Penalty u/s 271(1)(b) can not be imposed if assessment order passed u/s 143(3) not u/s 144

Penalty u/s 271(1)(b) can not be imposed when assessment order passed u/s 143(3) not best judgment assessment u/s 144

ABCAUS Case Law Citation
ABCAUS 3417 (2020) (10) ITAT

Important case law relied upon by the parties:
Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs.  ADIT [2008] 115 TTJ 419 (Del.)

In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming penalty u/s 271(1)(b) of the Income Tax Act, 1961 (the Act).

The Assessing Officer (AO) had imposed penalty u/s 271(1)(b) for non-compliance by the assessee with respect to the statutory notices issued under the Act.

Before the Tribunal, the assessee relied upon the judgment of the Coordinate Bench of the Tribunal where it had taken the view that though the  penalty proceedings had been initiated u/s 271(1)(b) of the Act for alleged non-compliance,  the Assessing Officer had passed the assessment orders u/s 143(3) of the Act and not as best judgment assessment u/s 144 of  the Act meaning thereby that the subsequent compliance in the  assessment proceedings was considered as a good compliance and the default committed earlier was condoned by the Assessing officer and, therefore, the impugned penalties u/s 271(1)(b)  could not have been levied  by.

Per Contra, the Revenue submitted  that  no reasonable  cause  had been demonstrated by the  assessees  for failure  to  comply  with the statutory notices and,  therefore,  the penalty levied was legally correct and that a hyper technical view should  not  be taken and further that the subsequent passing of assessment orders u/s 143(3) of the Act by the Assessing Officer did not mean that the defaults committed earlier by the assessees were ignored.

The Tribunal observed that the CIT(A), while dismissing the assessees’  appeals had observed that subsequent compliance by the assessee to the  statutory notice cannot  be  a  basis  for  non levy of  penalty  on  account  of  earlier defaults.

The CIT(A) had also observed that the claim of the assessees that no penalty is leviable since the assessment orders had been issued u/s 143(3) was not acceptable as the impugned penalty had been levied for specific defaults on specific dates.

The Tribunal noted the judgment passed by the Coordinate Bench and observed that the Department had not pointed out any order in favour of the Department in this regard. 

Therefore, following the order of the Co-ordinate Bench the Tribunal set aside the impugned orders and directed the Assessing Officer to delete the penalty.

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