GAGAN GAUTAM,DELHI vs. ITO, WARD- 5(1), NEW DELHI

ORDER PER O.P. KANT, AM:

This appeal by the assessee is directed against order dated 10/05/2019 passed by the Learned Commissioner of Income Tax (Appeals)-17, New Delhi [in short ‘the Learned CIT(A)’] in relation to penalty levied by the Assessing Officer under section 271(1)(b) of the Income-tax Act, 1961 (in short ‘the Act’) for alleged non- compliance of notices issued during assessment proceeding for assessment year 2010-11. The grounds raised by the assessee are reproduced as under:

1. That on the facts and circumstances of the case and in law the Ld. CIT (Appeals) erred in upholding penalty of Rs. 70,000/- as against penalty of Rs. 80,000/- levied by the Assessing officer u/s 271(l)(b) of the Income-tax Act, 1961.

2. That the observations of the Ld.CIT (Appeals) being contrary to the actual facts, the order sustaining the penalty is bad in law and penalty deserved to be set aside.

3. That the Ld.CIT (Appeals) having failed to appreciate that the assessee had challenged the reopening of assessment and the assessees’ requests made from time to time to provide the reasons recorded for reopening and sanction of appropriate authority having not been provided, the assessee was constrained to provide the details and ore the order levying penalty is bad in law.

4. That the Ld.CIT (Appeals) ought to have held that the addition made to the returned income having been deleted in appeal before the CIT (Appeals) and the assessee having complied with the notices through emails, no penalty is leviable.

5. That unnecessary harassment having been caused to the assessee by the irresponsible action of the Department, proper cost be levied on the Department. That the assessee craves leave to add, alter, amend, modify, vary or delete any ground of appeal before or at the time of hearing.

2. Briefly stated facts of the case are that in view of the cash deposits of ₹ 14,89,775/- observed in bank account, assessment proceedings were reopened by way of issue of notice dated 30/03/2017 under section 148 of the Act by the Income Tax Officer, Ashok Nagar, Madhya Pradesh. In response to said notice, the assessee filed return of income on 03/05/2017 declaring total income of ₹ 1,89,280/-. Thereafter, the case was transferred to the Income Tax Officer, Ward 50(1), New Delhi (i.e. the Ld. Assessing Officer), who has passed the assessment order. Thereafter, the Assessing Officer commenced assessment proceedings, which has been completed under section 144 of the Act as best judgment assessment on 27/12/2017. The Assessing Officer has recorded in the assessment order non-compliance of notices issued under section 143(2) and 142(1) of the Act by the assessee. For those non-compliances, the Assessing Officer initiated penalty proceedings in terms of section 271(1)(b) of the Act. Before the Assessing Officer, the assessee requested to keep the penalty in absence, however, the Assessing Officer levied penalty of ₹ 80,000 ( ₹ 10,000 each for eight number of defaults) in his order dated 26/06/2018. Aggrieved, the assessee filed appeal before the Learned CIT(A) and made detailed submissions contesting the allegation of non-compliance. The said submission have been reproduced by the Ld. CIT(A) on page 6 to 9 of the impugned order. The Ld. CIT(A) has summarized the alleged non- compliances by the assessee on page 10 of the impugned order. After considering the submission of the assessee, the Learned CIT(A) deleted the penalty of ₹ 10,000/- for one default, however upheld penalty of Rs.70,000/- in respect of the remaining defaults, observing as under: “6.4 Hon’ble ITAT Delhi ‘G’ Bench in the case of Akhil Bhartiya Prathmik Shikshak Sangh Bhawan Trust vs. Assistant Director of Income tax (2008) 115 TTJ (Delhi) 419 held that if assessment order is passed u/s 143(3) and not u/s 144 then non-compliance is deemed to have been waived. Since, in this case, the order passed is u/s 144 of the Act, therefore, the non-compliance cannot be deemed to have been waived. 6.5 Further it is important to note that section 273B does provide that the penalty is not to be imposed if the assessee has reasonable cause for non-compliance. Since, in this case, the assessee has failed to furnish any explanation to justify the non-compliance, therefore, it is a fit case for imposition of penalty under section 271(l)(b) of the I.T. Act. 6.6 In view of the above discussion, I find that the assessee has failed to explain the reasons for non-compliance. Therefore, I find that the Assessing Officer has correctly invoked penalty u/s 271(l)(b) of the Income Tax Act, 1961 in this case. As the assessee has attended one hearing in response to notice issued 07.11.2017, the penalty u/s 271(l)(b) is restricted to Rs. 70,000/-.”

2.1 Aggrieved with the above finding of the Ld. CIT(A), the assessee is in appeal before the Income Tax Appellate Tribunal (in short ‘the Tribunal’) raising the grounds as reproduced above.

5 142(1) An email received from assessee with a marked as request for adjournment but did not file 24.11.17 29.11.17 'final any requisite details. On request case was opportunity' adjourned to 06.12.2017 6. On 04.12.2017, an e-mail received from assessee with a request for adjournment but did not file Adjournment 06.12.17 any requisite details. Assessee was 29.11.17 requested to appear on 06.12.2017. On 06.12.2017, none attended. On 13.12.2017, an e-mail received from assessee with a request for adjournment 142(1) but did not file file any requisite details. marked as 7 07.12.17 13.12.17 Considering the request, assessee was last and final asked to file the requisite document either opportunity through AR or through e-mail on or before 15.12.2017 .

On 15.12.2017, assessee sent an email 8 Adjournment 13.12.17 15.12.17 but did not file any submission 6.1 We find from above table that the penalty in respect of default at serial No. 3 (three) for non-compliance of notice dated 07/11/2017, has already been deleted by the Learned CIT(A) as the assessee attended on that date and on his request case was adjourned to another date. We find that in respect of default listed at serial No. 5, the notice was issued on 24/11/2017 for hearing fixed on 29/11 2017. It is evident from the third column, that case was adjourned to 06/12/2017 and therefore, we do not find any reason for levying penalty, when the Assessing Officer himself adjourned the matter to another date. Against the default listed at serial No. 6 of the table, we find that the assessee sent an E-mail on 04/12/2017 for hearing dated 06/12/2017. The assessee was not communicated at refusal of adjournment and therefore the assessee did not attend on 06/12/2017. In our opinion, there is a reasonable cause for failure to attend on said date in view of the adjournment application filed by him. In respect of default listed at serial No. 7 and 8, also the assessee sought adjournment through email. We also find that most of the non-compliance is within the period of one month i.e. from 14/11/2017 to 13/12/2017. The Assessing Officer himself has claimed in para 2 of the assessment order that case was transferred to him because jurisdiction lied with him. It is also to be noted that objection of the assessee against reopening was not disposed off by the Assessing Officer, which is one of the prerequisite for validity of reassessment proceedings.

6.2 In quantum Appellate proceeding, the assessee challenged the reassessment proceedings on the ground that there was no application of the mind in the reasons recorded. According to the assessee, he had filed regular return of income for the year under consideration, whereas the reasons recorded the Assessing Officer has noticed that no return was filed for the relevant assessment year. The assessee also challenged the jurisdiction of the Income Tax Officer at Ashok Nagar, Madhya Pradesh in issuing notice under section 148 of the Act. The Ld. first appellate authority however allowed the appeal of the assessee on merit of the addition observing as under: “6. In ground no. 7, the appellant has challenged the addition amounting to Rs.16,23,775/- as per the credits in the bank account of the appellant maintained in Punjab National Bank for the year under consideration. It has been argued by the appellant that this nature of receipts falls under the provision of section 44AF of the Act as he is in the retail business of selling pooja items, religious objects related to rituals etc and therefore, he is not required either to get his accounts audited or to maintain books of accounts because he has disclosed more than 5% of total turnover as profits. He has also earned some professional income for giving advice of astrology to various persons. It is contended that his earnings are in small amounts, in cash, for most of the time and he keeps on depositing the cash periodically. Simultaneously, the cash is also withdrawn for the purchases such as pooja items etc as many withdrawals are reflected in cash, along with cash deposits. It is further contended that such sales and purchases representing deposits and withdrawals in the bank account relates to the retail business and provisions of section 44AF is duly applicable. 6.1 It is seen from assessment order that AO has conceded about the original return filed by the appellant but the same was treated as invalid due to the fact that provision of section 44AF was not mentioned in earlier return. Further, in the return, filed in response to notice u/s 148 the appellant has declared the receipts u/s 44AF but the same was not accepted by the AO, in the absence of any details furnished by the assessee. 6.2 Here it is pertinent to note that at the time of reopening the then AO was not in the knowledge of original return. It is not clear whether any notice issued to treat the original return of income as defective or non-est. Further, the return submitted in response to notice u/s 148, the appellant has mentioned about his income falling within 44AF of the Act. Even if the original return is treated as invalid, nothing has been brought on record to substantiate that appellant is not in retail business. Nothing has been brought on record by the AO to say that assessee is not in the business of retail trading of pooja items or in the profession of consultancy in astrology. On the other hand, in his return, in response to notice u/s 148 of the Act, the appellant has disclosed it as profit out of the retail business, falling within the meaning of provisions of section 44AF of the Act. It is clear from the provision of section 44AF of the Act that appellant is not required to maintain or get his books of accounts audited especially when he has shown profits above the threshold limit. 6.3 in such circumstances, looking to the scheme of the Act, no further details are required as such. The bank account clearly indicates the receipts and withdrawals however, the AO has only taken the receipts and disregarded withdrawals as expenditure without any basis. 6.4 It is also seen that the assessee has considered Rs. 15,18,775/- as his gross receipts for computation of profit for retail business and disclosed more than 5% and also Rs. 1,05,000/- as income from professional consultancy. There are certain other receipts in cash also which has been duly considered and the gross total income amounting to Rs. 2,03,690/- has been duly worked out. 6.5 From above discussions it is very clear that the appellant has properly disclosed his income u/s 44AF of the Act, wherein all the receipts have been considered. AO was unable to establish beyond doubt that assessee is not earning such business income, nor considered the expenditure involved. In view of this and looking to the facts and circumstances of this case and in law the additions is not sustainable and accordingly, the same is directed to be deleted and appellant is required to be assessed at the income disclosed by him, voluntarily. Therefore, this ground of appeal is allowed.”

6.3 The Ld. CIT(A) did not adjudicate on legal grounds challenged by the assessee. From the above observation of the Ld. first appellate authority in quantum appellate proceeding, we find that he has decided the appeal on the basis of the submission and explanation which were filed before the Assessing Officer without taking any additional evidence on record. This means that information which was required for completing the assessment was already filed by the assessee before the Assessing Officer and non-attendance or non-filing of information by the Assessing Officer in response to various notices is rendered merely a technical or venial breach when the addition has already been deleted by the Learned CIT(A) in quantum appeal proceedings keeping in view the explanation regarding the source of cash deposits. In view of Section 273B of the Act, when the assessee has complied with the notice issued by the AO the penalty was not imposable as the explanation filed by the assessee was finally found to be correct and accepted in the quantum appeal. 6.4 In view of the above facts and circumstances, we do not find any justification for sustaining the penalty levied by the Assessing Officer and accordingly, we cancel the penalty sustained by the Learned CIT(A). The grounds of the appeal of the assessee are accordingly allowed.