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Facts
The assessee did not file his return of income. The Assessing Officer (AO) reopened the case under section 147, issued notices under section 148 and 142(1), but the assessee did not comply. The AO passed an ex-parte assessment order under section 144 and initiated penalty proceedings under section 271(1)(b) for non-compliance with two notices. The penalty of Rs. 20,000 was upheld by the CIT(A).
Held
The Tribunal held that non-compliance with statutory notices under section 142(1) is an admitted position. The assessee failed to offer any explanation or a bonafide reason for non-compliance, and ignorance of law is not a valid excuse. Therefore, the levying of penalty under section 271(1)(b) by the lower authorities was justified.
Key Issues
Whether penalty under section 271(1)(b) is justified for non-compliance with statutory notices when no reasonable cause is shown and the assessment order is ex-parte.
Sections Cited
147, 148, 142(1), 144, 271(1)(b), 250, 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI VIKRAM SINGH YADAV, AM AND
O R D E R Per Kavitha Rajagopal, JM:
This appeal is filed by the assessee, challenging the order of the Learned Commissioner of Income Tax Appeal, Mumbai (‘ld. CIT(A)’ for short), National Faceless Appeal Centre (“NFAC” for short) passed u/s 250 of the Income Tax Act, 1961 (‘the Act'), pertaining to the Assessment Year (‘A.Y.’ for short) 2013-14.
It is observed that this matter came up for hearing on 25.11.2025, 12.11.2026 and thereafter on 10.03.2026 where none appeared on behalf of the assessee. It was further observed that the Tribunal vide its order sheet dated 12.01.2026 had granted the assessee a final opportunity to represent his case, failing which an ex-parte order would be passed.
Inspite of the same, neither the assessee nor his authorized representative appeared, not Mr. Akshit Mahesh Karia was any adjournment application filed by the assessee. In the absence of the same, we hereby proceed to dispose of this appeal by hearing the Learned Departmental Representative (“Ld. DR” for short) and on perusal of the materials available on record.
The assessee has raised the following grounds of appeal:
“1) That the learned C.I.T. (Appeals) has erred in law and on facts in not appreciating that the penalty imposed U/s 2 1(1)(b) of the Act amounting to Rs.20,000/- is void and invalid as the assessment proceedings in the course of which it has been Initiated are without jurisdiction and void because the binding judgement of the Hon'ble Bombay High Court in the case of HEXAWARE TECHNOLOGIES LTD. VS. ASSISTANT COMMISSIONER OF INCOME TAX regarding issue of notice U/s 148 in faceless manner has not been followed by the A.O.
2) That without prejudice to the above ground the learned C.I.T. (Appeals) has further erred in law and on facts in ignoring that the above penalty imposed by the A.O. Is in violation of the provisions of Section 274 of the Act as no reasonable opportunity of being heard has been provided to the assessee in as much as the penalty has been imposed without rejecting the assessee's request to keep the penalty proceedings in abeyance till the disposal of the assessee's appeal against assessment order and thereafter to provide a fresh opportunity to explain the assessee's case.
3) That without prejudice to the above grounds the learned C.I.T.(Appeals) has further erred in law and on facts in ignoring that the penalty imposed is invalid and void as it has been imposed in violation of the provisions of Section 271(1)(b) of the Act that a penalty of Rs.10,000/- may be imposed for each default but the A.O. has imposed a single penalty of Rs.20,000/for alleged non compliance of 2 notices U/s 142(1) as stated in the penalty order dated 06.02.23 and 15.03.23 for compliance on 20.02.23 and 22.03.23 respectively.
4) That without prejudice to the foregoing ground the learned C.I.T.(Appeals) has erred in law and on facts in not appreciating that the assessee had reasonable cause for non compliance of notices U/s 142(1) of the Act on account of bonafide belief that he was not required to comply with the notices U/s 142(1) as he was not liable to pay any tax under the Income-tax Act as the tax has already been deducted at Source.
5) That the learned C.I.T. (Appeals) has further erred in law and on facts in rejecting the assessee's explanation for noncompliance of notices on the ground that ignorance of law cannot be an excuse ignoring that if any ignorance resulted in breach of law the default will be technical or venial which did not prejudice the interest of revenue as no tax avoidance or tax evasion was involved (Reliance is placed of the judgement of Hon'ble Supreme Court in the case of HINDUSTAN STEEL LTD. VS. STATE OF ORISSA (1972) reported in 83 ITR Page 26.
6) That the appellate order is arbitrary, unjust, excessive, bad in law and against the principals of natural justice.”
Brief facts of the case are that the assessee is an individual and had not filed his return of income for the year under consideration. The assessee’s case was reopened u/s 147 of the Act based on the information from the insight portal that the assessee has transacted in purchase/sale of immovable properties and had also received salary income during the impugned year. Notice u/s 148 of the Act dated 07.04.2022 was issued but not served upon the assessee. Further, the Learned Assessing Officer (“Ld. AO” for short) issued notices u/s 142(1) of the Act dated 06.02.2023 and 15.03.2023 and subsequently a show cause notice u/s 144 of the Act was issued by the Ld. AO. The Ld. AO passed the assessment order dated 02.02.2024 u/s 147 r.w.s. 144 r.w.s. 144B of the Act being the best judgment assessment thereby determining total income at Rs.50,70,560/- after making various additions/disallowances. Penalty proceeding was also initiated by the Ld. AO u/s 271(1)(b) of the Act. The penalty order u/s 271(1)(b) of the Act dated 15.07.2024 was passed by the Ld. AO where penalty amounting to Rs.20,000/- was levied for non- compliance of two notices u/s 142(1) dated 06.02.2023 and 15.03.2023 respectively.
Aggrieved, the assessee was in appeal before the first appellate authority who vide order dated 18.07.2025 upheld the penalty levied by the Ld. AO.
Aggrieved, the assessee is in appeal before us, challenging the order of the Ld. CIT(A) on the abovementioned grounds.
Mr. Akshit Mahesh Karia 7. We have heard the Ld. DR and perused the materials available on record. The issue that requires adjudication is whether the lower authorities were justified in levying penalty u/s 271(1)(b) of the Act amounting to Rs.10,000/- each for default on two occasions for non-compliance of the statutory notices. The facts are that the assessee is said to have received salary income amounting to Rs.8,55,560/- from Eclerx Services Ltd. as per Form 26AS and the same has not been offered to tax and further the Ld. AO made addition of Rs.18,25,000/- towards the Long Term Capital Gain (“LTCG” for short) out of sale of immovable property, unexplained investment u/s 69 amounting to Rs.23,75,000/- and undisclosed commission receipt amounting to Rs.15,000/- thereby determining the total income at Rs.50,70,560/-. The assessment order was an ex-parte order where the assessee is said to have been non-compliant to the statutory notices issued by the Ld. AO. The Ld. AO initiated penalty proceeding u/s 271(1)(b) of the Act vide show cause notices u/s 271(1)(b) of the Act dated 02.02.2024 and 06.06.2024, for which the assessee made compliance to the notice dated 06.06.2024 vide response dated 10.06.2024 where the assessee has requested the Ld. AO to keep the penalty proceeding in abeyance till the disposal of the appeal filed by the assessee before the Ld. CIT(A) challenging the assessment order. The Ld. AO levied penalty amounting to Rs.10,000/- each for non- compliance of two statutory notices issued u/s 142(1) of the Act dated 06.02.2023 and 15.03.2023 in the absence of any satisfactory reply from the assessee vide the impugned order. The same was upheld by the Ld. CIT(A) rejecting the assessee’s contention that on a bonafide belief that the assessee was not required to file his return of income and also to reply to the notices who was also not assisted by a tax advisor, cannot be a bonafide reason for non-compliance as per Ld. CIT(A). Before us there was neither any representation nor Mr. Akshit Mahesh Karia any written submission made by the assessee justifying why penalty should not be levied u/s 271(1)(b) of the Act. For adjudication of the issue in hand, we hereby reproduce the relevant provision for ease of reference:
“1 [271. Failure to furnish returns, comply with notices, concealment of income, etc.—
(1) If the 2 [Assessing Officer] or the ( ***) [Joint Commissioner (Appeals)] or the [Commissioner (Appeals)] or the [Principal Commissioner or Commissioner] in the course of any proceedings under this Act, is satisfied that any person— (a) ……
(b) has (***) failed to comply with a notice [under sub-section (2) of section 115WD or under sub-section (2) of section 115WE or under sub-section (1) of section 142] or sub-section (2) of section 143 10[or fails to comply with a direction issued under sub-section (2A) of section 142], or (c) …. (d) …. he may direct that such person shall pay by way of penalty,—
[…]
[(ii) in the cases referred to in clause (b), [in addition to tax, if any, payable] by him, [a sum of ten thousand rupees] for each such failure;] [(iii) in the cases referred to in [clause (c) or clause (d)], [in addition to tax, if any, payable] by him, a sum which shall not be less than, but which shall not exceed [three times], the amount of tax sought to be evaded by reason of the concealment of particulars of his [income or fringe benefits] or the furnishing of inaccurate particulars of such income [or fringe benefits].
[* * * * *]
Explanation 1.—Where in respect of any facts material to the computation of the total income of any person under this Act,—
(A) such person fails to offer an explanation or offers an explanation which is found by the [Assessing Officer] or the [***] [Joint Commissioner (Appeals) or the] [Commissioner (Appeals)] or the [Principal Commissioner or Commissioner] to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him,] Mr. Akshit Mahesh Karia then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.”
On a bare perusal of the said provision it is evident that the Ld. AO may direct the assessee to pay a sum of Rs.10,000/- for each failure to comply with notices u/s 142(1) of the Act where the assessee fails to offer an explanation or offers an explanation which is found to be false by the Ld. AO or the explanation offered is not substantiated and also fails to prove that the explanation is bonafide and that the assessee has disclosed all material facts for the purpose of computation of his income. Here, in the present case, the assessee has neither offered any explanation for non-compliance before the Ld. AO nor has given any bonafide reason except for pleading ignorance. Further, we are also conscious of the fact that the Ld. AO was constrained to pass ex-parte order u/s 144 of the Act since the assessee did not comply with the notices issued by him from time to time and hence the assessee cannot claim the plea of subsequent compliance either. The provision explicitly states that the assessee must show reasonable cause for non-compliance casting onus upon the assessee which case it is not for the Revenue to prove that there has been deliberate default on the part of the assessee for not complying with the statutory notices. Therefore, the non-compliance with statutory notices u/s 142(1) of the Act is an admitted position and we do not find any error in the action of the lower authorities in levying penalty u/s 271(1)(b) of the Act and hence, we hold that there is no infirmity in the order of the Ld. CIT(A). Accordingly, the grounds of appeal raised by the assessee are hereby dismissed.
Order pronounced in the open court on 16.03.2026