PRACHI ENTERPRISES PVT. LTD.,KOLKATA vs. I.T.O.,WARD-5(2), KOLKATA

The assessee in the present case is a company which filed its return of income for the year under consideration on 25.09.2016 declaring a total income at nil. The said return was selected for scrutiny assessment and a notice u/s 143(2) was issued by the AO on 03.07.2017. The said notice issued by the AO u/s 143(2) as well as the subsequent notices issued by him u/s 142(1) on 27.07.2018 and 04.10.2018 remained uncomplied with by the assessee. The AO, therefore, issued another notice on 01.11.2018 electronically at the registered e-mail address of the assessee as well as by post fixing the hearing on 12.11.2018. There was however no compliance on the part

Assessment Year: 2016-17 Prachi Enterprises Pvt. Ltd. of the assessee even to the said notice. Consequently penalty proceedings u/s 271(1)(b) were initiated by the AO and since the explanation offered by the assessee during the course of the said proceedings for non-compliance to the notice issued on 01.11.2018 was not found to be satisfactory, the AO imposed a penalty of Rs. 10,000/- u/s 271(1)(b) of the Act. On appeal, the Ld. CIT(A) confirmed the said penalty imposed by the AO. Aggrieved by the order of the Ld. CIT(A), the assessee has preferred this appeal before the Tribunal.

We have heard the arguments of both the sides and also perused the relevant material available on record. The learned counsel for the assessee has submitted that the assessment for the year under consideration was finally completed by the AO vide an order dated 04.12.2018 passed u/s 143(3) of the Act after taking into consideration the details and documents furnished by the assessee and after verification of the books of account produced by the assessee. He has contended that the fact that the assessment was completed by the AO u/s 143(3) clearly shows that there was a substantial compliance made by the assessee and the non-compliance to the notice in question issued by the AO on 01.11.2018 was not wilful in order to justify the imposition of penalty u/s 271(1)(b). In support of this contention, he has relied on the decision of Delhi Bench of this Tribunal in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs ADIT reported in 115 TTJ (Del) 419 and also the decision of coordinate bench of this Tribunal in the case of M/s. Shree Brindaban Rice Mill vs DCIT, CC-XXVII rendered vide its order dated 31.10.2017 in ITA No. 800-804/Kol/2016.

In the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust (supra), the assessment order was finally passed by the AO u/s 143(3) and not u/s 144 of the Act and keeping in view the same, it was held by the Delhi Bench of this Tribunal that the subsequent compliance on the part of the assessee in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. It was held that there was thus no reason to come to the conclusion that the default on the part of the assessee was wilful and the penalty imposed u/s 271(1)(b) was not justified. Following the said decision of Delhi Bench, coordinate bench of this Tribunal in the case of M/s. Shree Brindaban Rice Mill (supra) cancelled the penalty imposed by the AO and confirmed by the Ld. CIT(A) u/s 271(1)(b) of the Act after taking a note of the fact that the assessment was completed by the AO u/s 143(3) after taking into consideration the substantial compliance made by the assessee subsequently. In our opinion, the ratio of these two decisions of the coordinate benches of this Tribunal is squarely applicable to the facts of the present case and respectfully following the same, we cancel the penalty of Rs. 10,000/- imposed by the AO and confirmed by the Ld. CIT(A) u/s 271(1)(b).

In the result, the appeal of the assessee is allowed. Order Pronounced in the Open Court on 20th March, 2020.