KETHAYA GOUNDER NAGARAJ,DINDIGUL vs. ITO, DINDIGUL

The assessee is an individual and did not file the return of income for the year under consideration. The AO received information that the assessee had substantial financial transactions in the bank account during the year under consideration. Since the assessee did not file the return of income, the A.O reopened the assessment by issue of notice u/s. 148 of the Act. The assessee filed the return of income in response to notice u/s. 148 of the Act declaring income of Rs. 5,09,270/-. The assessee did not respond to the initial notice received by the AO. Subsequently, the assessee responded by submitting partial details as called for by the AO. The AO after considering the response filed by the assessee passed the order u/s. 147 r.w.s 144B of the Act assessing the income at Rs. 32,38,161/- by disallowing purchases to the tune of Rs. 23,63,391/- and addition towards business income at Rs.3,65,500/. Subsequently, the AO initiated penalty proceedings u/s. 272A(1)(d) of the Act for the reason that the assessee has not responded to the notices issued u/s.142(1) of the Act on 09.06.2023, 12.07.2023 and 21.08.2023. The AO levied a penalty of Rs. 30,000/- stating that the assessee could not substantiate any reasonable cause for not responding to the notices issued. Aggrieved, the assessee filed further appeal before the CIT(A) and the CIT(A) confirmed the penalty.

There is a delay of 81 days in filing the appeal by the assessee. The assessee has filed condonation petition/affidavit stating the reasons for delay in filing the appeal. Having heard both the parties and perused the material on record, we are of the view that there is a reasonable and sufficient cause for the delay in filing the appeal before the Tribunal. Therefore, following the Hon’ble Supreme Court decision in the case of Collector, Land Acquisition

The Ld. Authorized Representative (AR) of the assessee submitted that the assessee has filed the return of income in response to notice u/s. 148 of the Act. The Ld. AR further submitted that the assessee though did not respond to initial notices, filed the details in response to subsequent notice and the AO has considered the details furnished while completing the assessment. The Ld. AR also submitted that when the assessment is completed u/s. 147 r.w.s 144B of the Act considering the submissions of the assessee then the penalty u/s. 272A(1)(d) of the Act cannot be levied for not responding to the notices u/s. 142(1) of the Act. The Ld. AR in this regard placed reliance on the decision of Coordinate Bench in the case of Peria Gounder Ramasamy vs. ITO [MA No.21/Chny/2026 & ITA No.3311/Chny/2025 dated 15.04.2026], where it is held that: “5. We have heard the rival submissions and perused the material available on record. We find that while adjudicating ITA No. 3311/Chny/2025, the Tribunal has inadvertently observed that there was delay in filing the appeal before the Ld.CIT(A) and proceeded to restore the matter back to the file of the Ld. CIT(A). However, from the records, it is evident that the Ld.CIT(A) had already condoned the delay and adjudicated the appeal on merits. 6. Therefore, there exists a mistake apparent from record in the order of the Tribunal dated 27.01.2026 in so far as it relates to ITA No. 3311/Chny/2025. Accordingly, in exercise of powers u/s. 254(2) of the Act, we rectify the order of the Tribunal to the following extent: "Since the assessee has duly complied with the subsequent notice dated 21.08.2023 and the assessment has been completed under regular provisions without invoking Section 144 of the Act, we are of the considered view that the assessee has demonstrated reasonable cause. Accordingly, the penalty levied u/s. 272A(1)(d) of the Act is deleted." 7. In the result, the Miscellaneous Application filed by the ass is allowed.”

The Ld. Departmental Representative (DR), on the other hand, relied on the orders of the lower authorities.

We have heard the Ld. AR and the Ld. DR and perused the material on record. We notice that though the assessee did not respond to the first three notices, the details were furnished in response to the subsequent notices, and the AO, after considering the said submissions, completed the assessment u/s. 147 of the Act and not u/s. 144 of the Act. We are of the view that completion of assessment u/s. 147, and not u/s. 144, shows that the subsequent compliance made by the assessee was accepted and considered by the AO, and the earlier defaults stood condoned. Judicial precedents have consistently laid down the ratio that where the assessment is completed otherwise than u/s. 144 of the Act, penalty u/s. 272A(1)(d) of the Act for the earlier non- compliance cannot be sustained. We also notice that the coordinate ebnch in the above case has also held the similar view. Therefore, respectfully following the said ratio, we hold that the penalty levied u/s. 272A(1)(d) of the Act is not sustainable and direct the AO to delete the same.

In result the appeal of the assessee is allowed.