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Income Tax Appellate Tribunal, DELHI
Before: SH. G.S.PANNU, HON’BLE & SH. ANUBHAV SHARMA
The assessee has come in appeal against appellate order dated 08.07.2019 in appeal no. 10557/18-19 for assessment year 2011-12 passed by Commissioner of Income Tax(Appeals)-9, New Delhi (hereinafter referred to as the First Appellate Authority in short ‘Ld. F.A.A.’) in regard to appeal before it against assessment order dated 31.12.2018 by DCIT, Circle 25(2), New Delhi imposing penalty of Rs. 10,000/- u/s 271(1)(b) of Income Tax Act, 1961.
Tisha Electronics P. Ltd 2 2. The facts in brief are the assessee is a Private Limited Company and claimed that it did not carry out any business during the year under consideration. The assessee company e-filed Return of its Income declaring total income at Rs. NIL for the Assessment Year 2011-12. A notice u/s 148 of the I.T. Act, 1961 dated 28.03.2018 was issued by I.T.O., Ward- 3(5), Noida. Notices u/s 142(1 ) of the Income Tax Act, 1961 for scrutiny assessment proceedings u/ s 143(3) r.w.s 129 of the Income Tax Act, 1961 along with detailed questionnaire were issued and compliance was required. It appears that no compliance was noted by the A.O. Hence a notice was issued under section 274 read with section 271(l)(b) of the Income Tax Act, 1961 dated 15.12.2018 to show cause why penalty be not imposed. The Ld. A.O. has imposed a penalty of Rs. 10,000/- under section 271(1 )(b) of the Income Tax Act, 1961 for alleged failure to make compliance of notices issued under section 143(2) and 142(1) of the Income Tax Act, 1961.
2.1 Being aggrieved of the Order under section 271(1)(b) of the Income Tax Act, 1961, the appeal was filed which was dismissed by Ld CIT(A) while observing in para 5.2 of CIT(A) :- “5.2 Contention of the appellant that the assessment has been completed under section 143(3) of the Act and that it has attended to the subsequent proceeding and therefore penalty levied is unjustified is not tenable for the reason that it is duty of the appellant to attend to the proceedings and furnish the details and documents as called for in the notice u/s 142(1) on the scheduled date. As per provision of the Act, subseqneut compliance does not preclude the AO to impose penalty for failure of the appellant to attend to the proceeding on the scheduled date without seeking adjournment or without assigning any valid reason. In view of above, I am inclined to uphold the penalty of Rs. 10,000/- imposed at 271(1)(b) of the Act. Ground of appeal is decided against the appellant.”
4. The Assessee has now raised following grounds before this Tribunal. “1. That the Ld. CIT(A)-IX, New Delhi has erred in law and on facts in sustaining the Levy of Penalty amounting to Rs. 10,000/- under section 271(1)(b) of the Income Tax Act, 1961 ignoring the fact that the Assessment Order passed under section 143(3) read with section 147 of the Income Tax Act, 1961 was itself without jurisdiction and void-ab-initio.
2. That the Ld. CIT(A)-IX, New Delhi has erred in law and on facts in sustaining the Penalty imposed under section 271(1)(b) of the Income Tax Act, 1961 by the Ld. A.O. has failed to consider the replies made by the appellant.
3. That the Ld. CIT(A)-IX, New Delhi has erred in law and on facts in sustaining the Penalty imposed by the A.O. under section 271(1)(b) of the Income Tax Act, 1961, wholly unjustified, arbitrary, unsustainable in law and deserves to be deleted.
4. That the order of the Ld. CIT(A)-IX New Delhi is arbitrary, biased and against the principles of natural justice and equity.
5. That any other relief or reliefs as your honour may deem fit in the facts and circumstances of the case be granted.
6. Your humble appellant craves leave to add amend or withdraw any ground of appeal, before hearing.”
5. Heard and perused the record. At time of hearing the authority letter was filed for the appellant which was taken on record.
5.1 On behalf of the assessee, the Ld. AR submitted that the assessee had joined the assessment proceedings and there was no disobedience of the notices issued u/s 142(1). It was submitted that when the assessment was completed u/s 143(3) r.w.s. 147 of the Act no penalty u/s 271(1)(b) of the Act cannot be levied. It was also submitted that in fact name of assessee was struck off u/s 248(1) of the Companies Act, 2013 on 07.06.2017. Therefore, there was not in existence any natural person or a legal entity to serve the notices. Ld. AR relied the judgment of Co-ordinate Bench at Delhi in & 6204/Del/2019 Shiv Kumar Nayyar vs. ACIT to contend that in similar circumstances the Tribunal has deleted the penalty levied u/s 271(1)(b) of the Act.
5.2 On the other hand Ld. DR supported the orders passed by Ld. Tax Authorities below submitting that once there is default in appearance there is natural consequences to initiate penalty proceedings u/s 271(1)(b) of the Act.
After giving thoughtful consideration to the submissions and the matter on record it can be observed that at page no. 13 and 14 of PB the assessee has placed on record certified copies of the order sheet of the assessment proceedings and same are reproduced below for the convenience of understanding as to how the Ld. AO had proceeded during the assessment proceedings :-
28/03/2018 Notice u/s 148 issued 10/04/2018 Notice u/s 142(1) issued and fixed for 19/04/2018 16/05/2018 Notice u/s 142(1) issued and fixed for 30/05/2018 05/06/2018 Notice u/s 142(1) issued and fixed for 20/06/2018 03/08/2018 Notice u/s 142(1) issued and fixed for 16/08/2018 18/09/2018 Notice u/s 142(1) issued and fixed for 28/09/2018 29/10/2018 Notice u/s 142(1) issued and fixed for 5/11/2018 12/11/2018 Notice u/s 271(1)(b) issued and fixed for 20/11/2018 30/11/2018 Present Virender Kumar CA behalf of the assessee partly written reply filed and case adjourned to 03/12/2018 03/12/2018 Notice u/s 142(1) issued and fixed for 07/12/2018 07/12/2018 Present Sh. Virender Kumar, CA behalf of the assessee, partly written reply filed and case adjourned to 10/12/2018 11/12/2016 Present Sh. Virender Kumar, CA behalf of the assessee, case discussed 15/12/2018 Order passed
Very apparently from the aforesaid proceedings it can be observed that at no stage the ld. AO formed an opinion that for the purpose of Section 271(1)(b) of the Act there was failure on the part of assessee to comply with the notices. The Bench is of considered opinion that although there is duty on the assessee to attend proceedings and furnish the details or documents as called for in the notice u/s 142(1) of the Act however, the assessing officer has to draw ‘satisfaction’ for the purpose of Section 271(1)(b) of the Act, that there is a failure requiring initiation of penalty proceedings u/s 271(1)(b) of the Act. No such satisfaction seems to be recorded or an order directing issuance of notice u/s 271(1)(b) of the Act is mentioned in any of the proceedings of the alleged default of non-appearance on any particular day for which notices were served.
At the same time, the aforesaid order sheet entries establish that the assessee had appeared before the Assessing Officer through authorized representative Shri Virender Kumar, CA. The case was discussed on 11.12.2018 and order pronounced on 15.12.2018 u/s 143(3) of the Act. That being so, as such there was no default in appearance in pursuance of notice u/s 142(1) of the Act and the assessment was concluded under section 143(3) of the Act only and not u/s 144 of the Act. The Co-ordinate Bench in Tisha Electronics P. Ltd 6 the judgment relied by the Ld. AR of the assessee has held that “Coordinate Benches of the Tribunal in a number of decisions have held that where the assessment order was finally passed u/s 143(3) and not u/s 144 of the Act due to subsequent compliance during the assessment proceedings, that would be considered as good compliance and the defaults committed earlier should be ignored and taking a lenient view the penalty u/s 271(l)(b) of the I.T. Act 1961 should not be levied. Further, the Coordinate Bench of the Tribunal in the case of one of the group member namely Smt. Neetu Nayyar vs ACIT and Smt. Meena Nayyar vs. ACIT (supra) has also deleted the penalty levied by the AO u/s 271(l)(b) and sustained by the Ld. CIT(A) under identical circumstances. Since the assessment in the instant case has ultimately been completed u/s 143(3) of the Act on the basis of various details filed by the assessee before the AO, therefore, considering the totality of the facts of the case and relying on the decision of the Tribunal in the case of Smt. Neetu Nayyar vs. ACIT (supra) and Smt. Meena Nayyer vs. ACIT (supra) I am of the considered opinion that it is not a fit case for levy of penalty u/s 271(1)(b) of the Act.”
In the light of aforesaid the grounds raised on behalf of the assessee are determined in favour of assessee. The appeal is allowed. The impugned order of penalty u/s 271(1)(b) dated 31.12.2018 is set aside.
Order pronounced in the open court on 30th June, 2022.