Facts of the Case

The assessee, an individual, filed his return declaring total income of ₹2,69,820 for AY 2017-18. The case was selected for scrutiny, and notices under Sections 143(2) and 142(1) were issued electronically seeking information and documents.

During the assessment proceedings, the assessee submitted a written reply dated 17.10.2019. However, the Assessing Officer noted non-compliance with a specific notice dated 12.09.2019 and initiated penalty proceedings under Section 272A(1)(d).

Subsequently, the assessment was completed under Section 143(3) on 20.12.2019 after considering the assessee’s submissions. Despite this, a penalty of ₹10,000 was imposed for alleged non-compliance, which was upheld by the CIT(A). The assessee appealed before the ITAT.

 Issues Involved

  1. Whether penalty under Section 272A(1)(d) can be imposed when the assessee ultimately complied, albeit belatedly.
  2. Whether delayed compliance constitutes reasonable cause under Section 273B.
  3. Whether completion of assessment after considering submissions negates the allegation of non-compliance.

Petitioner’s Arguments (Assessee)

  • The assessee had submitted the required information before completion of assessment.
  • The delay was not deliberate and occurred due to circumstances beyond control, including fraudulent bank activity in his name.
  • Since the assessment was framed after considering the reply, there was effective compliance.
  • Reasonable cause existed, attracting protection under Section 273B.

Respondent’s Arguments (Revenue)

  • The assessee failed to comply with the specific notice dated 12.09.2019.
  • No satisfactory explanation was provided for such non-compliance.
  • Therefore, penalty under Section 272A(1)(d) was rightly imposed and confirmed by the CIT(A).

 Court Order / Findings (ITAT Allahabad)

  • The assessee had indeed filed submissions before completion of assessment.
  • The assessment order under Section 143(3) was passed after considering those submissions.
  • Hence, it was not a case of absolute non-compliance but at most delayed compliance.
  • Belated compliance, particularly when accepted by the Assessing Officer, does not warrant penalty.
  • AY 2017-18 was a transitional year from physical to electronic proceedings, which reasonably explained delays.
  • Section 273B applied since the delay was due to bona fide reasons and not deliberate.

 Important Clarification by the Tribunal

  • Mere delay in responding to a notice does not automatically justify penalty if compliance is eventually made.
  • When assessment is completed after considering the assessee’s reply, the allegation of non-compliance loses substance.
  • Transition to digital assessment procedures can constitute reasonable cause under Section 273B.

Link to download the order - https://itat.gov.in/public/files/upload/1698727612-34%20of%202023%20Suresh%20Kumar(Assessee%20Appeal)%20uder%20section%20272A%20%20and%20273B%20of%20the%20Act%20SMC%20(Corrected%20on%2027.09.2023).pdf

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