ABDULMANNAN MOHAMMEDKASAM BASTAWALA,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD 5(3)(1), AHMEDABAD, AHMEDABAD

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ITA 1843/AHD/2024Status: DisposedITAT Ahmedabad15 January 2025AY 2013-145 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the assessee had provided a categorical explanation in response to the notices issued by the AO regarding the credit card expenditures. The assessee had stated that these expenditures were not incurred by him but were due to the misuse of his credit cards by a friend who was absconding. The Tribunal observed that since the AO had noted in his order that the assessee had given an explanation, it could not be said that there was a non-compliance with the notices. The facts for AY 2013-14 were identical. Therefore, considering the facts and in the interest of justice, the penalty under Section 271(1)(b) was liable to be deleted for both assessment years. The ratio decidendi is that providing a plausible explanation, even if the underlying addition is sustained, can constitute compliance and negate willful non-compliance for penalty purposes under Section 271(1)(b). The operative direction was the deletion of the penalty.

What were the facts?

The assessee, Abdulmannan Mohammedkasad, filed appeals against the orders of the Ld. CIT(A) NFAC, Delhi, for Assessment Years (AY) 2012-13 and 2013-14. The Assessing Officer (AO) observed substantial credit card expenditure of Rs. 19,96,363/- by the assessee, who declared only salary income. The AO issued notices under Section 142(1) seeking explanation for the expenditure. The assessee replied via email on 08.12.2017, stating he was a salaried person and his friend had misused his credit cards for these transactions, and the friend was absconding. The AO added the expenditure as unexplained and initiated penalty proceedings under Section 271(1)(b) for non-compliance with notices. The Ld. CIT(A) upheld the penalty, finding willful non-compliance.

What were the issues?

1. Whether the penalty of Rs. 30,000/- imposed under Section 271(1)(b) of the Income Tax Act, 1961, for non-compliance with notices issued under Section 142(1) is justified for AY 2012-13? 2. Whether the penalty of Rs. 30,000/- imposed under Section 271(1)(b) of the Income Tax Act, 1961, for non-compliance with notices issued under Section 142(1) is justified for AY 2013-14? Assessee's Contentions: The assessee argued that he had provided a categorical explanation to the AO regarding the credit card expenditures, stating they were made by a friend who misused his cards and had since absconded. He contended that this constituted a reasonable cause for any perceived non-compliance and that the penalty under Section 271(1)(b) was unjustified. The assessee relied on cases such as Vedabai vs. Shantaram Baburao Patil, Charu Modi Bhartia vs. DCIT, and Balram Kumar Mahendra. Revenue's Contentions: The revenue, through the Sr. DR, argued that the assessee had failed to comply with the statutory notices issued by the AO, leading to the imposition of the penalty under Section 271(1)(b). The Ld. CIT(A) had confirmed the penalty on the grounds of deliberate and willful non-compliance.

Which sections of the Income-tax Act were involved?

Section 271(1)(b),Section 142(1),Section 273B

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Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: DR. BRR KUMAR & SHRI SIDDHARTHA NAUTIYAL

For Appellant: Shri Chetan Agrawal, C.A
For Respondent: Shri V K Mangla, Sr. DR
Hearing: 16.12.2024Pronounced: 15.01.2025

PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER:

Both the appeals have been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax (Appeals), (in short "Ld. CIT(A)"), National Faceless Appeal Centre (in short “NFAC"), Delhi vide order dated 23.08.2024 passed for A.Ys.2012-13 & 2013-14. Since the common facts and issued are involved for both the years under consideration, all the cases are taken up together.

2.

The assessee has taken the following grounds of appeal:- “1) Learned CIT(A) erred in law as well on fact in upholding the penalty of Rs. 30,000/- u/s.271(1)(b) of the Act imposed by Ld. A.O.” “1) Learned CIT(A) erred in law as well as on facts in upholding the penalty of Rs.30,000/- u/s.271(1)(b) of the Act imposed by Ld. AO.”

3.

The brief facts of the case are that the Assessing Officer observed that the assessee had incurred substantial expenditure totaling to Rs.19,96,363/- through several credit cards held by the assessee, during the impugned

assessment year. The Assessing Officer observed that on examination of records it was found that the assessee was receiving monthly salary from M/s. Blue Dart Express Ltd. and the assessee had filed return of income declaring salary income only. Therefore, the Assessing Officer issued several notices of hearing asking the assessee to explain the source of expenditure. The assesseee, vide email dated 08.12.2017 informed the Assessing Officer that he is a salaried person and the above transactions totaling to Rs.19.96 lakhs on his credit cards were made by his friend, by misusing the credit cards held by the assessee and his friend is now absconding. The assessee stated that he has not made these transactions on these credit cards and has also not paid the dues of the credit card companies. The Assessing Officer, however, confirmed the addition of sum of Rs.19,96,363/- on account of unexplained the Hon'ble Supreme Court held that the expression “reasonable cause" Income-tax, Central Circle-26, New Delhi [2019] 104 taxmann.com 390 (Delhi - Trib.)[26-03-2019], the ITAT held that where in response to notice issued under Section 142(2) requiring assessee to furnish information in respect of an account maintained with a bank in foreign country, assessee had categorically submitted before Assessing Officer that alleged bank account did not belong to her at all, it could not be said that assessee had failed to comply with said notice and, thus, impugned levy of penalty under Section 271(1)(b) was unjustified.

8.

In the case of Balram Kumar Mahendra 21 taxmann.com 222 (Delhi), the Tribunal held that Change of address can be a reasonable cause under Section 273B for non-compliance of notice under Section 143(2) by Income-tax, Central Circle-8, New Delhi [2015] 60 taxmann.com 131 (Delhi - Trib.)/[2015] 154 ITD 617 (Delhi - Trib.)[06-05-2015], the ITAT held that penalty under Section 271(1)(b) cannot be imposed for each and every notice issued under Section 143(2), which remained not complied with on part of assessee, but it should be restricted to first default only.

10.

In the instant facts, we observe that in response to notice issued by the Assessing Officer the assessee categorically replied that these expenditures had not been incurred by the assessee and that credit card has been misused by his friend to make the aforesaid expenditures and that the assessee has also not paid the dues of the credit card companies as well. Therefore, once the Assessing Officer has noted in his order that the assessee has given an explanation in response to notice issued by the Assessing Officer asking for details of expenditure done on credit cards, it cannot be said that there was non-compliance by the assessee in response to notices issued by the Assessing Officer. We observe that facts for A.Y. 2013-14 are also identical to A.Y. 2012-13, wherein assessee submitted that expenditures on the credit cards were not made by the assessee, but the credit card of the assessee had been misused by his friend, who is now absconding.

11.

In our view, considering the facts of the instant case, in the interest of justice, penalty under Section 271(1)(b) of the Act is liable to be deleted for both the assessment years under consideration before us.

12.

In the result, the appeal of the assessee is allowed. This Order is pronounced in the Open Court on 15/01/2025 Ahmedabad; Dated 15/01/2025 TANMAY, Sr. PSITA Nos.1797&1843/Ahd/2024 Asst. Years -2012-13 & 2013-14 -5- आदेश की प्रतिलिपि अग्रेषित/

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