Infractions of Section 142 do not subject a person to a fine under Section 271(1)(b) (1)
Fact and issue of the case
Briefly the facts of the case are that the assessee is an individual and receives income from agricultural activities. The assessment u/s 143(3) r.w.s. 147 of the I.T. Act was completed by the AO on 27.12.2017 determining the total income at Rs.3,63,518/-. The ld. PCIT, Jodhpur vide his order dated 05.03.2021 u/s 263 of the I.T. Act has set aside the assessment order of the AO for not examining the agricultural income of the assessee of Rs.1,45,000/- which was claimed as exempt by him. Subsequently, the AO completed the assessment u/s 147 r.w.s. 263 of the I.T. Act on 01.12.2021, wherein he assessed the total income at Rs.5,08,518/- by not allowing the agricultural income of Rs.1,45,000/- as exempt. The AO also levied penalty u/s 271(1)(b) of the I.T. Act of Rs.10,000/- for not complying to the notices issued u/s 142(1) of the I.T. Act. Aggrieved by this, the assessee has preferred an appeal before CIT(A).
In the aforesaid order, the AO issued notice to the assessee u/s 143(2) of the I.T. Act, 1961 and re-adjudicated the matter.
The ld. DR supported the order of the lower authorities.
Observation of the court
We have heard both the parties, perused materials available on record and gone through orders of the authorities below. The ld. AR for the assessee has replied for the notice issued by the Department that the assessee is going to prefer an appeal before the ld. CIT(A)/NFAC against the order whose copy was provided to the assessee now and requested the Assessing Officer that the penalty proceeding may kindly kept in abeyance and submit proof of filing the appeal. Again the ld. AR for the assessee submits again reply of notice dated 20.06.2022 and prayed for the same. Further, once again the ld. AR for the assessee has sent reply dated 04.08.2022 for the notice u/s 271(1)(c) of the Income Tax Act that the appeal of the assessee against the addition has been accepted and requested to drop the penalty proceeding and it may be treated as compliance of notice issue previously.
We are of the view that the AO had levied the penalty at Rs. 10,000/-for non compliance of notices Under section142(1) of the Act. As it was clear from the provisions of Section 271(1)(b) that this provision can be invoked only for non compliance of notice Under section 115WD (2) or Section 115WE(2) or Section 142(1) or 143(2) or directions issued Under section 142(2A) of the Act. Therefore, other than the default committed by the assessee specified in clause (b) of section 271(1) the non compliance to the other notices or directions would not attract the penalty Under section 271(1)(b) of the Act. Further, we perused the documentary evidence of the assessee’s reply notices on 14.06.2022, 20.06.2022 and 04.08.2022 for requesting to treat as compliance of reply of notice in which there was a reasonable cause to treat.
In our considered opinion, that the assessee was served with the notices issued by the AO and subsequently reply of notices were sent by the assessee is also on record. The reasons explained by the assessee were bonafide and reasonable before the CIT (A) where the ld. CIT(A) has not taken into consideration.
Therefore, we set aside the order passed by ld. CIT(A) and the penalty imposed Under section 271(1)(b) of the Act for non compliance of Section 142(1) is deleted. The appeal of the assessee is allowed.
As regards the appeal of the assessee in ITA No. 120/Jodh/2022 for the assessment year 2012-13 in the matter of section 271(1)(b) of the Act, the Bench has allowed the appeal of the assessee in ITA No. 119/Jodh/2022 for the assessment year 2010-11 being similar issue. Hence, the decision taken by the Bench in ITA No. 119/Jodh/2022 for the A.Y. 2010-11 shall apply mutatis mutandis in the case of the assessee for the A.Y 2012-13. Hence, this appeal of the assessee is allowed.
In the result, both appeals of the assessee are allowed.
Order pronounced in the open Court on 20/01/2023.
In the result, appeal of the assessee is allowed and ruled in favour of the assessee
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