CHANDRAKANT HARSHADBHAI GOHEL,SURAT vs. DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, SURAT, SURAT

It is therefore prayed that the above penalty may please be deleted as learned members of the tribunal may deem it proper.

Brief facts of the case are that a search and seizure action under Section 132 of the Act was carried out on 23/01/2018 in case of a group of persons dealing in Crypto-currency. The assesse was also covered in the said search action. Consequent upon such search action, 2 to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT notice dated 24.09.2019 under Section 153C was issued to the assessee on to file return of income for A.Y. 2012- 13. In response to notice under Section 153 C, the assessee filed his return of income on 24.02.2021 declaring total income of Rs. 1,76,900/-. The assessment was completed on 19/05/2021 under Section 144/153C of the Act by accepting the returned income.

The Assessing Officer initiated and levied penalty under section 271(1)(b) of Rs. 10,000/- vide his order dated 20/01/2021. The assessing officer while passing the penalty order under Section 271(1)(b) recorded that the assessee failed to comply notice under Section 142(1) dated 04/12/2020 for A.Y. 2012-13. The Assessing Officer issued notice under Section 274 r.w.s. 271(1)(b) of the Act dated 08/01/2021 asking the assessee as to why penalty be not levied for non-compliance of notices under Section 142(1) of the Act. The Assessing Officer recorded that no reply was filed by assessee. The Assessing officer levied penalty of Rs. 10,000/-, for non-compliance of notices dated 04/12/2020 under Section 142(1) of the Act. to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT 5. Feeling aggrieved by the order of Assessing Officer, in levying penalty, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee submitted that all details were submitted from time to time to the Assessing Officer. For non-compliance for 04/12/2020, the assessee stated that there was delay due to Covid-19 pandemic due to second wave everywhere and everyone was doing work with proper safety measure. Thus, such non-compliance should not be considered as default for penalizing the assessee. Otherwise the assessee always co-operated during the assessment and finally order under Section 143(3).

The ld. CIT(A) after considering the submission of assessee held that in spite of taking objection on initiation of assessment proceedings, the assessee has filed reply and submitted required details in response to notices of the Assessing Officer. The Assessing Officer has not mentioned any sort of non-cooperation or adverse remark regarding non-attendance or non-submission of details in the final assessment order. The assessee has cooperative and replied and attended all the hearing in the erstwhile to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT case. The ld. CIT(A) also held that filing of details ultimately cannot be the ground for non-levy of penalty when the default in non-submission of details in response to notice under Section 142(1) of the Act is committed. Considering these facts and the fact that ultimately details were filed before completion of assessee, therefore, the ld. CIT(A) restricted the penalty to the extent of Rs. 5,000/-. The ld CIT(A) thus, granted partial relief to the assessee. Further aggrieved, the assessee has filed the present appeal before this Tribunal.

I have heard the submissions of the learned authorised representative (ld. AR) of the assessee and the learned Senior Departmental Representative (ld. Sr. DR) of the Revenue and have also perused the orders of the lower authorities carefully. The ld. AR of the assessee submits that assessment order was passed by Assessing Officer on 19.05.2021 and no addition was made in the assessment order. The assessing officer accepted the explanation of assessee and accepted the return income. The Assessing Officer levied penalty under Section 271(1)(b) for non- compliance of notice dated 04.12.2020. The ld. AR to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT submits that in the month of December, 2020, it was a severe period of Covid-19 infection throughout the country and the assessee could not file his explanation and sought adjournment. It is not the case of assessing officer that the assessee remained silent on various notices. response before the Assessing Officer. The assessee subsequently made full compliance, the explanation offered by assessee on various issues was accepted and ultimately no addition was made by the Assessing Officer in final assessment order. Before the ld. CIT(A), the assessee explained that there was reasonable cause for non-filing/response and seeking time for making compliance to the notices issued by assessing officer. Though, the ld. CIT(A), accepted that complete details were filed by assessee, yet the penalty order for alleged single default, was sustained to the extent of Rs. 5,000/-.

The ld. AR for the assessee further submits in similar appeal against the penalty levied under Section 271(1)(b) in assessee’s group case, this Bench has already deleted similar penalties in Shree Granite Vs DCIT in to 368/Srt/2022 order dated 23/01/2023, though in ITA No.417 to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT such cases the penalty was sustained to the extent of Rs. 10,000/-. There is no provision to levy or sustained the penalty under section 271(1)(b) to the extent. Either it should have been deleted in toto or to be sustained in full for alleged single default.

The ld. AR submits that the Coordinate Benches of the Tribunal in a series of decisions held that when the assessment has been made under Section 143(3) and not under Section 144, it means that subsequent compliance in the assessment proceedings was considered as a good compliance and the defaults committed earlier were ignored by the Assessing Officer and therefore, there is no cause for levying of such penalty under Section 271(1)(b) of the Act. The ld. AR of the assessee accordingly prayed for deleting the penalty of Rs. 5,000/-. To support his submission, the ld. AR has relied upon the following decisions:

On the other hand, the ld. Sr. DR for the revenue supported the orders of lower authorities. The ld. Sr. DR submits that acceptance of return of income has no effect on non-compliance of notice during the assessment. The penalty under Section 271(1)(b) or 272A(1)(d) is levied for non-compliance of notice issued by Assessing Officer or by ld. CIT(A). The alleged subsequent compliance was made by assessee when penalty was levied by Assessing Officer. Before levying penalty, the assessee was given full opportunity before levying penalty under Section 271(1)(b) or under Section 272A(1)(d) of the Act as the case may be. From the order of lower authorities, it is clearly discernible that assessee is in habit for non-compliance. This is a fit case for levy of penalty, as has been levied by Assessing Officer and confirmed by the ld. CIT(A). 8 ITA No.417 to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT 11. I have considered the rival submissions of both the parties and have gone through the orders of lower authorities. I have also deliberated upon the various case laws relied by the ld. AR of the assessee. I find that the Assessing Officer passed the assessment order on 19.05.2021. I noted that the Assessing officer levied the penalty of Rs. 10,000/- for non-compliance of notice vide his order dated 20/01/2021, that is prior to passing the assessment order. I further find that the ld. CIT(A) accepted the explanation of assessee and sustained the penalty to the extent of Rs. 5,000/-. I find that there is no such discretionary power to ld CIT(A), to restrict the penalty to the extent of Rs. 5,000/-. The order passed by ld CIT(A) is not in consonance with the provisions of section 271(1)(b), therefore, I direct to delete the penalty which is sustained to the extent of Rs. 5,000/-.

Even otherwise I find convincing force in the submission of ld. AR of the assessee that during corresponding period, wherein the assessee could not make compliance of notice issued by Assessing Officer was a severe Covid-19 pandemic period. However, thereafter the assessee made to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT full compliance of various notices issued by Assessing officer and ultimately the explanation or submission furnished and assessment order was passed under section 143(3)/ 153A.

I further find that Division Bench of Delhi Tribunal in Akhil Bhartiya Prathmik Shmshak Sangh Bhawan Trust Vs ADIT (supra) held that where assessee had not complied with notice under Section 142(1) but assessment order was passed under Section 143(3) and not under Section 144, that meant that subsequent compliance in the assessment proceedings was considered as a good compliance and defaults committed earlier were ignored by Assessing Officer and, therefore, penalty under Section 271(1)(b) was not justified. I further find that similar view was followed in a series of decisions as has been relied by the ld. AR for the assessee in his submission. Thus, considering the fact that assessment in the present case was completed under Section 153A/143(3) in accepting return of income, I find that it was sufficient compliance, merely because the assessee could not make compliance due to some bonafide reason, no penalty under Section to 423/Srt/2022 Chandrakant Harshadbhai Gohel Vs DCIT 271(1)(b) of the Act could be levied on the assessee. In view of aforesaid factual and legal position, I direct the Assessing Officer to delete the entire remaining impugned penalty. In the result, ground of appeal raised by assessee is allowed.