Facts of the Case

The assessee, Gyan Mata Radha Satyam Kriyayog Ashram Research Institute, filed an appeal before the Income Tax Appellate Tribunal (ITAT), Allahabad Bench, against the order of the Commissioner of Income Tax (Appeals) dated 13.08.2020. The appeal arose from a penalty order passed by the Assessing Officer under Section 271(1)(b) of the Income-tax Act, 1961 for Assessment Year 2011-12.

During reassessment proceedings initiated under Sections 147 and 148, the Assessing Officer issued notices under Section 142(1) seeking information regarding cash deposits. The assessee furnished replies and explanations, though with some delay. Ultimately, the assessment was completed under Section 143(3), after considering the material submitted.

Separately, penalty proceedings were initiated alleging non-compliance with notices.

Issues Involved

Whether penalty under Section 271(1)(b) is sustainable when the assessee eventually complies with notices and the assessment is completed under Section 143(3) after considering the furnished information.

 Petitioner’s (Assessee’s) Arguments

  • The assessee had substantially complied with all notices issued during assessment proceedings, though there was some delay.
  • The Assessing Officer himself acknowledged receipt of replies and supporting details.
  • In the quantum appeal, the Commissioner (Appeals) deleted the addition relating to cash deposits, thereby accepting the explanation submitted.
  • Since the assessment was ultimately framed after considering the material, penalty for non-compliance was unjustified.

Respondent’s (Department’s) Arguments

  • The assessee had failed to comply within the stipulated time with notices issued under Section 142(1).
  • Replies were filed only after issuance of show-cause notice under Section 144.
  • Belated compliance could not be treated as proper compliance.

Court Order / Findings

  • The assessment order itself recorded that the assessee had filed replies and explanations regarding the deposits.
  • After receiving the information, the Assessing Officer completed the assessment under Section 143(3), thereby treating the compliance as sufficient.
  • The Commissioner (Appeals) in quantum proceedings deleted the addition, effectively accepting the explanation provided by the assessee.
  • Once the explanation is accepted and assessment is completed on merits, earlier technical non-compliance cannot justify penalty.
  • In view of Section 273B, penalty cannot be imposed where there exists a reasonable cause.

Important Clarification

The ruling emphasizes that penalty provisions are not automatic. Where subsequent compliance is made and accepted during assessment proceedings, especially when the assessment is completed under Section 143(3), earlier defaults may be considered condoned, particularly in light of Section 273B.

Link to download the order –

https://itat.gov.in/public/files/upload/1614249160-95%20Gyan%20Mata%20Radha%20Satyam.pdf

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