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Facts
The assessee invested a significant amount in cryptocurrency and did not file an ITR for the relevant year, claiming income below the threshold. Upon being issued a notice, the assessee filed a return but the assessment was completed at a much higher income. Penalty proceedings were initiated for non-compliance with notices.
Held
The Tribunal held that while the AO was justified in initiating penalty proceedings for non-compliance with notice u/s 142(1), considering the facts and circumstances, and the provisions of Section 273B, the assessee had a reasonable cause for not submitting the required details. Therefore, the penalty was deleted.
Key Issues
Whether a penalty levied for non-compliance of statutory notice under Section 272A(1)(d) of the Income Tax Act, 1961, can be deleted if the assessee demonstrates a reasonable cause for such non-compliance?
Sections Cited
148, 144, 147, 144C(13), 271AAC, 272A(1)(d), 274, 142(1), 133(6), 273B
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,”SMC” JAIPUR
Before: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 222/JPR/2025
PER DR. S. SEETHALAKSHMI, J.M. The assessee has filed this appeal challenging the impugned order dated 06.02.2025, passed by the learned Commissioner of Income Tax (Appeals), Delhi – 42 , for the assessment year 2018-19.
The assessee has raised following grounds:
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1. 1. On the facts and circumstances of the case and in law, Ld. CIT(A) has grossly erred in confirming the penalty imposed under Section 272A(1)(d) of the Income Tax Act, 1961. Appellant prays that since there was no default in compliance of any of the notices issued during the assessment proceedings, the penalty confirmed deserves to be deleted. as there was no wilful or intentional non-compliance on the part of the assessee. Hence the order passed is bad in law and void ab initio deserves to be quashed.
Sunil Kumar Nayak, Jhunjhunu 2. On the facts and circumstances of the case and in law the order passed u/s 250 of the Act, confirming the penalty imposed, was passed without properly appreciating the detailed submissions and the documentary evidence furnished by the assessee. Appellant prays that such act being in violation of principles of natural justice, the order passed u/s 250 of the Act deserved to be set aside and rolled back. The non-application of mind by the learned authorities and passing of penalty without considering reasonable cause is arbitrary, unlawful and against the principles of natural justice and hence deserves to be rolled back.
That the appellant reserves the right to add/ alter/ modify/ deleted any or all grounds at any time during the appeal.”
3. Succinctly, the facts as culled out from the records are that the assessee (Resident but not ordinarily resident) had not filed ITR for the relevant year, as his income was below the threshold limit. The AO on the basis of AIR information/TAS/26AS details, that the assessee had invested Rs.1,49,81,040/- in crypto currency, issued a notice u/s 148. The assessee in response thereto filed return declaring an income of Rs.1,94,470/- Assessment was completed u/s 144/147 r.w.s.144C(13) of the I.T. Act, assessing income of Rs.1,51,75,510/- Penalty proceedings u/s 271AAC and 272A(1)(d) of the I.T. Act were initiated along with the assessment order dated 23.12.2023, for concealing the particulars of income. The assessee had filed an appeal to ITAT against the assessment order. In the meantime, looking to the limitation, the AO issued penalty notice u/s 274 r.w.s. 272A(1)(d) and not satisfied by the reply filed by the assessee, levied penalty of Rs.10,000/- for not making timely compliance of notice issued u/s 142(1). Against the levy of penalty, the Sunil Kumar Nayak, Jhunjhunu assessee filed appeal before the CIT(A).
Aggrieved from the order of AO, levy penalty preferred an appeal, assessee before the ld. CIT(A). Apropos to the grounds so raised the relevant finding of the ld. CIT(A) is reiterated here in below:-
“6. I have carefully considered the facts of the case, penalty order and written submissions of the appellant.
Ground no. 1 related to imposition of penalty u/s 272A(1) (d) has been contested. In his reply appellant has stated that it is quite clear the assessee has duly submitted his response in response to each notice well on time except for one notice Issued u/s 142(1) date 28.02.2023. As already mentioned above and during the submission to various authorities, since the company with which assessee was dealing for trading in crypto had stopped working. So there was difficulty in fetching the complete set of documents as requested in the notices Issued by the Id. AO. The assessee also wishes to submit that the notice Issued u/s 142(1) of the Act dated 10.02.23 was pertaining to FY 17-18 and it was a 3 page questionnaire containing approx 20 point that are to be addressed by the assessee along with supporting documents within the time slot of Just 5 days. Despite that the assessee tried his best and managed to gather the relevant documents comprising 15 attachments (Acknowledgement copy attached) and submitted the same on 02.03.23. The Id. AO rather than appreciating the efforts of the assessee and without considering the ground realty of the case also without considering the fact that no other instance of delay remained on the part of the assessee in submitting response to other notices, has harshly and illogically applied penalty on the assessee. It may please be noted that had mens-rea be on the part of the assessee he would not have even reverted. The genuineness of the assessee can very well be established from this act and minor delay in replying to one of the notice is completely illegal. incorrect as well as against the principal of natural justice to levy a penalty under the provisions of section 272A(1) (d) of the act on the assessee.
In the penalty order it has been mentioned by the AO that during the assessment proceedings, statutory notice(s) u/s 142(1) of the Act dated 10.02.2023 was issued to the assessee but the assessee did not make compliance to the same within prescribed period.
On perusal of the assessment order, it is mentioned by the AO that during the course of assessment proceedings, the assessee was asked regarding the Sunil Kumar Nayak, Jhunjhunu source of funds used to purchase the said crypto currency vide notice u/s 143(2) dated 18.08.2022, notice u/s 142(1) dated 10.02.2023 and show cause notice dated 28.02.2023. The assessee made compliance vide submissions dated 22.08.2022, 02.03.2023, 03.03.2023. However, the assessee has failed in submitting substantiating documentary evidence regarding source of funds used make the above mentioned investment in crypto currency during the year under consideration. The assessee has submitted that the portfolio detail is not available to us as we are unable to reach to company as company is closed now." Therefore, a notice u/s 133(6) of the Act calling for information regarding crypto currency investment and trading was issued to M/s Skysharp IT Solutions Private Limited, B-67, Wagirpur Industrial Area, Ground floor, Delhi. However, this company did not compliance to this notice. The appellant did not file satisfactory reply furnished explanation to show cause notice nor sought any adjournment. Due to non-compliance on the part of the assessee, the Assessing Officer stated that penalty proceedings u/s 272A(1)(d) of the Act were initiated for non-compliance of notice and penalty u/s 272A(1)(d) amounting to Rs. 10,000/- was also imposed by the AO for non-compliance of statutory notice.
It is evident from the assessment order that during the assessment proceedings all the notices were issued through e-proceedings (portal) but no proper compliance was made by the assessee of the notice issued u/s 142(1) of the Income Tax Act, 1961. Looking to the facts mentioned above, it is clear that the assessee has intentionally and willfully avoided the compliance of the notices u/s 142(1) dated 10.02.2023. During the course of penalty appellate proceedings, it is noticed that assessee has not submitted any documentary evidence with a reasonable cause for non-furnishing of statutory notices. It is only stated that questionnaire containing approx 20 points. Although, it is pertinent to mention here that firstly reply filed during the course of assessment proceedings could not substantiate the purchase of crypto currency by the assessee. Secondly, DRP has also rejected all the grounds raised
by the assessee in quantum objection filed before the DRP. Form the above facts it is clear that the assessee did not file any cogent and tenable reply supported by documentary evidences to prove the source of investment made by him in crypto currency, during the course of assessment as well as DRP proceedings.
11. In view of above, it is concluded that the AO was justified in levying penalty for the non-compliance of notice u/s 142(1) of the Income Tax Act, on 10.02.2023 Therefore, the penalty of Rs. 10,000/- imposed by the AO u/s 272A(1)(d) is hereby upheld. Hence, ground of appeal raised by the appellant is dismissed.
Sunil Kumar Nayak, Jhunjhunu 12. Ground no. 2 is general in nature and hence do not require any adjudication Hence, the ground no. 2 is dismissed. 13. In the result, the appeal is dismissed.”
Aggrieved from that order of ld. CIT(A), the assessee preferred the present appeal. Ld. AR of the assessee in support of grounds submitted that it was not the total non compliance of the assessee, in response to notice for which penalty levied the assessee sought time to furnish the details but was not given and as it submitted in the quantum proceedings that the assessee has reasonable cause for non-compliance.
7. Per contra, Ld. DR relied upon the orders of Ld. CIT(A).
We have heard the rival contentions and perused the material placed on record, as well as the relevant provisions of law and the case laws cited by the Ld.AR in support of his case. As is evident from the record that the assessee could not submit the portfolio details as the company with when the assessee under taken transaction was ceased. Record also reveals that in the quantum proceeding we have already set aside the issue and it was not a total non compliance on the part of the assessee. Thus, considering the provisions of section 273B, we are of the considered view that the assessee has reasonable cause for not submitting Sunil Kumar Nayak, Jhunjhunu the required details and therefore, we direct to delete the penalty of Rs.10,000/- imposed by the AO and confirmed by the CIT(A) automatically gets deleted. In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 19/08/2025.