Penalty u/s 271(1)(b) deleted for non compliance due to non-availability of accounting staff in September month for finalization of accounts

Penalty 2711b-Non compliance due to September Finalisation

September being the month for finalization of accounts, the assessee’s explanation that there was nonavailability of accounting staff, cannot be doubted. Penalty u/s 271(1)(b) for non compliance of notices 143(2), 142(1) deleted by ITAT

ABCAUS Case Law Citation:
964 2016 (06) ITAT
Assessment Years: 2005-06 to 2011-12
Date/Month of Order/Judgment: June 2016

Brief Facts of the Case:
A search and seizure operation u/s 132 was carried out at the business group of the assessee.  Later, notice u/s 153A was issued requiring the assessee to file the return of its income. The assessee submitted that the original return filed may be treated as being filed in response to notice u/s 153A.

In course of assessment proceedings the AO had issued notices u/s 143(2) and 142(1) along with questionnaire but anybody attended on the appointed date nor any application for adjournment was filed. A show cause notice u/s 274 read with section 271 was issued requiring the assessee to explain as to why penalty u/s 271(1)(b) should not be levied. The assessee filed response stating that non compliance of notices was purely unintentional and compliance with the said notice would be done in next 20 days. However assessee did not make the compliance and the AO levied penalty of Rs. 10,000/- u/s 271(1)(b).

Before CIT(A) the assessee submitted that the assessee group, comprising of companies, individuals and joint ventures, had co-operated fully with the department and the records of the entire assessee group, numbering 275 assessment orders, may be examined and a ‘holistic view of the compliance in general’ may be taken in the matter. Further, assessee stated the finalization of accounts and non-availability of account staff till the end of September as reasons for delay in compliance with the notices. He further submitted that the provision for penalty was not for ‘mere technical non-compliance but for the actual or habitual defaulters’. CIT(A), however, did not accept the assessee’s contention and confirmed the action of AO.

Aggrieved, the assessee went in appeal before the ITAT.

Observation by ITAT:

In our opinion, the explanation given by assessee was quite reasonable because in the entire assessee’s group 275 assessment orders were passed and we notice from the assessment order, as reproduced earlier, that assessee had made compliance before passing of the assessment order. There was no deliberate attempt on the part of assessee to disregard the notice issued by the department. September being the month for finalization of accounts, the assessee’s explanation that there was nonavailability of accounting staff, cannot be doubted. We, therefore, hold that assessee was prevented by reasonable cause from attending the proceedings ……… We, accordingly, delete the penalty.