No penalty unless the conduct of assessee is found to be contumacious

This appeal by the assessee is directed against the order of the ld. CIT (Appeals) wherein penalty under section 271(1)(b) of the Income-tax Act, 1961 (the Act) has been confirmed at Rs.10,000/-

In this case, the notice u/s 153A of the Act issued on 18.08.2016. The assessee e-filed its return of income on 06.09.2016 declaring total income of Rs.23,11,110/- in pursuance to the notice u/s 153A of the Income tax. Notice u/s 142(1) was issued on 07.10.2016. Thereafter, notice u/s 143(2) was issued on 07.10.2016. Notice u/s 142(1) along with questionnaire was issued on 27/10/2016. The assessee has failed to furnish information as per notice u/s 142(1) on the above mentioned date. Further, a show cause notice u/s 271(1)(b) was issued on 05.12.2016, fixing the date on 12.12.2016, but the same was not complied by the assessee. Thereafter, AO passed order for penalty on 15.12.2016.

The ld. CIT (A) has upheld the above said order despite noting assessee’s submissions that there was due compliance by the assessee on the grounds that the appellant has not only committed the default under the provision of 271 (1) (b) but also failed to show the reasonable cause for committing such default. Against the above order, assessee filed an appeal before thr tribunal.

ITAT observed that throughout in the order, AO has mentioned his queries and he has noted that the assessee has duly responded However not being satisfied with the reply, the AO has made additions and computed the income at Rs.1,88,85,961/-. Nowhere in the order of the AO there is any whisper that AO is not satisfied by the compliance by the assessee to his notices or queries. This shows that there is lack of proper application of mind by the AO levying the penalty as well as the ld. CIT (A) upholding the same. The penalty order by the same AO is quite in contradiction to the assessment order passed by the same AO in which there is no whisper about lack of compliance by the assessee. Accordingly, ITAT stated that the conduct of the assessee is not at all contumacious and therefore, deletes the penalty.

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