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Income Tax Appellate Tribunal, NAGPUR BENCH, NAGPUR
Before: SHRI SATBEER SINGH GODARA & SHRI G. D. PADMAHSHALI
द्वधरध / Appearances Assessee by : Mr. Abhishek Kumar [‘Ld. AR’] Revenue by : Smt. Rashmi Mathur [‘Ld. DR’] सुनवाई की तारीख / Date of conclusive Hearing : 27/10/2023 घोषणा की तारीख / Date of Pronouncement : 30/10/2023 आदेश / ORDER PER G. D. PADMAHSHALI, AM; This appeal of the assessee is directed against the DIN & Order No. ITBA/NFAC/S/250/2021-22/1040559518(1) dt. 10/03/2022 passed by National Faceless Appellate Centre, Delhi [hereafter ‘NFAC] u/s 250 of the Income-tax Act, 1961 [hereafter ‘the Act’], which stemmed out order of penalty dt. 21/11/2018 passed u/s 271(1)(b) of the Act by Income Tax Officer, Ward-1, Akola [hereafter ‘AO’] for assessment year 2016-17 [hereafter ‘AY’].
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Ashwinkumar Kailashchand Bajoriya, AY: 2016-17 2. The long and short of the case is that; 2.1 The assessee is an individual, whose case was subjected to scrutiny u/s 143(3) of the Act, wherein the assessee was called upon by notices u/s 142(1) of the Act dt. 24/08/2018 and 07/09/2018 to furnish certain details, however both these notices remained unattended.
2.2 In view of aforestated non-compliance, the assessee was put to final show cause notice dt. 22/11/2018 u/s 274 r.w.s. 271(1)(b) of the Act, and thereby granted an opportunity to explain the reasoning beyond his non- compliance. Appellant’s submission that ‘he was busy with time barring tax audit till 31/10/2018’ did failed to impress the Ld. AO, which resulted in levying impugned penalty of ₹10,000/- u/s 271(1)(b) of the Act.
2.3 Aforestated levy of penalty was unsuccessfully assailed before first appellate authority in an appeal; consequently the assessee came in present appeal before Tribunal on twofold grounds that, the impugned levy of penalty is bad in law and without natural justice.
At the virtual hearing, the Ld. AR solidifying the fact of non-compliance has pleaded that, once the assessment is framed u/s 143(3) of the Act the compliance of requirement is proved, therefore there remain no foundation for levying any penalty u/s 271(1)(b) of the Act. Per contra the Ld. DR Smt. Mathur argued that, non-compliance without reasonable cause cannot go scot free, hence the impugned penalty deserves to be sustained.
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Ashwinkumar Kailashchand Bajoriya, AY: 2016-17 4. After hearing to rival contention of both the parties; in the light of rule 18 of ITAT-Rules, 1963 perused material placed on record and duly considered the facts of the case in the light of legal position.
The limited issue before us is that, whether a penalty u/s 271(1)(b) of the Act is leviable for non-compliance of notices issued during assessment proceedings, where the final assessment vide DIN & order No. ITBA/AST/S/143(3)/2018-19/1014566494(1) was framed u/s 143(3) of the Act.
The plain reading of applicable provision of clause (b) of s/s (1) of section 271of the Act revealed us that, ‘the assessee’s failure to comply with a notice under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-section (1) of section 142 or sub-section (2) of section 143 or fails to comply with a direction issued under sub-section (2A) of section 142, empowers the assessing officers to levy a sum of ten thousand rupees for each such failure by virtue of clause (ii) to section 271(1) of the Act. Now the words ‘for each such failure’ appearing in this applicable provision in our considered view is referred in context of five exclusive requirements viz; (i) notice u/s 115WD(2) calling upon to file return of FBT (ii) notice issued u/s 115WE(2) require production of evidence in support of FBT return filed (iii) notice u/s 142(1) requiring assessee either to furnish return or to produce accounts/documents or such information in connection therewith (iv) notice u/s 143(2) to produce evidence in support ITAT-Pune Page 3 of 6
Ashwinkumar Kailashchand Bajoriya, AY: 2016-17 of return filed and (v) direction to get books audited u/s 142(2A) of the Act, etc. Since compliance of requirement could only be defaulted once, therefore consequential penalty u/s 271(1)(ii) could only be levied once, where such requirement is effectively defaulted. It must be noted here that, during the course of assessment proceedings, for each of aforestated requirement, it may necessitate the assessing officer to issue either single or multiple notices whereby compliance is called for. This however by no means empowers the assessing officer to impose a penalty u/s 271(1)(b) for each and every notice issued which remained un-responded. Further since this provision is of deterrent nature and not for revenue earning, therefore it could only be imposed once for each of the effective default as enumerated u/c (b) of section 271(1) of the Act, irrespective of number of notices issued remained unattended. That is to say, if the ultimate compliance is ensured by the assessee, then no penalty u/s 271(1)(b) is warranted.
The legislative intent behind provisions of section 271(1)(b) is to ensure that assessee complies with the requirement of notice issued either by furnishing details sought for or by explaining in line therewith. Thus the effective compliance eventually must enable the assessing officer to assess total income of the assessee in accordance with provisions of law. That is to say the object of this provision is not revenue generation but to encourage assessee to comply so as to assist the tax authority to arrive at reasonable conclusion in assessing correct taxable income. For this purpose, the assessing officer may issue multiple notices, of which few may remain ITAT-Pune Page 4 of 6
Ashwinkumar Kailashchand Bajoriya, AY: 2016-17 unattended, but what is important is the conclusion arrived by the tax authority. In framing the assessment, if final conclusion is drawn on the basis of material placed on record and without resorting to best judgement u/s 144 of the Act, then in our considered opinion the purpose of issue of all the notices is fulfilled and effectively complied, as unattended notices (if any) leaves no bearing on the assessment order finally framed. Therefore in such case, levy of penalty u/s 271(1)(b) is unjustified.
In view of the aforestated discussion, we are of the considered view that, where any notice issued u/s 142(1) of the Act remained unattended or not- complied but the assessment order was passed u/s 143(3) and not u/s 144 of the Act, it meant either on the basis of earlier compliance or subsequent compliance made by the assessee in assessment proceedings was considered as good compliance and defaults committed with respect to unattended notices was ignored as immaterial or ineffective, therefore the levy of penalty u/s 271(1)(b) of the Act in such cases is not justified.
We find similar view in the decision of various co-ordinate benches including ‘Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust Vs ADIT’ reported in 115 TTJ 419 and ‘Jai Gopal Sondhi Vs ITO’ [6305/Del/2017], ‘Ramabhai Kanjibhai Patel Vs DCIT’ [110/SRT/2023]’ and ‘Sardarmal Kothari Vs ACIT’ [2104/Mads/2012]’ and ‘Swarnaben M. Khanna & Others v. DCIT’ reported in 132 TTJ 1.
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Ashwinkumar Kailashchand Bajoriya, AY: 2016-17 10. In the instant, admittedly the final assessment was framed u/s 143(3) of the Act, therefore following the same parity, we hold that the imposition of penalty ₹10,000/- u/s 271(1)(b) of the Act against appellant’s failure to attend two notices issued u/s 142(1) of the Act, was unwarranted as the assessment in this case was framed otherwise than u/s 144 of the Act. For the reason the impugned penalty stands deleted and the ground of appeals is thus stands allowed.
In result, the appeal of the assessee is ALLOWED U/r 34 of ITAT Rules, order pronounced in open court on this Monday 30th day of October, 2023.
-S/d- -S/d- SATBEER SINGH GODARA G. D. PADMAHSHALI JUDICIAL MEMBER ACCOUNTANT MEMBER पुणे / PUNE ; ददनाांक / Dated : 30th day of October, 2023. आदेश की प्रनिनलनप अग्रेनषि / Copy of the Order forwarded to : 3. The CIT(A)-NFAC, Delhi (India) 1.अपीलाथी / The Appellant. 2. प्रत्यथी / The Respondent.
The CIT, Concerned 5. DR, ITAT, Bench, Nagpur 6. गार्डफ़ाइल / Guard File. Ashwini आदेशानुसार / By Order वररष्ठ दनजी सदिव / Sr. Private Secretary आयकर अपीलीय न्यायादधकरण, पुणे / ITAT, Pune.
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