)(b) of the Income Tax Act, 1961, for non-compliance with a statutory notice, was justified. The Tribunal also considered whether the circumstances surrounding the non-compliance, particularly the impact of the Covid-19 pandemic, constituted a reasonable cause that could exempt the assessee from the penalty under section 273B of the Act.

ISSUE-WISE DETAILED ANALYSIS

Relevant legal framework and precedents: The legal framework involved sections 271(1)(b) and 273B of the Income Tax Act, 1961. Section 271(1)(b) deals with penalties for non-compliance with notices, while section 273B provides that no penalty shall be imposed if the assessee proves there was a reasonable cause for the failure. The Tribunal referenced a similar case, Sanskruti Mega Structure Pvt. Ltd. vs DCIT, where penalties were deleted due to reasonable cause attributed to the Covid-19 pandemic.

Court's interpretation and reasoning: The Tribunal reasoned that the Covid-19 pandemic presented a reasonable cause for the assessee's non-compliance. The Tribunal noted that the assessment was ultimately completed under section 143(3), indicating that the Assessing Officer had implicitly condoned the earlier non-compliance. This interpretation aligns with precedents where penalties were not imposed due to reasonable causes beyond the control of the assessee.

Key evidence and findings: The key evidence included the timeline of notices and responses, particularly the fact that the assessee had complied with the notice issued on 15.01.2021 by submitting the required information on 08.02.2021. The Tribunal also took into account the general disruption caused by the Covid-19 pandemic, which was a significant factor in the assessee's delayed compliance.

Application of law to facts: The Tribunal applied section 273B to the facts, determining that the Covid-19 pandemic constituted a reasonable cause for the delay in compliance. The Tribunal found that the Assessing Officer's completion of the assessment under section 143(3) without variations to the returned income further supported the conclusion that the penalty was unwarranted.

Treatment of competing arguments: The Tribunal considered the Revenue's argument that penalties should be upheld due to non-compliance but found it unpersuasive in light of the reasonable cause provided by the pandemic. The Tribunal emphasized the importance of considering the context and circumstances that led to non-compliance.

Conclusions: The Tribunal concluded that the penalties imposed under section 271(1)(b) were not justified due to the reasonable cause provided by the pandemic. The Tribunal directed the Assessing Officer to delete the penalties for the relevant assessment years.

SIGNIFICANT HOLDINGS

The Tribunal held that the Covid-19 pandemic constituted a reasonable cause under section 273B of the Income Tax Act, 1961, thereby exempting the assessee from penalties under section 271(1)(b). The Tribunal emphasized that "reasonable cause" should be interpreted in light of circumstances known to the actor at the time of non-compliance. The Tribunal's decision reinforced the principle that penalties should not be imposed when non-compliance is due to factors beyond the control of the assessee.

The final determination was that the penalties imposed for the assessment years 2013-14 to 2017-18 were to be deleted, and the appeals filed by the assessee were allowed. The Tribunal's decision applied to all the appeals en masse, given the identical nature of the issues and circumstances across the assessment years.