RAKESH JINDAL, RAIGARH,RAIGARH vs. DCIT, CENTRAL CIRCLE-2, RAIPUR, RAIPUR

Vide three effective grounds of appeal, the assessee has challenged the levy of penalty of Rs.20,000/- under section 271(1)(b) of the Act for non-compliance of notices issued under section 142(1) dated 05.11.2019 and 19.11.2019. 1 Rakesh Jindal vs DCIT, Central Circle-2, Raipur

The relevant facts, in brief, required for adjudication of this case are that the assessee, a Chartered Accountant employed with M/s Jindal Power Limited, filed his original Income Tax Return (‘ITR’) of the relevant year on 23.07.2012 declaring income of Rs.30,410/-. Later, the assessee revised the said return on 24.07.2012 declaring income of Rs.58,22,480/-. Subsequently, the case of the assessee was reopened under section 148 of the Act. During the course of reopened assessment proceedings, the Ld. Assessing Officer (‘AO’) issued show-caused notice under section 142(1) of the Act on 05.11.2019 and 19.11.2019. However, the assessee did not ensure any compliance of these notices. Another notice under section 142(1) of the Act was issued to the assessee on 23.11.2019, which also was not responded to. The Ld. AO, having no option except to complete the assessment being barred by limitation, finalized the assessment under section 144 r.w.s. 147 of the Act on 27.12.2019 determining total income of Rs.1,93,72,480/-. Thereafter, the Ld. AO issued penalty notice under section 271(1)(b) of the Act on 29.12.2019 after completion of the assessment under section 144 r.w.s. 147 of the Act on 27.12.2019. During the course of penalty proceedings, the Ld. AO provided two opportunities of being heard vide notices under section 271(1)(b) dated 29.12.2019 and 30.01.2021. However, the assessee did not respond to. The Ld. AO, therefore, levied penalty of Rs.20,000/- under section 271(1)(b) of the Act for non-compliance of the notices dated 05.11.2019 and 19.11.2019 issued under section 142(1) of the Act. Aggrieved, the assessee filed appeal before the Ld. CIT(A), who dismissed the appeal as under: “The assessee’s appeal against the penalty order levied under Section 271(1)(b) of the Income Tax Act, 1961, for failure to comply with the notices

Shri Veekas S Sharma, CA, Ld. Authorized Representative (‘AR’) of the assessee submitted that the assessee was not aware of any of notices issued under section 142(1) of the Act for which penalty under section 271(1)(b) of the Act was levied as he had neither received any alert on his mobile number nor on his personal email though both were mentioned in the ITR. Further, the assessee had not seen his Income Tax Portal regularly to know pending actions at his end, which resulted non-compliance. Had the assessee received any notice, he would have responded immediately. Further, it was brought to our notice that the assessee was 3 Rakesh Jindal vs DCIT, Central Circle-2, Raipur residing at Raigarh, though the assessment was centralized at Raipur. Non- compliance on the part of the assessee was not intentional as he did not derive benefit there from. Further, the Ld. AR contended that the said penalty was barred by limitation as the initial notice under section 271(1)(b) of the Act was issued on 29.12.2019 and that two after two days from the date of completion of assessment. The said penalty should have been levied within six months from the end of the month as it had no linkage/correlation with the assessment. Thus, the penalty got barred by limitation on 30.06.2020. However, the Ld. AO levied penalty vide order dated 09.06.2021. As the said penalty had no correlation with the income assessed and appeal pending against thereon as the pending appeal had no bearing on the fate of the said penalty. The Ld. AR drew out attention that the Ld. CIT(A) had passed ex parte order without giving proper opportunity of being heard to the assessee as the same was against the principal justice. He placed reliance on the decisions of Hon’ble Supreme Court in the case of Hindustan Steel Ltd. 83 ITR 26 and Tribunal decisions in the cases of Balram Kumar Mahendra ITA No. 1366/Del/2010, Indian Institute of Tourism ITA No. 64/Agra/2009 and Nirav J RAvani ITA No. 204 to 214/Rajkot/2022. 5. Shri Piyush Tripathi, Ld. Sr. DR vehemently argued the case and defended the impugned order. He contended that the assessee a chartered accountant had ensured non-compliance to evade investigation. The assessee had not only failed to ensure compliance during the assessment proceedings but also in penalty proceedings. This clearly established defiance of law. He prayed for dismissal of appeal.

We have heard both parties at length and have perused the material available on the record. The Hon‘ble Supreme Court, in the case of Hindustan steel Ltd. 83 ITR 26 has held that an order-imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of his obligation. Before us, the Ld. AR submitted that there was reasonable cause for non-compliance on the part of assessee. It was submitted that the assessee had neither received any alert on his mobile number nor on his personal email though both were mentioned in the ITR. Further, the assessee had not seen his Income Tax Portal regularly to know pending actions at his end, which resulted non- compliance. Our attention was also drawn to the fact that the assessee had never received any notice in physical mode/post/by hand as the assessee was residing at Raigarh, whereas the assessment proceedings were going on at Raipur.

Basically, penalty under Section 271(1)(b) of the Act is strictly an administrative or procedural penalty. It is levied for failing to comply with statutory notices. The penalty proceedings under Section 271(1)(b) of the Act are intended to have deterrence to ensure timely compliance and therefore, we are of the considered view that the penalty proceedings under Section 271(1)(b) of the Act should be initiated within the reasonable time period from the date of non- compliance of the statutory notice and the same should be disposed of at the earliest. Waiting for the fate of quantum appeal for finalization of penalty

We have taken note of the fact the Ld. AO had not initiated penalty under Section 271(1)(b) of the Act for non-compliance of notice under section 142(1) of the Act issued to the assessee on 23.11.2019. We have considered the entire facts of the case and are satisfied with the reasons of non-compliance of the notices dated 05.11.2019 and 19.11.2019 issued under section 142(1) of the Act as there is no deliberate defiance of law or is guilty of conduct contumacious or dishonest or act in conscious disregard of the legal obligation. We therefore, hereby set aside the impugned order and delete the penalty of Rs.20,000/-.

In the result, the appeal of the assessee is allowed.

""थ"/ The Respondent

The Pr. CIT, Raipur (C.G.)