THE TAMIL NADU DR AMBEDKAR LAW UNIVERSITY,CHENNAI vs. INCOME TAX OFFICER (EXEMPTIONS) - WARD 1, INCOME TAX OFFICE (EXEMPTIONS) - WARD 1

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ITA 4139/CHNY/2025Status: DisposedITAT Chennai04 August 2026AY 2013-20146 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the non-compliance with notices was due to the COVID-19 pandemic and the assessee's bona fide belief of not being required to file a return. Therefore, reasonable cause existed, and the penalty was not sustainable.

What were the facts?

The assessee, a trust, failed to file its income tax return for AY 2013-14 and did not respond to statutory notices. This led to an ex-parte assessment and a penalty under Section 271(1)(b) for non-compliance with notices.

What were the issues?

Whether penalty under Section 271(1)(b) is leviable for non-compliance with notices when reasonable cause, such as the pandemic, is shown.

Which sections of the Income-tax Act were involved?

Section 271(1)(b),Section 142(1),Section 144,Section 147,Section 69A,Section 273B

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘B’ BENCH, CHENNAI

Before: SHRI MANU KUMAR GIRI & SHRI S. R. RAGHUNATHA

Hearing: 09.07.2026Pronounced: 04.08.2026

आयकर अपीलीय अधिकरण, ‘बी’ न्यायपीठ, चेन्नई IN THE INCOME TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI श्री मनु कुमार गिरर, न्याययक सदस्य एवं श्री एस. आर. रघुनाथा, लेखा सदस्य के समक्ष BEFORE SHRI MANU KUMAR GIRI, JUDICIAL MEMBER AND SHRI S. R. RAGHUNATHA, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.4139/Chny/2025 ननिाारण वर्ा / Assessment Year: 2013-14 The Tamilnadu Dr.Ambedkar Law The Income Tax Officer University vs. Exemptions Ward – 1 Poompozhil, 5, Dr.DGS Dinakaran Chennai. Salai, Raja Annaimalaipuram SO Chennai – 600 028. [PAN: AADAT3528N] (अपीलाथी/Appellant) (प्रत्यथी/Respondent) अपीलाथी की ओर से/Appellant by : Shri. R.Vijayaraghavan, Advocate (Virtual) प्रत्यथी की ओर से/Respondent by : Ms.P.Sunanda, JCIT

सुनवाई की तारीख/Date of Hearing : 09.07.2026 घोर्णा की तारीख/Date of Pronouncement : 04.08.2026 आदेश /O R D E R PER S. R. RAGHUNATHA, AM : The present appeal is filed by the assessee against the order dated 31.10.2025 passed by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as

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“ld.CIT(A)”), dismissing the appeal filed by the assessee against the penalty order dated 27.09.2022 passed u/s.271(1)(b) of the Income Tax Act, 1961 (hereinafter referred to as the “Act”), pertaining to Assessment Year (A.Y.) 2013-14. 2. The brief facts of the case are that the assessee is a trust and for the year under reference 2013-14, the assessee did not file any return of income. As per the information available with the department, the case of the assessee was reopened to verify the cash deposit of Rs.2.44 crores made in its bank account and accordingly the notice u/s.148 of the Act was issued on 31.03.2021. In response to the notice the assessee did not file any return of income. Further, the statutory notices u/s.142(1) of the Act were issued and no response were received from the assessee. Later the draft assessment order was issue don 12.03.2022 to provide an explanation why the proposed additions should not be made. In response the assessee filed reply without any supporting documentary evidence. Hence, the AO passed an order u/s.144 r.w.s. 147 of the Act dated 29.03.2022 by making an addition of Rs.2,44,10,860/- as unexplained money u/s.69A of the Act. Further, the AO also initiated penalty proceedings u/s.271(1)(b) of the Act of Rs.10,000/- each for non-compliance of notices issued u/s.142(1) of the Act dated 25.08.2021, 29.11.2021 and 20.01.2022. 3. Pursuant to the assessment order dated 29.03.2022, the penalty proceedings u/s.271(1)(b) of the Act and notices were issued upon the assessee who could not respond to the same. Thereafter, AO levied a penalty of Rs.30,000/- for non-compliance of each instance of notice u/s.142(1) of the Act. The AO was of the view that the assessee was “deliberately avoiding” the notices. Aggrieved by the order of the AO, the assessee filed an appeal before the ld.CIT(A) vide Form 35 dated 27.10.2022. 4. Aggrieved by the penalty order passed by the AO, the assessee challenged the same before the ld.CIT(A). Subsequently, order u/s.250 of the

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Act was passed on 30.10.2025 confirming the penalty levied by the AO. The ld.CIT(A), in the order, noted that penalty proceedings u/s.271(1)(b) of the Act are separate proceedings which was initiated for non-compliance of the notice u/s.142(1) of the Act. In response to notice issued by the ld.CIT(A), the assessee filed a written submission explaining the merits of the quantum assessment. However, the ld.CIT(A) was not convinced with the submissions of the assessee and stated that the assessee did not provide any cogent reason as to the reason behind their non-compliance to prove the sufficient cause. In view of the same, the ld.CIT(A) passed the order u/s.250 of the Act upholding the penalty imposed on the assessee. 5. Aggrieved by the order of the ld.CIT(A), the assessee is in appeal before us. 6. The ld.AR for assessee argued before us, that the assessee is a trust, engaged in running education institution of law university and was severely affected by the pandemic during the COVID 19 situation existing across the country. Therefore, the notices issued u/s.142(1) of the Act dated 25.08.2021, 29.11.2021 and 20.01.2022 were in the peak of the pandemic in the country and hence could not be complied. Further, the ld.AR submitted the trust existing solely for education purposes and not for profit, eligible for exemption u/s.10(23C)(iiiab) of the Act and not liable to file the return of income for the impugned assessment year 2013-14. The assessee was, in fact, unaware of the assessment proceedings initiated as well. Therefore, it was not deliberate avoidance, as the AO had put forward in his order. Moreover, the assessment, relating to the present penalty levied, was remitted back to the AO by the first appellate authority vide order dated 18.11.2025 and therefore, the ld.AR for assessee prayed for the deletion of penalty. 7. On the contrary, the ld.DR reiterated the findings of the lower authorities and prayed for confirming the order of the ld.CIT(A).

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8.

We have heard the rival submissions, perused the orders of the lower authorities and carefully examined the material available on record. The short issue arising for our consideration is whether the penalty of Rs.30,000/- levied by the AO u/s.271(1)(b) of the Act for the alleged non-compliance with the notices issued u/s.142(1) of the Act deserves to be sustained in the facts and circumstances of the present case. 9. It is an admitted position that the notices u/s.142(1) of the Act, alleged to have been violated by the assessee, were issued on 25.08.2021, 29.11.2021 and 20.01.2022, during the period when the country was witnessing unprecedented disruption on account of the COVID-19 pandemic. The assessee is an educational trust engaged in running a law university and has consistently pleaded that owing to the severe disruption caused by the pandemic, the notices could not be effectively attended to. The Revenue has not brought any material on record to demonstrate that the explanation offered by the assessee is inherently false or lacks bona fides. In our considered opinion, the extraordinary circumstances prevailing during the relevant period cannot be ignored while examining the existence of "reasonable cause" contemplated u/s.273B of the Act. 10. We further observe that the AO has proceeded on the assumption that the assessee had "deliberately avoided" compliance with the statutory notices. However, such a conclusion has been reached merely on account of non- compliance and not on the basis of any independent material establishing a conscious or wilful disregard of the statutory notices. It is a settled principle that penalty proceedings are distinct and independent from assessment proceedings and the burden lies upon the Revenue to establish that the default was without reasonable cause. Mere non-compliance, by itself, cannot automatically lead to the levy of penalty where the assessee demonstrates circumstances preventing such compliance.

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11.

We also find considerable force in the submission of the ld.AR that the assessee is an educational institution claiming to be eligible for exemption u/s.10(23C)(iiiab) of the Act and, according to the assessee, was under the bona fide belief that it was not required to file a return of income for the impugned assessment year. Whether such belief ultimately succeeds in the quantum proceedings is a matter to be adjudicated separately. Nevertheless, the explanation assumes relevance while appreciating the bona fides of the assessee's conduct in the penalty proceedings. Penalty provisions being quasi- criminal in nature are required to be construed strictly, and where the explanation furnished by the assessee is plausible and supported by surrounding circumstances, the benefit of doubt should ordinarily go in favour of the assessee. 12. We further note that the assessee had, albeit belatedly, participated in the assessment proceedings by filing a reply in response to the draft assessment order. Though the explanation furnished was not accepted by the AO, the subsequent participation of the assessee indicates that there was no absolute or contumacious disregard of the statutory proceedings. The object of section 271(1)(b) is to ensure effective compliance with statutory notices and not to punish every technical or venial default irrespective of the surrounding circumstances. In the present case, considering the unprecedented pandemic situation, the nature of the assessee as an educational trust, the explanation furnished regarding its bona fide belief, and the subsequent remand of the quantum proceedings, we are satisfied that the assessee had shown reasonable cause within the meaning of section 273B of the Act for the non- compliance. 13. Accordingly, in the totality of the facts and circumstances of the case, we hold that the levy of penalty u/s.271(1)(b) of the Act is not sustainable. We, therefore, set aside the order of the ld.CIT(A) and direct the AO to delete the

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penalty of Rs.30,000/- levied u/s.271(1)(b) of the Act by allowing the grounds of appeal of the assessee. 14. In the result the appeal of the assessee is allowed.

Order pronounced in the open court on 04th August, 2026 at Chennai.

Sd/- Sd/- (मनु कुमार गिरर) (एस. आर. रघुनाथा) (MANU KUMAR GIRI) (S. R. RAGHUNATHA) न्याययक सदस्य/Judicial Member लेखासदस्य/Accountant Member चेन्नई/Chennai, ददनांक/Dated, the 04th August, 2026 Devadas आदेश की प्रनतललपप अग्रेपर्त/Copy to: 1. अपीलाथी/Appellant 2. प्रत्यथी/Respondent 3.आयकर आयुक्त/CIT– Chennai/Coimbatore/Madurai/Salem 4. पवभागीय प्रनतननधि/DR 5. गार्ा फाईल/GF DEVADAS Digitally signed by DEVADAS GOPALANACHARY GOPALANACHARY Date: 2026.08.06 09:02:19 +05'30'

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