Penalty u/s 271(1)(b) can't be imposed if Assessee Proves that there was a Reasonable Cause for Non-Compliance of Notice: ITAT [Read Order]

The Jaipur bench of the Income Tax Appellate Tribunal (ITAT) held that the penalty under Section 271(1)(b) of the Income Tax Act, 1961 cannot be imposed if the assessee proves that there was a reasonable cause for the non-compliance of notices.

The assessment was completed under Section 144 read with Section 147 of the Income Tax Act at an income of Rs.20,57,003/-. The assessee failed to comply with the notices issued under Section 142(1) of the Income Tax Act. Therefore, a penalty proceeding under Section 271(1)(b) of the Income Tax Act was initiated vide show cause notices under Section 274 read with Section 271(1)(b) of the Income Tax Act issued to the assessee for non-compliance of notices.

The Commissioner of Income Tax (Appeal) [CIT(A)] confirmed the penalty under Section 271(1)(b) of the Income Tax Act amounting to Rs.10,000/-.

The Authorized Representative submitted that the CIT(A) confirmed the levy of penalty by holding that video conferencing as sought by the assessee could not be provided due to technical glitches and the assessee has not given any reasonable cause for non-compliance of the notice.

It was further submitted that the Assessing Officer issued only one notice under Section 142(1) of the Income Tax Act to submit the reply on or before 21.09.2021 and completed the assessment on 29.09.2021 without even mentioning whether the notice was served on the assessee or not. In fact, the notice was not received by the assessee and even the notice which was issued during the Covid period providing less than 5 days’ time was not sufficient to comply with the notice.

The Two-member bench comprising of Sandeep Gosain (Judicial member) and Rathod Kamlesh Jayantbhai (Accountant member) held that penalty under Section 271(1)(b) of the Income Tax Act was subject to Section 273B of the Income Tax Act which provides that no penalty shall be imposable if the assessee proves that there was a reasonable cause for the said failure. When the notice under Section 142(1) of the Income Tax Act was issued, the entire country was grappling with COVID-19 and thus this notice did not come to the notice of the assessee.

Further, the time given to furnish the reply was very short considering that between two days were Saturday and Sunday. There was a reasonable cause for non-compliance of the notice. The bench did not concur with the findings of the CIT(A) and thus the penalty confirmed by the CIT(A) under Section 271(1)(b) of the Income Tax Act was directed to be deleted. Thus, the appeal of the assessee was allowed.

To Read the full text of the Order CLICK HERE

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