NIHAL INDUSTRIES PRIVATE LIMITED,AHMEDABAD vs. INCOME TAX OFFICER, WARD 3(1)(1), AHMEDABAD

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ITA 1488/AHD/2024Status: DisposedITAT Ahmedabad12 March 2025Bench: SHRI SIDDHARTHA NAUTIYAL (Judicial Member), SHRI MAKARAND V. MAHADEOKAR (Accountant Member)1 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while failure to respond to notices warrants penalty, imposing separate penalties for each instance of default is not justified. The penalty is intended as a deterrent, not revenue generation.

What were the facts?

The assessee filed a return declaring a loss, and the case was reopened. Notices were issued, to which the assessee failed to respond, leading to a best judgment assessment and a penalty under Section 271(1)(b). The CIT(A) confirmed the penalty, holding that notices were served electronically.

What were the issues?

Whether the penalty imposed under Section 271(1)(b) is justified, and whether separate penalties can be imposed for non-compliance with multiple notices arising from the same cause.

Which sections of the Income-tax Act were involved?

Section 147,Section 148,Section 142(1),Section 144,Section 271(1)(b)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “D” BENCH, AHMEDABAD

Before: SHRI SIDDHARTHA NAUTIYAL & SHRI MAKARAND V. MAHADEOKAR

For Appellant: Shri Arjav D. Vidani, AR

"ी िस"ाथ" नौिटयाल, "ाियक सद" एवं "ी मकरंद वसंत महादेवकर, लेखा सद" के सम%। ] ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1488/Ahd/2024 िनधा"रण वष" /Assessment Year : 2014-15 Nihal Industries Private The Income Tax Officer बनाम/ Limited Ward-3(1)(1) v/s. 1961, Above Royal Cycle Ahmedabad Inside Panchkuwa Panchkuwa Ahmedabad – 380 001 "थायी लेखा सं./PAN: AADCN 7129 D (अपीलाथ&/ Appellant) ('( यथ&/ Respondent) Assessee by : Shri Arjav D. Vidani, AR Revenue by : Ms. Ketaki Desai, Sr.DR सुनवाई की तारीख/Date of Hearing : 11 /03/2025 घोषणा की तारीख /Date of Pronouncement: 12 /03/2025 आदेश/O R D E R

PER MAKARAND V. MAHADEOKAR, AM:

1.

This appeal by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as “CIT(A)”], dated 21.06.2024, confirming the penalty of Rs.30,000/- levied by the Assessing Officer [hereinafter referred to as “AO”] under Section 271(1)(b) of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for Assessment Year (AY) 2014-15. Nihal Industries Pvt.Ltd. vs. ITO Asst. Year : 2014-15 Facts of the case:

2.

The assessee filed its return of income for AY 2014-15 on 17.11.2014, declaring a loss of Rs.7,47,000/-. The case was reopened under Section 147 of the Act, and a notice under Section 148 of the Act was issued on 28.08.2022. The AO issued notices under Section 142(1) of the Act on 03.04.2023, 19.04.2023, and 25.04.2023. The assessee failed to comply with these notices, and consequently, the AO completed the assessment under Section 144 r.w.s. 147 of the Act on 04.05.2023, making an addition of Rs.2,44,53,602/-. Subsequently, penalty proceedings under Section 271(1)(b) of the Act were initiated, and the AO imposed a penalty of Rs.30,000/- for non-compliance with the statutory notices.

3.

The assessee challenged the penalty before the CIT(A), contending that the notices were not received at the registered address of the company and the assessment proceedings were conducted ex-parte, without the assessee having knowledge of the same. The CIT(A) dismissed the appeal, holding that notices were served electronically through the e-filing portal, and therefore, the assessee's plea of non-receipt was not acceptable. The CIT(A) further held that the assessee failed to provide any reasonable cause for non- compliance.

4.

Aggrieved by the order of the CIT(A), the assessee is in appeal before us with following grounds of appeal:

1. The Learned CIT has erred in law and fact by confirming the penalty of Rs.30,000/- imposed by the assessing officer under section 271(1)(b) of the act.

2. With your Honours pre permission, the appellant reserves the right to add, alter or amend or withdraw any ground/s of appeal. Nihal Industries Pvt.Ltd. vs. ITO Asst. Year : 2014-15

5.

During the course of hearing before us, the Authorized Representative (AR) reiterated that the assessee never received any physical or email communication regarding the assessment and penalty proceedings. The Director of the assessee company filed an affidavit stating that they have not received any notice and they were not aware about the assessment proceedings.

6.

The Departmental Representative (DR), on the other hand, stated that as per the scheme of faceless assessment the notices are issued online by mail and therefore there is no question of non-receipt of notices.

7.

We have carefully considered the submissions made by the assessee as well as the findings of the CIT(A). The primary issue for adjudication is whether the penalty under Section 271(1)(b) of the Act is justified in the present case.

7.1. The assessee is a Private Limited Company engaged in business and is expected to be aware of the faceless e-assessment process. Notices were issued through the faceless e-proceedings portal, which is a legally recognized mode of service under the Income Tax Act. Given that a corporate entity is required to have adequate systems in place to track e-proceedings on the Income Tax portal, the claim of the assessee regarding non-receipt of notices is not entirely convincing. Therefore, we find that the assessee has not demonstrated reasonable cause for non-compliance with the statutory notices issued under Section 142(1) of the Act. Nihal Industries Pvt.Ltd. vs. ITO Asst. Year : 2014-15 7.2. However, while the failure to respond to statutory notices warrants the levy of penalty, the imposition of separate penalties for each instance of default is not justified. The Co-ordinate Bench in the case of Smt. Rekha Rani (ITA No. 6131/Del/2013) has held that penalty under Section 271(1)(b) of the Act cannot be imposed repeatedly for multiple notices if the default arises from the same cause. It was further observed that in such cases, the appropriate remedy for non-compliance is the completion of best judgment assessment under Section 144 of the Act, rather than imposing multiple penalties.

7.3. Following the rationale laid down in the case of Rekha Rani (supra), we reiterate that penalty under Section 271(1)(b) of the Act is intended as a deterrent measure and not as a revenue-generating provision. Allowing penalties to be imposed for multiple defaults of the same nature would lead to an excessive and unintended burden on the assessee, which does not align with the legislative intent behind the provision.

7.4. Considering the facts and circumstances of the case, we restrict the penalty to Rs.10,000/- for a single default, instead of Rs.30,000/- as confirmed by CIT(A).

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