BHOGIBHAI VITHALBHAI PATEL,MEHSANA vs. THE ACIT, CIRCLE-GANDHINAGAR, GANDHINAGAR
What did the Tribunal hold?
The Tribunal held that the penalty of Rs. 20,000 imposed under Section 272A(1)(d) of the Act was unjustified and deserved to be set aside. The CIT(A) had summarily dismissed the assessee's affidavits explaining the communication failure due to the authorized representative's inaction, without providing an opportunity for cross-examination or conducting an independent inquiry, which violated the principles of natural justice. The Tribunal noted that the non-compliance was not due to willful default or mala fide intent but due to the negligence of the authorized representative, which was beyond the assessee's control. The Tribunal also found the show-cause notice to be vague, failing to specify the exact non-compliance and erroneously including Section 142(2A), indicating a non-application of mind by the AO. The Tribunal concluded that the assessee had demonstrated a reasonable cause for non-compliance under Section 273B, as the lapse was inadvertent and not deliberate, and the assessee had the intention to comply. Therefore, the penalty was not sustainable.
What were the facts?
The assessee, Bhogibhai Vithalbhai Patel, a senior citizen, filed his return for AY 2017-18 declaring Rs. 8,29,990. His case was selected for limited scrutiny. Notices under Section 143(2) and 142(1) were issued. The Assessing Officer (AO) made a best judgment assessment under Section 144, adding Rs. 19,00,000 under Section 68 for unexplained cash deposits. Subsequently, the AO imposed a penalty of Rs. 20,000 under Section 272A(1)(d) for non-compliance. The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], stating that notices were sent to his authorized representative's email, who failed to inform him. The CIT(A) rejected this explanation and upheld the penalty.
What were the issues?
1. Whether the penalty of Rs. 20,000 levied under Section 272A(1)(d) of the Income Tax Act, 1961, is sustainable in law, considering the assessee's explanation of communication failure through his authorized representative? Assessee's Contention: The assessee argued that he is a senior citizen with limited familiarity with tax proceedings. Notices were sent to his authorized representative's email, who failed to inform him, leading to inadvertent non-compliance without mala fide intent. Affidavits were filed to explain this communication gap. The penalty notice was vague, failing to specify exact non-compliance and erroneously included Section 142(2A). Reliance was placed on *Glass Lines Equipments Co. Ltd. v. CIT* and *CIT v. Manjunath Cotton & Ginning Factory*. Revenue's Contention: The revenue supported the orders of the AO and CIT(A), stating that multiple opportunities for compliance were provided and utilized by the assessee.
Which sections of the Income-tax Act were involved?
Section 272A(1)(d),Section 143(2),Section 142(1),Section 144,Section 68,Section 273B,Section 274,Section 142(2A)
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- CIT v. Manjunatha Cotton & Ginning Factory2,590 citing359 ITR 565 · 2013 · HC · Read judgment
- Glass Lines Equipments Company Ltd. v. CIT150 citing253 ITR 454 · 2002 · HC · Read judgment
Income Tax Appellate Tribunal, “ SMC” BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI MAKARAND V. MAHADEOKAR
ORDER \nPER MAKARAND V. MAHADEOKAR, AM:\nThis appeal by the assessee is directed against the order passed by the\nCommissioner of Income Tax (Appeals), National Faceless Appeal Centre\n(NFAC), Delhi (hereinafter referred to as “CIT(A)”), dated 30.08.2024,\nconfirming the penalty of Rs.20,000/- levied by the Assessing Officer\n(hereinafter referred to as “AO") under Section 272A(1)(d) of the Income Tax\nAct, 1961 (hereinafter referred to as \"the Act\") vide assessment order dated\n12/12/2019 for the Assessment Year (AY) 2017-18.\nFacts of the Case:\n2. The assessee is a senior citizen deriving income from pension and bank\ninterest. The return of income for A.Y.2017-18 was filed on 19.07.2017\ndeclaring total income of Rs.8,29,990/-. The case was selected for limited\nscrutiny under CASS, and a notice u/s 143(2) of the Act was issued on\n24.09.2018. Subsequent notices u/s 142(1) of the Act dated 05.04.2019 and\n23.08.2019 were issued to the assessee for furnishing additional information.\nAs the assessee allegedly failed to comply with the notices, the AO proceeded\nto make a best judgment assessment u/ s.144 of the Act on 12.12.2019, making\nan addition of Rs.19,00,000/- under Section 68 of the Act for unexplained cash\ndeposits. Thereafter, the AO imposed a penalty of Rs.20,000/- under Section\n272A(1)(d) of the Act for non-compliance.\n3. The Assessee preferred an appeal before the CIT(A) and submitted\nbefore the CIT(A) that the notices and penalty orders were communicated to\nthe email ID of the authorized representative, Shri M.B. Thakor, who failed\nto inform the assessee. The assessee also filed affidavits explaining the\ncommunication failure and asserted that he was unaware of the proceedings.\nHowever, the Ld.CIT(A) rejected the affidavits, considering them to be\nafterthoughts and unsupported by credible evidence. The CIT(A) observed\nthat the assessee failed to comply despite being granted sufficient\nopportunities. The CIT(A) concluded that the assessee failed to demonstrate\nreasonable cause under Section 273B of the Act and upheld the penalty of\nRs.20,000/- imposed by the AO.\n4. Aggrieved by the order of the CIT(A), the assessee is in appeal before\nus with the following grounds of appeal:\n1. On facts and circumstances of the case and in law, the order passed by the\nLd. CIT(A) is bad in law, illegal besides being in violation of principle of\nnatural justice & equity, as passed without considering the material\nalready placed on record, as such it is liable to be quashed and set aside.\n2. On facts and circumstances of the case and in law, the Ld. CIT(A) has\ngrossly erred in sustaining the impugned penalty of Rs.20,000/-u/s.272A\nof the Act so levied by the A.O. when there is no justification in doing so.\nThe impugned order may kindly be set aside and penalty u/s.272A of the\nAct may kindly be directed to be deleted.\nLEAVE CRAVED\nThe appellant craves leave to add, alter, amend and/or withdraw any of the\ngrounds or ground of appeal either before or at the time of appeal hearing.\nRELIEF CLAIMED\nThe appellant respectfully urges that by allowing ground no.1 so being raised\nby the appellant, the impugned order may kindly be quashed and set aside, and\nby allowing ground no.2, the penalty of Rs.20,000/- may kindly be deleted.\n5. During the course of hearing before us, the Authorized Representative\n(AR) of the assessee submitted that the assessee is a 72-years old senior citizen\nderiving income from pension and bank interest, with limited familiarity\nwith the complexities of tax proceedings. The return of income for A.Y. 2017-\n18 was filed through his authorized representative's office on 19.07.2017 and\nall communications from the Income Tax Department, including notices\nissued under Section 143(2) and Section 142(1) of the Act, were sent to the\nemail ID of the authorized representative (Shri M.B. Thakor). The AR further\nstated that the authorized representative failed to inform the assessee about\nthe notices, resulting in non-compliance. The assessee contended that this\nwas an inadvertent lapse without any mala fide intent or wilful default. The\nAR emphasized that the assessee had submitted an affidavit dated 12.02.2020,\nalong with an affidavit by the authorized representative, explaining the\ncommunication gap and confirming the bonafide nature of the lapse. The AR\nfurther pointed out that these affidavits were supported by the fact that the\nrepresentative's office was handling multiple clients matters and\ninadvertently failed to convey the notices to the assessee and the penalty\nnotice u/s 272A(1)(d) of the Act and recovery demand notice were only\ndiscovered when the assessee received a physical recovery notice from the\nAO on 30.01.2020. The AR stated that upon discovery, the assessee took\nimmediate steps to comply and filed an appeal against the assessment order\nand penalty. However, despite this detailed explanation, as stated by the AR,\nthe CIT(A) summarily dismissed the affidavits as afterthoughts and failed to\nconduct an inquiry or provide an opportunity for rebuttal, violating the\nprinciple of natural justice. The AR relied on judicial precedents, including\nGlass Lines Equipments Co. Ltd. v. CIT (253 ITR 454) (Gujarat HC),\nwherein it was held that an affidavit must be read as a whole, and any\nrejection must be based on valid reasons. It was further argued that the show-\ncause notice was vague and did not specify the exact notices that were\nallegedly non-complied with.\n5.
1. The AR further argued that the penalty notice issued u/s 274 r.w.s.\n272A(1)(d) of the Act was vague and failed to specify which notices the\nassessee had failed to comply with. The AO referred to multiple sections\n[143(2), 142(1), 142(2A)] but did not clarify the specific non-compliance\nrelated to notices dated 05.04.2019 and 23.08.2019. This ambiguity deprived\nthe assessee of an opportunity to defend effectively and indicates non-\napplication of mind by the AO, rendering the penalty order invalid. The AR\nplaced reliance on the judgment in the case of CIT v. Manjunath Cotton &\nGinning Factory (359 ITR 565) (Karnataka HC), where it was held that the\nfailure to specify the exact reason for penalty in the notice renders the entire\npenalty proceedings unsustainable.\n5.
2. The AR pointed out that the reference to Section 142(2A) of the Act (for\nspecial audit) in the show-cause notice was erroneous and irrelevant, as the\nassessee was not required to maintain any books of accounts being a senior\ncitizen deriving income from pension and interest and the inclusion of\nSection 142(2A) of the Act indicated a mechanical and baseless inclusion,\nfurther invalidating the penalty order.\n6. The Ld. Departmental Representative (DR) supported the orders of the\nAO and the CIT(A), contending that multiple opportunities were provided to\nthe assessee for compliance, which the assessee failed to utilize.\n7. After considering the rival submissions and perusing the material on\nrecord, we find that the assessee submitted affidavits explaining the reasons\nfor non-compliance, asserting that the communication failure was due to his\nrepresentative's inaction. However, the CIT(A) summarily dismissed the\naffidavits as afterthoughts without providing an opportunity for cross-\nexamination or conducting an independent inquiry. This action amounts to a\nviolation of the principles of natural justice. The Hon'ble Jurisdictional High\nCourt in the case of Glass Lines Equipments Co. Ltd. v. CIT (253 ITR 454)\nhas held that affidavits must be read in their entirety, and selective acceptance\nor rejection without valid reasoning is impermissible.\n7.
The facts clearly indicate that the non-compliance was not due to any\nwillful default or mala fide intent on the part of the assessee. The lapse\noccurred due to the negligence of the authorized representative, which was\nbeyond the control of the assessee. There are many judicial precedents where\nit is held that an assessee should not be penalized for the omissions or errors\nof their legal representative when the assessee has placed bona fide reliance\non them. In the present case, the failure of the representative to communicate\nnotices cannot be attributed to any fault of the assessee, who is a senior citizen\nrelying on professional guidance for compliance.\n7.
The show-cause notice issued by the AO under Section 274 r.w.s.\n272A(1)(d) of the Act failed to specify the exact section or details of non-\ncompliance. Instead, it vaguely referred to multiple provisions [Sections\n143(2), 142(1), 142(2A)] without clearly identifying the specific default. This\namounts to non-application of mind by the AO. The inclusion of Section\n142(2A) of the Act (related to a special audit) in the show-cause notice was\nerroneous and irrelevant, as the assessee was not required to maintain any\nbooks of accounts, being a senior citizen deriving income from pension and\nbank interest. The invocation of an inapplicable provision demonstrates a\nmechanical and baseless approach by the AO, further rendering the penalty\nproceedings unsustainable.\n7.
Section 273B of the Act provides relief from penalties under Section\n272A(1)(d) of the Act, if the assessee can demonstrate a reasonable cause for\nnon-compliance. In this case, the affidavits filed by the assessee and the\nauthorized representative explain the genuine reasons behind the non-\ncompliance. There was no evidence to suggest any mala fide intent or willful\ndefiance by the assessee. Therefore, the penalty imposed does not stand in\nlight of the reasonable cause demonstrated by the assessee. The assessee\ncomplied with the initial notice u/s 143(2) of the Act on 01.10.2018 and only\nfailed to comply with subsequent notices due to a communication gap. This\nshows that the assessee had the intention to comply with the proceedings and\nthat the subsequent default was inadvertent and not deliberate. Hence, the\npenalty imposed cannot be justified under such circumstances.\n7.
In light of the above findings and judicial precedents relied on, we hold\nthat the penalty of Rs.20,000/- imposed under Section 272A(1)(d) of the Act,\nwas unjustified and deserves to be set aside.\n8. In the result, the appeal of the assessee is allowed, and the impugned\npenalty order is quashed.\nOrder pronounced in the Open Court on 8th January, 2025 at Ahmedabad.\nSd/-\n(SUCHITRA KAMBLE)\nJUDICIAL MEMBER\nSd/-\n(MAKARAND V. MAHADEOKAR)\nACCOUNTANT MEMBER\nअहमदाबाद/Ahmedabad, दिनांक/Dated 08/01/2025\nटी. सी. नायर, व.नि. स. / T.C. NAIR, Sr. PS\nआदेश की प्रतिलिपि अग्रेषित/
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