DIAMOND GRAIN DEALERS ASSOCIATION,MUMBAI vs. ITO WARD 41(3)(1), MUMBAI

PDF · subscribers
ITA 4086/MUM/2025Status: DisposedITAT Mumbai31 October 2025AY 2017-185 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the appeal of the assessee is allowed. The Tribunal considered the totality of the facts and circumstances and was of the considered view that it was not a fit case for the levy of penalty under Section 272A. The assessee had demonstrated bonafide reasons for non-compliance. The Tribunal noted that the CIT(A) had already set aside the assessment order to the AO for fresh assessment after considering the assessee's submissions regarding non-compliance and on merits. Therefore, the penalty order under Section 272A(1) was set aside. The ratio decidendi is that genuine and bonafide reasons for non-compliance with statutory notices, especially when demonstrated by the assessee and considered by the appellate authority in setting aside the assessment, can lead to the deletion of penalty under Section 272A.

What were the facts?

The assessee, Diamond Grain Dealers Association, an AOP registered under the Bombay Public Trust Act, 1950, is in appeal against the order of the CIT(A) dated 17.01.2025. The appeal pertains to Assessment Year 2017-18. The assessee failed to file its return of income for AY 2017-18 by the due date and also did not furnish it in response to a notice under Section 142(1) issued on 13.03.2018. Information gathered under 'Operation Clean Money' revealed cash deposits of Rs. 12,00,550/- in the assessee's bank account during the demonetization period. The Assessing Officer (AO) completed a best judgment assessment under Section 144(1)(b) and initiated penalty proceedings under Section 272A(1) for non-compliance with five notices. A penalty of Rs. 30,000/- was levied for non-compliance with three notices under Section 142(1). The CIT(A) confirmed the penalty.

What were the issues?

1. Whether, in the facts and circumstances of the case and in law, the AO erred in levying penalty under Section 272A(1)(d) of the Income-tax Act, 1961 (the Act) amounting to Rs. 30,000/-, without appreciating that the appellant is not well-versed with taxation laws and its consultant failed to comply with the requirements? (Question of law and fact, turning on Section 272A(1)(d) and Section 142(1)). Assessee's Contention: The assessee argued that non-compliance with notices under Section 142(1) was due to genuine and bonafide reasons. As an AOP engaged in distributing food grains with meager profits, it lacked suitable employees for tax matters and relied on a consultant who provided incorrect advice. The assessee was advised that no return was required due to no taxable income. The notices were sent to the wrong side of the compound, leading to non-receipt. The assessee contended that the lapse was unintentional and not a fit case for penalty. Revenue's Contention: The revenue contended that low income does not justify non-compliance with multiple notices issued by the AO, and therefore, the penalty for persistent non-compliance was rightly imposed.

Which sections of the Income-tax Act were involved?

Section 272A(1)(d),Section 142(1),Section 144(1)(b),Section 69A,Section 139,Section 250,Section 272A(1)

AI-generated summary — verify with the full judgment below

Before: SHRI BEENA PILLAI & SMT.RENU JAUHRI

For Appellant: Shri Bhupendra Shah
For Respondent: Shri Annavaran Kosuri- Sr. AR
Hearing: 14.10.2025Pronounced: 31.10.2025

Appellant by : Shri Bhupendra Shah Respondent by : Shri Annavaran Kosuri- Sr. AR Date of Hearing 14.10.2025 Date of Pronouncement 31.10.2025 आदेश / O R D E R PER RENU JAUHRI [A.M.] :-

This appeal is filed by the assessee against the order of the Learned Commissioner of Income-tax (Appeals), Mumbai/National Faceless Appeal Centre, Delhi [hereinafter referred to as “CIT(A)”] dated 17.01.2025 passed u/s. 250 of the Income-tax Act, 1961 [hereinafter referred to as “Act”] for the Assessment Year [A.Y.] 2017-18.

2.

The grounds of appeal are as follows:

“1. In the facts and circumstances of the case and in law, the Learned AO erred in n levying penalty u/s. 272A(1)(d) of the Act amounting to Rs. 30,000/- without appreciating the fact that Appellant is not well versed with taxation laws and only the consultant looks after their tax matters and the consultant to whom the work was assigned also did not take steps to comply.

2. In the facts and circumstances of the case and in law, the leaned CIT (A) erred in confirming the penalty without considering the submission of the Appellant.”

3.

The brief fact of the case are that the assessee did not file its return for A.Y. 2017-18 u/s. 139 (on or before 31.03.2018) and also failed to furnish the same in response to notice u/s. 142(1) issued on 13.03.2018. On the basis of information gathered under ‘Operation Clean Money’, it was noticed that the assessee had deposited cash of Rs. 12,00,550/- in its bank account with IDBI during the demonetization period from 09/11/2016 to 30.12.2016. 3.2 In view of non filing of return, ld. AO proceeded for completion of best judgment assessment under the provision of section 144(1)(b) and accordingly sent notices to the assessee. However, no compliance was made to any of the five notices issued by the ld. AO and therefore on the basis of information collected from the Banks regarding assessee’s accounts, Ld. AO proceeded to make the addition u/s. 69A of Rs. 19,9,14,302/- and also initiated penalty proceedings u/s. 272A(1) of the Act. Thereafter the ld. AO proceeded to impose the penalty for non- compliance to the 3 notices u/s. 142(1) of the Act and levied penalty of Rs. 30,000/- vide order dated 06.01.2022 @ 10,000/- for each default.

. 3.3 Aggrieved, the assessee preferred an appeal before ld. CIT(A). However, ld. CIT(A) has confirmed the penalty order. Aggrieved further, the assessee has filed an appeal before the Tribunal.

4.

Before us, ld. AR has submitted that the assessment order has been set aside by ld. CIT(A) after considering the assessee’s contentions that non compliance to notices u/s. 142(1) was due to genuine and bonafide reasons, and therefore the penalty for non compliance also deserves to be deleted. It was submitted that the assessee, an AOP, is registered under the Bombay Public Trust Act, 1950 since 1994. It is carrying out the activity of distribution of food grains and other items through public distribution system (PDS) to the public at large. The margin of profit is very meagre and as such there was no taxable income. It is a very small organization having no suitable employees to handle the taxation matters and the assessee was dependant on a tax consultant who did not guide them properly. It had not filed its return since there was no taxable income and was advised by the consultant that no return was required to be filed. Ld. CIT(A) has already set aside the assessment order to ld. AO for fresh assessment after considering the assessee’s explanation. It is further submitted by the assessee that no compliance could be made to the notices as these were sent to the wrong side of the compound where no one was there to receive these notices.

. Under these circumstances, ld. AR argued that the unintentional lapse occurred in complying with the notices u/s. 142(1) and it is not a fit case for imposition of penalty.

4.2 Ld. DR on the other hand, strongly relied on the orders of the lower authorities and argued that simply because, its income was low, there was no justification for not complying with the multiple notices issued by the ld. AO and, therefore, the penalty has been rightly imposed for persistent non-compliance.

5.

We have heard the rival submissions and perused the material placed on record. Before us, ld. AR has submitted that subsequent to the levying of impugned penalty, the ld. CIT(A) has decided the quantum appeal vide order dated 17.01.2025 whereby, after considering the assessee’s submission regarding non compliance to the notices issued by ld. AO as well as on merits, he has set aside the AO’s order to give another chance to the assessee to represent his case.

5.2 After considering the totality of facts and circumstances of the case, we are of the considered view that it is not a fit case for levy of penalty u/s. 272A as the assessee has been able to demonstrate bonafide reasons for non- compliance. Accordingly the penalty order u/s. 272A(1) is hereby set aside.

Order Pronounced in Open Court on 31.10.2025

More judgments on Section 272A(1)(d)

All 1,125 judgments and leading authorities on Section 272A(1)(d) →

Recent GST High Court judgments

Search GST case law →