The Pune bench of the Income Tax Appellate Tribunal ( ITAT ) set aside a penalty proceeding of ₹20,000 levied under section 271(1)(b) of the Income Tax Act. The penalty was imposed for non-compliance with notices issued under section 142(1) of the act during reassessment proceedings.
The assessee, Balbir Kaur Birdie, is the legal heir of the late Major General Sandeep Singh Birdie, an officer of the Indian Army. She filed her income return for the AY 2016-17, declaring a total income of ₹75 lakhs. The assessing officer (AO) completed the assessment proceedings under Section 143(3) and accepted the initial return filed.
The assessee filed a revision petition under Section 264 before the Principal Commisiioner of Income Tax (PCIT) to correct an apparent error in computing capital gains allowed by the PCIT. The case was then remanded back to the AO for reassessment.
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The AO issued two statutory notices under Section 142(1) during the reassessment. Since the assessee did not respond, the AO finalised the reassessment under Section 144, maintaining the same total income as before. The AO initiated penalty proceedings under section 271(10(b) for failure to comply with notices and levies a penalty of ₹20,000. Aggrieved by this order, the assessee pursued an appeal to the Commissioner of Income Tax( Appeals)[CIT(A)], where the CIT(A) upheld the penalty.
The Income Tax Appellate Tribunal (ITAT) observed that Major General Birdie had already participated in the original assessment proceedings and that the AO had initially accepted the returned income. The AO issued the reassessment notices during COVID-19, which was met with communication difficulties.
The Tribunal observed that the assessee was posted in a remote area with limited internet and telephone connectivity, which prevented timely compliance with those notices.
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The ITAT bench consisting of Rama Kanta Panda (Vice President) and Vinay Bhamore (Judicial Member) held that the non-compliance by the assessee was not intentional but was due to external circumstances beyond the assessee’s control. The ITAT quashed the penalty of ₹20,000 imposed under section 271(1)(b) and also set aside the CIT(A)’s order. The ITAT directed the AO to cancel the penalty.
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