M.U. ENTERTAINMENT,MUMBAI vs. INCOME TAX OFFICER, WARD -24(2)(1), MUMBAI, MUMBAI

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ITA 3833/MUM/2026Status: DisposedITAT Mumbai13 August 2026AY 2019-20206 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal restored the matter to the CIT(A) for fresh adjudication. The assessee was given an opportunity to furnish documentary evidence to support its claim of reasonable cause for non-compliance.

What were the facts?

The assessee failed to comply with two notices issued under section 142(1) of the Income-tax Act, 1961, during assessment proceedings. The Assessing Officer levied a penalty of ₹20,000 under section 272A(1)(d) for these defaults.

What were the issues?

Whether the assessee had a reasonable cause for non-compliance with statutory notices, and if the penalty levied under Section 272A(1)(d) was justified.

Which sections of the Income-tax Act were involved?

Section 142(1),Section 272A(1)(d),Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “D” MUMBAI

Before: SHRI OM PRAKASH KANT & SHRI ANIKESH BANERJEE

For Appellant: Shri Santi Pawan Kumar, Adv
For Respondent: Shri Mahesh Londhe – SR DR
Hearing: 07/08/2026Pronounced: 13/08/2026

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “D” MUMBAI

BEFORE SHRI OM PRAKASH KANT (ACCOUNTANT MEMBER) AND SHRI ANIKESH BANERJEE (JUDICIAL MEMBER)

ITA No. 3833/MUM/2026 Assessment Year: 2019-2020

M.U. Entertainment, Flat Income Tax Officer, Ward – No.402, 4th Floor, Versoa 24(2)(1), Piramal Chambers, La Sheeta Co-operative Housing Vs. Baug, Parel, Mumbai – 400012. Society Ltd, Seven Bungalow, Versova, Andheri (W), Mumbai - 400053. PAN NO. ABHFM 6769 J Appellant Respondent

Assessee by : Shri Santi Pawan Kumar, Adv. (Virtually) Revenue by : Shri Mahesh Londhe – SR DR.

Date of Hearing : 07/08/2026 Date of pronouncement : 13/08/2026

ORDER PER OM PRAKASH KANT, AM

This appeal by the assessee is directed against the order dated 29.01.2026 passed by the learned Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, New Delhi [in short, ‘the learned CIT(A)’], confirming the penalty of ₹20,000/- levied under section 272A(1)(d) of the Income-tax Act, 1961 [in short, ‘the Act’] for non compliance of two notices issued u/s 142(1) of the Act

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during the course of assessment proceedings for Assessment Year 2019-20.

2.

The grounds raised by assessee are reproduced as under: -

“1. The order of the learned Assessing officer in so far as it is against the appellant is opposed to law, equity and weight of evidence, probabilities, facts and circumstances of the case. 2. The Appellant denies himself liable to a penalty of Rs. 20,000/- levied by the learned Assessing Officer under section 272A(1)(d) of the Act, on the facts and circumstances of the case. 3. The order passed under section 272A(1)(d) of the Act by the learned Authorities below is bad in law, under the facts and circumstances of the case. 4. Without prejudice to the above, penalty under section 272A(1)(d) cannot be imposed for each and every default but it should be restricted to first default alone on the facts and circumstances of the case. 5. The learned Authorities below are not justified in passing the order of penalty as the levy of penalty under section 272A(1)(d) of the Act is not automatic and the learned Authorities below are ought to have dropped the penalty proceedings on the facts and circumstances of the case. 6. Without prejudice to the above, the penalty levied was very high and is required to be substantially reduced, on the facts and circumstances of the case.” 3. Briefly stated, the assessment for the year under consideration was completed on 29.01.2025 under section 147 read with section 144 of the Act. During the course of assessment proceedings, notices under section 142(1) dated 12.06.2023 and 07.06.2024 were issued to the assessee, which remained uncomplied with. Thereafter, show-cause notices dated 29.01.2025 and 20.03.2025, followed by a reminder dated 16.04.2025, were also not responded to. The matter was subsequently referred to the Verification Unit for verification of the assessee's address, and a notice was served through speed post on 09.05.2025. The Assessing Officer, observing

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that the assessee had failed to comply with the aforesaid notices, levied penalty of ₹20,000/- under section 272A(1)(d) of the Act in respect of the two defaults.

4.

Aggrieved, the assessee filed appeal before the learned CIT(A). Before the learned CIT(A), the assessee explained that it was a film- production firm which had suffered substantial loss from production of the film “Yeh Kaisa Tigdam”, following which its business operations were closed and the partners were not aware of the proceedings initiated by the Department. It was accordingly submitted that the defaults were occasioned by circumstances beyond the control of the assessee and were not deliberate. The learned CIT(A), however, rejected the explanation principally on the ground that no documentary evidence had been furnished in support thereof and confirmed the penalty, holding that the assessee had failed to establish reasonable cause within the meaning of section 273B of the Act. The Relevant finding of learned CIT(A) is reproduced as under:-

“5.3 It is a well-settled principle that the onus lies heavily on the appellant to comply with statutory notices issued by the Department. Statutory compliance is a non-delegable duty that must be managed diligently by the assessee. In the present case, the appellant has consistently failed to discharge this duty. The records indicate a pattern of non-responsiveness during both the assessment proceedings and the subsequent penalty proceedings. 5.4 The appellant’s sole contention that The Appellant firm was involved in producing movie, and had produced a movie called “Yeh Kaisa Tigdam”, which could not live upto the expectation of the producers and public and the movie failed to put up in the market. The partners of the Appellant firm could not bear the huge loss and had closed all the operations of the firm. The notices issued by

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the learned Assessing Officer were not known to the partners. Hence, they could not comply with the notices issued by the Department. 5.5. However, the appellant has not submitted any documentary evidences in support of its claim. In such circumstances, the appellant’s claim remains a bare assertion unsupported by any documentary evidence. In the absence of proof to the contrary, the Revenue cannot be expected to accept the appellant's word as gospel truth. The notices issued through the departmental portal/registered email are deemed served under Section 282 of the Act. 5.6 Further, the appellant’s silence during the penalty proceedings before the Assessing Officer (AO) is sufficient to prove that it was deliberately ignoring the income tax proceedings. Had there been a genuine grievance regarding the nonreceipt of notices, the appellant ought to have raised this plea before the AO during the penalty proceedings. This continued passivity is indicative of gross negligence rather than a bona fide mistake. 5.7 For a penalty to be waived, the appellant must demonstrate a "reasonable cause" that prevented compliance. Mere negligence, or a lackadaisical approach toward statutory obligations, does not constitute "reasonable cause" within the meaning of Section 273B. Hence, I find no merit in the appellant's arguments. The conduct of the appellant lacks the "reasonable cause" necessary for the cancellation of the penalty. Consequently, the penalty levied by the Assessing Officer under Section 272A(1)(d) of the Act for non-compliance to the notices issued u/s. 142(1) of the act is hereby confirmed.”

5.

Before us, the learned counsel reiterated the aforesaid explanation and submitted that the assessee is in a position to place documentary evidence in support of the circumstances which resulted in non-compliance with the statutory notices. He accordingly sought one opportunity to substantiate the explanation before the learned CIT(A).

6.

We have heard the rival submissions and perused the material available on record. It is evident from the impugned order that the explanation furnished by the assessee was not examined on the basis of any supporting evidence, principally because no such

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evidence was produced before the learned CIT(A). The assessee has now undertaken to place the relevant documentary evidence on record. Since the question whether the assessee was prevented by reasonable cause from complying with the notices is essentially dependent upon the factual circumstances and the supporting material, we consider it appropriate that the explanation be examined on the basis of the evidence rather than rejected merely for want of material which the assessee now seeks to produce.

7.

Accordingly, in the interest of substantial justice, we set aside the impugned order and restore the matter to the file of the learned CIT(A) for fresh adjudication. The assessee shall be afforded an opportunity to furnish the documentary evidence in support of its explanation, whereupon the learned CIT(A) shall examine whether the circumstances pleaded by the assessee constitute reasonable cause within the meaning of section 273B of the Act and decide the issue of penalty under section 272A(1)(d) afresh, in accordance with law and after affording reasonable opportunity of hearing to the assessee.

8.

We clarify that we have expressed no opinion on the merits of the levy of penalty.

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9.

In the result, the appeal of the assessee is allowed for statistical purposes.

Order pronounced in the open Court on 13/08/2026.

Sd/- Sd/- (ANIKESH BANERJEE) (OM PRAKASH KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated: 13/08/2026 M. Ranganath Vittal , Sr. P.S.

Copy of the Order forwarded to :

1.

The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file.

BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai

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