Levy of penalty u/s 271(1)(b) for each default in not responding to notices issued u/s 142(1) of the Act was not justified – ITAT
In a recent judgment, ITAT Pune deleted penalty u/s 271(1)(b) holding that levy of penalty for each default in not responding to the notices issued u/s 142(1) of the Act was not justified as the provision of Section 271(1)(b) is of deterrent nature and not for earning revenue.
ABCAUS Case Law Citation:
4470 (2025) (03) abcaus.in ITAT
In the instant case, the assessee had challenged the order passed by the CIT(A) National Faceless Appeal Centre, Delhi (NFAC) in confirming Penalty u/s 271(1)(b) of the Income Tax Act, 1961 (the Act).
The assessee was an individual. The Assessing Officer levied penalty of Rs. 30,000/- u/s 271(1)(b) of the Act as the assessee did not respond to notices issued by him u/s 142(1) of the Act on three occasions but then made partial compliance. Subsequently, the assessment was completed exparte u/s.147 r.w.s.144 of the Act.
Against the levy of penalty, the assessee preferred appeal before the CIT(A) (Appeals) contending inter alia that (i) email-id registered on income-tax portal does not belong to the assessee (ii) she filed her replies to the notices after the due dates, (iii) assessee was unaware of the notices as the entire assessment proceedings was handled by her consultant and (iv) she was also not aware of the failure to respond to the notices.
However, no reprieve was given by the CIT(A) who dismissed the appeal of the assessee.
The Tribunal observed that Section 273B of the Act provides that no penalty shall be imposed on the person or the assessee as the case may be, for any failure referred to in the said provision, if he proves that there was reasonable cause for the said failure. Also, the assessee had stated various reasons which prevented the assessee to appear before the Assessing Officer.
The Tribunal further observed that it was also a fact that the assessee had submitted replies to the notices but belatedly. Considering the facts, the Tribunal opined that it would be proper that the penalty of Rs.10,000/- could be imposed for the first default made by the assessee in this regard u/s 271(1)(b) of the Act but could not be imposed for each and every notice issued u/s 142(1), which remained uncomplied with.
The Tribunal observed that although the provision of Section 271(1)(b) is of deterrent nature and not for earning revenue. Any other view taken shall lead to the imposition of penalty for any number of times (without limits) for the same default. This does not seem to be the intention of the legislature in enacting the provisions of Section 271(1)(b) of the Act. In case of failure of the assessee to comply with the notice u/s 142(1) of the Act, the remedy with the Assessing Officer lies with framing of “best judgement assessment” under the provisions of Section 144 of the Act, as has been rightly done in the instant case but not to impose penalty u/s 271(1)(b) of the Act again and again for the same default.
The Tribunal held that the authorities below were not justified in levying penalty for each default in not responding to the notices issued u/s.142(1) of the Act.
Accordingly, the Tribunal set aside the order of CIT(A) and restricted the penalty levied u/s 271(1)(b) of the Act to the first default of the assessee in not complying with the notice u/s 142(1) of the Act.
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