The Income Tax Appellate Tribunal (ITAT), Allahabad Bench ruled that the non-compliance of show cause notice is not a valid ground for imposition of penalty.
The assessee, Gyan Mata Radha Satyam Kriyayog Ashram Research Institute has challenged the order imposing the penalty of Rs. 10,000/- under section 271(l)(b) of the Income Tax Act.
It was urged that the assessee has complied with all the notices issued by the Assessing Officer during the assessment proceedings though there was some delay in furnishing the requisite details as sought by the Assessing Officer in the notice under section 142(1) of the Act.
The assessee has referred to the assessment order and submitted that the Assessing Officer has accepted that the assessee has filed the reply and furnished the requisite details in respect of the cash deposit.
He has further contended that the CIT(A) in the quantum of appeal has deleted the addition made by the Assessing Officer and accepted the reply furnished by the assessee.
He has referred to the order of CIT(A) in the quantum appeal and submitted that the CIT(A) has deleted the addition and accepted the explanation regarding the source of deposit made in the bank account.
On the other hand, the department has submitted that there is a default and non-compliance on the part of the assessee to the notice issued under section 142(1). The assessee has filed the reply belatedly and that after show cause notice issued by the Assessing Officer under section 144 of the Act. Thus, belated reply filed by the assessee cannot be considered as a compliance.
The ITAT consisting of a Judicial Member, Vijay Pal Rao noted that the Assessing Officer has given the date of compliances in the above table whereas the penalty was imposed on the ground that the above notices were not complied by the assessee. Further, the Assessing Officer has also stated that the assessee has not made compliance to the show cause notice issued under section 271(1)(b). However, that cannot be a ground for imposition of penalty under section 271(1)(b) of the Act.
The Tribunal observed that in the quantum appeal, the CIT(A) vide its order has deleted the addition made by the Assessing Officer and therefore, it amounts to acceptance of the explanation of the assessee filed during the assessment proceedings.
Therefore, the ITAT held that when the assessee has finally complied with the notice issued by the Assessing Officer the penalty is not imposable as the explanation filed by the assessee was finally found to be correct and accepted in the quantum appeal. Consequently the penalty levied under section 271(1)(b) of the Act is deleted.
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