Loading judgment…
Facts
The assessee, a housewife with non-taxable income, failed to furnish an income tax return despite receiving a notice under Section 148 regarding a property transaction. Penalties under Section 271(1)(b) and Section 271F were initiated for non-compliance with notices and failure to file the return. The assessee claimed that notices went into spam, she was travelling, and did not have taxable income.
Held
The Tribunal held that the penalties levied under Section 271(1)(b) and Section 271F were to be deleted. The Tribunal found that the assessee had demonstrated reasonable cause for failure to comply with the notices and file the return, making the penalty discretionary and not automatic as per Section 273B.
Key Issues
Whether the penalties levied for non-compliance with notices and non-filing of return are justified when a reasonable cause is demonstrated by the assessee, considering Section 273B of the Income Tax Act.
Sections Cited
139, 148, 271(1)(b), 271(F), 273B, 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SMT. BEENA PILLAI & SHRI GIRISH AGRAWAL
The assessee is housewife and is married to Ex-Naval Officer. Assessee is being a non filer as she did not have taxable income for the year under consideration. During the year under consideration assessee received notice u/s.148 stating that certain information on details of transaction for purchase of immovable property vide notice dated 27/03/2023. The Ld.AO after passing order u/s. 148(d) on 27/03/2023 took necessary approval from specified authority and issued notice u/s. 148 calling upon assessee to furnish return. As assessee failed to furnished the return of income, penalty u/s. 271(F) was initiated. Penalty u/s. 271(1)(b) was also initiated as assessee failed to comply with subsequent notices. The assessement order was passed on 22/03/2024 by making addition in the hands of the assessee at Rs. 1,16,19,000/-. Aggrieved by the order of the Ld.AO, the assessee preferred appeal before the Ld.CIT(A) against the quantum addition 2.1 As appeal was pending, the Ld.AO initiated penalty proceedings u/s.271(F) & 271(1)(b) by issuing notice dated 26/03/2024 and 15/04/2024. Before the Ld.AO the assessee submitted that, the assessee never received any notices and that she was residing with her children outside India between January,2024 to February, 2024. The reply filed by the assessee is reproduced in the penalty orders passed under respective sections.
2.2 The Ld.AO after considering the reply filed by the assessee, levied penalty amounting to Rs. 27,000/- u/s. 271(b) and Rs.5000/- u/s. 271(F) of the Act. Aggrieved by the order of the Ld.AO assessee preferred the appeal before the Ld.CIT(A).
The Ld. CIT(A) upheld the penalty by observing as under: “[ITA No.644/Mum/2025 (for penalty u/s. 271(1)(b)) 4. Finding of CIT(A) 4.1. I perused the assessment order and grounds of appeals. The impugned appeal pertains to levy of penalty for non filing response to notices of the assessing officer during the course of assessment proceedings. Aggrieved by said assessment order, the appellant has raised multiple grounds of appeal which are adjudicated as under. 4.2. During the assessment proceedings, appellant has failed to comply the statutory notice issued u/s 142(1) on 02/11/2023 & 23/11/2023 of the Income Tax Act. The appellant has failed to submit reasonable cause which led to failure to comply notices of the Ld. AO. Therefore, the penalty of Rs.20,000/- was levied. 4.3. During the appellate proceedings as well the appellant has not furnished any reasonable cause which prohibited appellant from complying with statutory notices. Therefore, the penalty levied by Ld. AO is found to be correct and being upheld.] [ (for penalty u/s. 271F) 5.1 Finding of CIT(A) 5.2 The impugned appeal pertains to levy of penalty for non filing of income tax return. 5.3 As per the assessment order, the appellant was accorded reasonable opportunity to file response with reason of non-filing of income tax return despite having taxable income. The appellant during the assessment proceedings did not file any justification for not filing return of income. Thus, the Ld. AO levied penalty of Rs.5,000/- for not filing income tax return as per provisions of section 139.
A.Y. 2016-17 Indu Bisht 5.4 During the appellate proceedings as well, the appellant did not file any justified return of income. 5.5 On merits of the case, there is no denial of the fact that the appellant had purchased property and her case was scrutinised in detail and there was addition of Rs.1,16,90,000/-. Which clearly indicates that the appellant was liable to file income tax return u/s 139(1) but the same was not done. Further, in absence of any justification /s 274, the penalty levied is fund to be correct and being upheld.]” Aggrieved by the order of Ld. CIT(A) the assessee is in appeal before this Tribunal.
The Ld.AR submitted that, the assessee did not receive any notice u/s.148. Subsequent notice sent by the revenue went into spam folder. It was further submitted that, since the assessee was travelling mails were not being checked and also failed to look into spam folder. 4.1 The Ld.AR submitted that, assesse never received any message regarding notice being issued which is a usual procedure followed. The Ld.AR submitted that Ld.AO incorrectly rejected the explanation provided, though its own department accepts that the messages do go in spam folder and hence can be missed. He submitted that, subsequently assessee’s husband responded by filing details and the Ld.AO took note of the submission filed by the assessee while passing the assessment order. He thus submitted that once assessee complied with subsequent notices, penalty u/s. 271(1)(a)(b) was bad in law. 4.2 In respect of penalty levied u/s.271E, the Ld.AR submitted that, the assessee did not have taxable income for the year under consideration and thus there was no requirement to file return A.Y. 2016-17 Indu Bisht u/s.139(1) of the Act. He thus submitted that the assessee made out reasonable cause for not filing the return of Income u/s.139(1) of the Act and thus he prayed for deletion of the penalty u/s.271(F). 4.3 On the contrary, the Ld.DR relied on order passed by authorities below. We have perused the submissions advance by both sides in light of records placed before us.
Admittedly the assessee is house wife and has income which is below taxable limits. It is noted that assessee responded to the notice by filing all relevant details regarding the transaction and furnished all requisite details as called for during assessment proceedings. 5.1 A perusal of the provisions of u/s. 271(1)(b) and 271F, shows that, the Parliament used the words "may" and not "shall", thereby making their intention clear in as much as that levy of Penalty is discretionary and not automatic. A careful reading of Section 273B encompasses that certain penalties "shall" not be imposed in cases where "reasonable cause" is made out. Section 273B thus provides discretionary power by the use of word "shall be imposed if the assessee proves" where a reasonable cause for the said failure" is made out. 5.2 Applying the provisions of Section 273B of the Act, we have no hesitation in deleting the penalties levied u/s. 271(1)(b) and u/s. 271F of the Act since “reasonable cause” is clearly demonstrated by the assessee in the present fact of the case. Therefore the penalties levied u/s. 271(1)(b) and u/s. 271F are deleted.
Accordingly the grounds raised by the assessee in both the appeals stands allowed.
In the result the appeals filed by the assessee stands allowed. Order pronounced in the open court on 28/03/2025