SHAILENDRA RAMDHAN RATHOD,NAGPUR vs. INCOME TAX OFFICER WARD 4(4), NAGPUR, NAGPUR

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ITA 372/NAG/2025Status: DisposedITAT Nagpur20 April 2026AY 2015-20167 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty was unsustainable as the assessment itself was set aside due to non-service of notices. The assessee's failure to comply was found to be bona fide and due to circumstances beyond his control, satisfying the reasonable cause exception under Section 273B.

What were the facts?

The assessee, a non-resident, failed to file a return and comply with notices due to an incorrect email ID on the tax portal. The assessment was completed ex-parte, and a penalty was levied for non-compliance with notices. The CIT(A) confirmed the penalty.

What were the issues?

Whether penalty under Section 271(1)(b) is leviable when the underlying assessment is set aside due to non-service of notices and whether the assessee had a reasonable cause for non-compliance.

Which sections of the Income-tax Act were involved?

Section 271(1)(b),Section 142(1),Section 147,Section 144,Section 144B,Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, NAGPUR BENCH :: NAGPUR

For Appellant: Shri Bhavesh Moryani, Advocate
For Respondent: Shri Surjit Kumar Saha, Sr. DR
Hearing: 26.02.2026Pronounced: 20.04.2026

PER KHETTRA MOHAN ROY, AM:

This appeal by the assessee is directed against the order of Ld. Commissioner of Income Tax (Appeals)/NFAC, Delhi, dated 23/04/2025 passed under section 250 of the Income Tax Act, 1961 (for short, “Act”) which is arising out of penalty order passed u/s. 271(1)(b) of the Act, dated 19.09.2023 for the Assessment Year 2015-16 (AY).

ITA No. 372/NAG/20245 (Shailendra Ramdhan Rathod) 2. The primary grievance of the assessee in the present appeal is that Ld. CIT(A) erred in confirming the penalty imposed by the Ld. AO u/s 271(1)(b) of the Act, despite the fact that no notice u/s. 142(1) of the Act was ever received by the assessee.

3.

Brief facts of the case are that assessee is non-resident and salaried employee and not filed his regular return of income for the year under consideration. Notice u/s. 148 of the Act was issued to the assessee. In 148A proceedings, assessee failed to explain the source of investment in purchase of immovable property and capital gain on transfer of two immovable properties and also non-furnishing of return of income. Therefore, Ld. AO completed the assessment u/s. 147 r.w.s. 144 r.w.s. 144B of the Act and assessed the total income at Rs. 94,90,609/-. Thereafter, Ld. AO issued notice(s) u/s. 142(1) of the Act on three different occasions. Due to non- compliance by the assessee to the notices, Ld. AO passed penalty order u/s. 271(1)(b) and levied penalty of Rs. 30,000/- @ Rs. 10,000/- on each default.

ITA No. 372/NAG/20245 (Shailendra Ramdhan Rathod) 4. Aggrieved by the penalty order passed by the Ld. AO, assessee preferred an appeal before the Ld. CIT(A). However, the Ld. CIT(A) dismissed the appeal and upheld the action of the Ld. AO observing that assessee had failed to furnish any credible evidence or supporting material to substantiate his claim. The Ld. CIT(A) further held that penalty was rightly imposed based on the findings recorded in the penalty order and that the same has been rightly imposed. Now the assessee is in appeal before this Tribunal assailing the order of Ld.CIT(A).

5.

Learned counsel for the assessee submitted that assessee, a non-resident salaried individual, did not receive notices issued u/s 143(2) & 142(1) due to an incorrect email ID on the income tax portal, which was created by the previous counsel and not accessible to the assessee. The assessment order was received by the aged mother of the assessee, who could not inform him, resulting in unintentional non- compliance. The assessee became aware of the proceedings only upon visiting India in July 2023 and thereafter took

ITA No. 372/NAG/20245 (Shailendra Ramdhan Rathod) immediate steps. Despite these bona fide reasons, Ld. AO levied penalty u/s 271(1)(b), which was confirmed by the Ld. CIT(A). However, in the quantum appeal, Ld. CIT(A) has set aside the assessment for fresh adjudication due to non-service of notices. Hence, the very basis of the penalty no longer survives, rendering it infructuous and liable to be deleted.

6.

On the other hand, Ld. Departmental Representative (DR) supported the orders of authorities below and submitted that penalty u/s 271(1)(b) has rightly been imposed by the Ld. AO and duly confirmed by the Ld. CIT(A). It is contended that notices u/s 143(2) & 142(1) were issued through e-proceedings portal in accordance with the prescribed procedure, and the assessee was under an obligation to keep his contact details, including email ID, duly updated. Failure to do so, cannot be a valid ground to escape statutory compliance. He further submitted that plea of non-receipt of notices due to incorrect email ID or lack of knowledge of the e-portal system is an afterthought and does not absolve the assessee from compliance. Ld. DR further contended that setting aside of the

ITA No. 372/NAG/20245 (Shailendra Ramdhan Rathod) quantum assessment by the Ld. CIT(A) does not automatically invalidate the penalty proceedings, as penalty u/s 271(1)(b) is for failure to comply with statutory notices and is independent of the outcome of the assessment. The defaults having already occurred, the penalty has been rightly levied. Therefore, he prayed that the order of the Ld. CIT(A) confirming the penalty be upheld.

7.

We have heard rival contentions of both the parties and perused the material available on record. It is an undisputed fact that assessee is a non-resident individual and a salaried employee. The notices u/s. 143(2) & 142(1) were issued through e-proceedings portal, however, assessee has consistently contended that the same were never received due to an incorrect email ID and lack of access thereto. We observe that assessment order was received by the aged mother of the assessee, who due to her medical condition, could not communicate the same to the assessee. Thus, the non- compliance on the part of the assessee cannot be said to be wilful or deliberate, but rather attributable to circumstances

ITA No. 372/NAG/20245 (Shailendra Ramdhan Rathod) beyond his control. We also take note of the fact that Ld. CIT(A) in the quantum proceedings arising out of assessment u/s 147 r.w.s. 144 r.w.s. 144B, has set aside the assessment and restored the matter to the file of the Ld. AO for fresh adjudication, specifically on the issue of non-service of notices. This finding clearly establishes that proper service of statutory notices was not effected upon the assessee and that there was a denial of reasonable opportunity of being heard. In such circumstances, the very foundation on which the penalty u/s 271(1)(b) has been levied ceases to exist. When the assessment itself has been set aside due to improper service of notices, the consequential penalty for alleged non- compliance of such notices cannot be sustained and becomes infructuous. In terms of section 273B of the Act, no penalty shall be imposable where the assessee proves that there was a reasonable cause for such failure. In the present case, the explanation offered by the assessee is found to be bona fide and duly supported by the surrounding circumstances. In view of the above facts and circumstances, we hold that the penalty imposed u/s 271(1)(b) is unsustainable in law, particularly 6

ITA No. 372/NAG/20245 (Shailendra Ramdhan Rathod) when assessment proceedings; albeit afresh are wide open. Accordingly, we direct the Ld. AO to delete the penalty. Grounds of appeal raised by the assessee are allowed.

8.

In the result, appeal filed by the assessee stands allowed.

Order pronounced on 20.04.2026 under Rule 34 of Income Tax (Appellate Tribunal) rules 1963

sd/- sd/- PAWAN SINGH KHETTRA MOHAN ROY JUDICIAL MEMBER ACCOUNTANT MEMBER

Nagpur: Dated: 20/04/2026 vr/- Copy to: 1. The Assessee 2. The Revenue 3. The Pr.CIT concerned. 4. The DR, ITAT, Nagpur 5. Guard file. By order

Senior Private Secretary ITAT, Nagpur

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