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Facts
The assessee's legal heir faced initial difficulties in gathering financial information following the assessee's demise, leading to delayed compliance with notices. The Assessing Officer (AO) levied a penalty for non-compliance, which was upheld by the CIT(A).
Held
The Tribunal held that the penalty was not justifiable as the legal heir faced genuine difficulties due to the assessee's sudden death and had eventually complied after a further opportunity. The Tribunal noted that the assessee had partly complied with the notices, negating the AO's claim of complete non-compliance.
Key Issues
Whether penalty under Section 272A(1)(d) is leviable for non-compliance with notices when the legal heir faced genuine difficulties due to the assessee's death and later complied.
Sections Cited
272A(1)(d), 143(3), 147, 142(1), 273B, 274
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Income Tax Appellate Tribunal, JAIPUR BENCHES,’’B” JAIPUR
ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM This appeal filed by the assessee is directed against the order of the learned Commissioner of Income Tax, National Faceless Appeal Centre, Delhi [ for short ld. CIT(A) ] dated 15-01-2025, for the assessment year 2018-19 raising therein following grounds of appeal. ‘’1. In the facts and circumstances of the case .CIT(A) has erred in confirming the levy of penalty of Rs.10,000/- u/s 272A(1) of the Income Tax Act, 1961.’’ SMT. ANGURI DEVI KHANDELWAL (SHRI RADHA MOHAN KHANDELWAL – LEGAL HEIR VS DCIT, CIRCLE-4, JAIPUR 2.1 Apropos solitary ground of appeal of the assessee, it is noticed that the ld.CIT(A) has confirmed the levy of penalty of Rs.10,000/- u/s 272A(1)(d) of the Act and thus dismissed the appeal of the assessee by observing as under:- Decision The assessee has not furnished any submission before the appellate authorities. However, before the AO, it was submitted that the assessee Simt Anguri Devi had passed away in March 2021. After which the Legal Heir of the assessee took time to gather relevant data in order to reply to the AO. This explanation of the assessee does not hold much substance for two reasons. First, the appellant in various submissions filed in course of appeals against 143(3) and 147 orders, has clearly stated that since the inception of business, it was being looked after by children/legal heirs of the assessee and not the assessee herself. Hence, at this stage taking the plea that they needed time to understand the business and gather data to reply cannot be accepted. Secondly, the notices which were not complied with were Issued on 21.10.2022 and 19.12.2022 i.e. almost one and a half years after the demise of the assessee. Hence the demise cannot be taken as an excuse for non compliance to the statutory notices issued by the department. Further, the appellant always had the option of seeking adjournment, which they chose not to avail. In the event, I come to the conclusion that the appellant has been unable to forward any cogent reason for non-compliance, in which case the penalty levied by the AO u/s 272A(1)(d) is hereby confirmed. In the result, the appeal of the assessee is dismissed.’’ 2.2 During the course of hearing, the ld.AR of the assessee prayed to delete the penalty of Rs.10,000/- confirmed by the ld. CIT(A) u/s 272A(1)(d) of the Act. He further submitted that when a final opportunity was provided on 13-03-2023, the legal heir of the assessee promptly complied by filing SMT. ANGURI DEVI KHANDELWAL (SHRI RADHA MOHAN KHANDELWAL – LEGAL HEIR VS DCIT, CIRCLE-4, JAIPUR submissions on 21-03-2023, demonstrating the bona fide intention to comply with statutory obligations and the submissions of the ld. AR of the assessee is reproduced as under:- Submissions:-
1. As submitted above, the assessee expired on 10.03.2021, and the proceedings were initiated post her demise. The legal heir, Shri Radha Mohan Khandelwal, was confronted with substantial practical challenges in accessing and organizing the financial affairs of the deceased assessee. The initial inability to respond was neither deliberate nor intentional but solely due to practical difficulties and genuine constraints.
It is pertinent to highlight that when a final opportunity was provided on 13.03.2023, the legal heir promptly complied by filing submissions on 21.03.2023, demonstrating the bonafide intention to comply with statutory obligations.
Non-compliance initially was purely circumstantial, driven by factors beyond the control of the legal heir. No deliberate negligence or intentional disregard of statutory notices occurred, as compliance was eventually ensured within the extended opportunity provided by the ld. AO.
Section 273B provides immunity from penalty under Section 272A(1)(d) if reasonable cause is demonstrated. The circumstances of the instant case squarely fall under Section 273B, as genuine difficulties were faced by the legal heir due to the assessee’s death, fulfilling the condition of ‘reasonable cause’.
SUPPORTING CASE LAWS 5.1. Hon’ble Apex Court in Hindustan Steel Ltd. vs. State of Orissa (1973) 83 ITR 26 (SC) has observed that an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Hon’ble Apex Court further observed that penalty will not also be imposed merely because it is lawful to do so. The powers are to be exercised judiciously. The apex Court held as follows (headnote) :-
SMT. ANGURI DEVI KHANDELWAL (SHRI RADHA MOHAN KHANDELWAL – LEGAL HEIR VS DCIT, CIRCLE-4, JAIPUR "Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute." 5.2 Relying on the above decision, in CIT vs. Superintending Engineer, PWD [2003] 260 ITR 641 (Raj), the Hon’ble Rajasthan High Court held that :- “7 Thus, the penalty under s. 272A(2)(c) cannot be levied in a routine manner. The discretion vested with the authority is to be exercised judiciously on consideration of all the relevant circumstances. A bona fide breach cannot lead to a penalty under s. 272A(2)(c).”
5.3 Very recently Hon’ble ITAT Raipur Bench in the case of Bhavna Modi v. Income-tax Officer [2025] 170 taxmann.com 236 (Raipur - Trib.) held that:- “Admittedly, in the present case, the assessee failed to respond certain notices of the Assessing Officer, which were issued under sections 143(2) and 142(1), however, in response, subsequent notices, the assessee has made necessary replies and accordingly assessment was completed under section 143(3), therefore, respectfully, following the analogy drawn in the decision referred to Saleem Ahmed Khan v. Income-tax Officer [2023] 156 taxmann.com 36 (Jabalpur - Trib.) and Rambhai Kanjibhai Patel v. DCIT [IT Appeal No. 106 to 110 (SRT) of 2023, dated 11-05-2023], it is found that the penalty imposed under section 272A(1)(d) is not justifiable in the present case, as the Assessing Officer himself has deemed to have condoned the absence of assessee or his Authorized Representative on earlier occasions, subsequently the necessary information and evidences were furnished by the assessee to assist in the completion of the assessment and since assessment was completed under section 143(3), the penalty under section 272A(1)(d) cannot be imposed. Under such facts and circumstances, considering the ratio of law followed in various judicial decision, it is found appropriate to set aside the order of Commissioner (Appeals), and direct the Assessing Officer to delete the penalty. [Para 8]”
In view of the submission, and applicable judicial precedents, it is respectfully requested that this Hon’ble Tribunal may kindly delete the penalty amount of Rs. 10,000 as imposed and confirmed by the lower authorities.’’ SMT. ANGURI DEVI KHANDELWAL (SHRI RADHA MOHAN KHANDELWAL – LEGAL HEIR VS DCIT, CIRCLE-4, JAIPUR 2.3 On the other hand, the ld. DR supported the orders of the lower authorities. 2.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that during assessment proceedings, the assessee failed to comply with the notices u/s 142(1) of the Act dated 21-10-2022 and 19-12-2022. A penalty show cause notice dated 30-03- 2023 was issued and served upon the assessee requiring him to appear either personally or through a authorized representative to show cause as to why an order imposing a penalty on him should not be made u/s 272A(1)(d) of the Act. In response to the same, the assessee submitted response on 31-03-2023. According to the AO, the reason shown by the assessee was not acceptable and thus he levied the penalty of Rs.10,000/- for the failure to comply with the notice u/s 142(1) of the Act dated 21-10- 2022. The narration as made by the AO in his order dated 16-06-2023 is reproduced as under:- ‘’(b) The reason shown by the assesse is not acceptable on the following points: a. The first notice u/s 142(1) of the Act, 1961 issued on 21.10.2022 requiring the assesse to respond by 07.11.2022. The assesse neither filed any reply nor filed any adjournment requests. b. The second notice u/s 142(1) of the Act, 1961 issued on 19.12.2022 requiring the assesse to respond by 27.12.2022. The assesse asked for adjournment on 27.12.2022.
SMT. ANGURI DEVI KHANDELWAL (SHRI RADHA MOHAN KHANDELWAL – LEGAL HEIR VS DCIT, CIRCLE-4, JAIPUR c. Later, the assessee issued show cause notice on 13.03.2023 with compliance date fixed on 21.03.2023 only then the assessee responded at the fag end of time barring i.e. on 21.03.2023. (d) Therefore, it is a clear cut case of deliberately not responding to the statutory notice u/s 142(1) of the Act, dated 21.10.2022 (e) Again, another opportunity was granted with show cause notice u/s. 272A(1)(d) dated 10.05.2023 with compliance date fixed on 17.05.2023 but the assesse not submitted any response till date. Conclusion drawn for Imposition of Penalty In view of the above, the assessee has not shown any reasonable reasons cause for such failure to comply. I am, therefore, satisfied that it is a fit case for levy of penalty under Section 272A(1)(d) of the Act for failure to comply with notice us. 142(1) of the Act dated 21.10.2022, without reasonable cause is per section 273B of the Act. In view of the above facts, I am of the view that penalty u/s 272A(1)(d) is attracted in this case for non-compliances as mentioned above.
4. Computation of Penalty I hereby levy penalty of Rs. 10,000/- for the failure to comply with notice u/s. 142(1) of the Act dated 21.10.2022 5. Penalty of Rs.10,000/- is hereby levied as penalty under section 274 r.w.s. 272A(1)(d) of the I.T. Act. Demand notice u/s 156 is attached.’’ In first appeal, the ld. CIT(A) has confirmed the action of the AO. In this case, it is noticed that the assessee Smt. Anguri Devi Khandelwal, passed away on 10.03.2021. Subsequently, the assessment proceedings for AY 2018-19 were initiated/reopened on 29.03.2022. The proceedings were conducted through Shri Radha Mohan Khandelwal, the legal heir of the assessee. Due to the sudden demise of the assessee, the legal heir initially faced genuine difficulties in gathering the necessary documents and data, resulting in delayed compliance. It is further noted that an additional Show- SMT. ANGURI DEVI KHANDELWAL (SHRI RADHA MOHAN KHANDELWAL – LEGAL HEIR VS DCIT, CIRCLE-4, JAIPUR Cause Notice was issued by the AO on 13.03.2023, requiring compliance by 21.03.2023. The legal heir duly complied and submitted the response. The assessment was finalized on 30.03.2023 under Section 147, which included an addition of Rs. 3,21,190 as undisclosed income from alleged bogus sales. Penalty proceedings under Section 272A(1)(d) were also initiated for non-compliance with earlier statutory notices issued under Section 142(1).Consequently, a penalty order was passed on 16.06.2023, imposing a Penalty of Rs. 10,000 for the non-compliance mentioned above. The penalty order was challenged by the assessee before the National Faceless Appeal Centre (NFAC)/CIT(A), who upheld the penalty vide order dated 15.01.2025. From the records, it is noticed that the assessee had partly complied with the notice and submitted the submissions dated 21-03- 2023 which does not indicate that the assessee had failed to comply with the notices. Hence, it is not justified on the part of the AO to levy the penalty of Rs.10,000/- u/s 272A(1)(d) of the Act as some submissions / response was made by the assessee. Thus, in this view of the matter, the Bench does not concur with the findings of the ld. CIT(A) and the penalty confirmed by the ld. CIT(A) amounting to Rs.10,000/- u/s 272A(1)(d) is directed to be deleted. Thus, the appeal of the assessee is allowed.