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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI B.M. BIYANI, & SHRI PARESH M. JOSHI
आदेश/O R D E R
Per Bench:
The captioned six appeals for six assessment-years [“AY”] 2013-14 to 2014- 15 & 2016-17 to 2019-20 are filed by assessee challenging six separate orders of first-appeal, all dated 27.09.2024 and all passed by learned Commissioner of Income-Tax (Appeals)-3, Bhopal [“CIT(A)”], by which respective six penalty-orders, all dated 26.03.2021 and all passed by ACIT, Central Circle-2, Bhopal [“AO”], imposing a penalty of Rs. 10,000/- in each
Page 1 of 7 & 10-15/Ind/2025 Assessment years: 2013-14 & 2014-15, 2016-17 to 2019-20 of the six assessment-years u/s 271(1)(b)/270A(1)(d) of the Income-tax Act, 1961 [“the act”], have been upheld.
Heard the learned Representatives of both sides and the case records perused.
At the start of hearing, learned Representatives of both sides agree that the underlying facts and controversy involved in all six matters are identical except that there was a limited change in section under which penalty has been imposed [The change in section was made by Parliament in the Income-tax Act, 1961, according to which the penalty upto AY 2016-17 has been levied u/s 271(1)(b) and from AY 2017-18 onwards u/s 272A(1)(d)].
Hence, as per consensus of both sides, the facts of appeal of for AY 2013-14, being the first assessment year in line, were deliberated during the hearing and it is agreed by both sides that the adjudication made therein shall apply mutatis mutandis to all years.
Ld. AR for assessee made a brief submission about background of assessee’s case. He submitted that assessee is based at Indore and there was a search u/s 132 on 16.05.2018 carried out by Income-tax Department upon assessee’s premise. Consequent upon search, the case of assessee was centralized in the office of AO at Bhopal and thereafter the AO at Bhopal conducted assessment proceedings u/s 153A. During assessment proceedings, the AO issued certain notices to assessee. For AY 2013-14, the AO issued notice u/s 142(1) dated 19.02.2021 requiring the assessee to Page 2 of 7 & 10-15/Ind/2025 Assessment years: 2013-14 & 2014-15, 2016-17 to 2019-20 make compliance by 24.02.2021 but finding non-compliance from assessee, the AO imposed penalty of Rs. 10,000/- u/s 271(1)(b) vide penalty-order dated 26.03.2021 [Similar penalty of Rs. 10,000/- has been imposed for all other assessment-years]. Aggrieved, the assessee carried matter in first- appeal but did not get any relief. Now, the assessee has come in next appeal before ITAT.
With aforesaid brief details, Ld. AR made a straightforward submission that the assessee was having a ‘reasonable cause’ for non- compliance of the impugned notice dated 19.02.2021 issued by AO and hence the assessee is entitled to benefit of section 273B. To substantiate the existence of ‘reasonable cause’, the Ld. AR made two-fold submissions as under:
(i) He submitted that the assessee is located at Indore and the AO’s office was located at Bhopal and it was a case of Central Circle being emanating from search. He submitted that the AO issued impugned notice dated 19.02.2021 requiring compliance from assessee by 24.02.2021 but at the relevant time, there was Covid-19 Pandemic and entire world was facing the challenge of serious pandemic and the assessee was not exception. He submitted that the AO required assessee to make compliance within a short span of just 5 days and that too during pandemic period which was not possible or practicable for assessee to comply with.
Page 3 of 7 & 10-15/Ind/2025 Assessment years: 2013-14 & 2014-15, 2016-17 to 2019-20 (ii) Without prejudice, he submitted the sequence of proceedings done by AO in assessee’s case. He submitted that the AO initially issued notice dated 04.12.2020 u/s 153A calling the assessee to file return. The assessee filed a reply-letter dated 05.12.2020 followed by another letter dated 15.12.2020 to AO requesting to provide various statements/material/documents, etc. recorded/found/seized during search action to enable the assessee to prepare and file return; the request-letters filed by assessee are placed at Pages 1-2 of Paper-Book.
However, the AO did not supply the required material and instead issued impugned notice u/s 142(1) to assessee but how the assessee would file reply to AO’s notice when the material was not supplied by AO and no return was filed by assessee. Ld. AR pointed out that AO did not supply the required documents till the completion of assessment.
Per contra, Ld. DR for revenue supported the orders of lower- authorities. He submitted that during Covid period, when the officers of department were working, the assessee could also make compliances of the impugned notices issued by AO. He submitted that at least the assessee could respond to the impugned notice by way of e-mail but that was also not done. He submitted that the CIT(A) has also made this very observation in Para 3.1.3 of impugned order. He emphasized that the CIT(A) has passed a vehement order looking into overall conduct of assessee, therefore the order of CIT(A) must be upheld.
Page 4 of 7 & 10-15/Ind/2025 Assessment years: 2013-14 & 2014-15, 2016-17 to 2019-20 7. We have considered rival submissions of both sides and carefully perused the case record including the orders of lower authorities. The assessee is aggrieved by the penalty of Rs. 10,000/- imposed by AO u/s 271(1)(b) for non-compliance of notice u/s 142(1) dated 19.02.2021. Ld.
AR/assessee is harping on the provision of section 273B, therefore at first we re-produce the same:
273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, ……., clause (d) of sub- section (1) or sub-section (2) of section 272A, no penalty shall be imposable on the person or the assessee, as the case may be, for any failure referred to in the said provisions if he proves that there was reasonable cause for the said failure.
On a careful and judicious consideration of the facts of assessee in the light of above provision of section 273B, we find a strong merit in the twin submissions made by Ld. AR as narrated above. The first contention raised by Ld. AR is such that the AO issued impugned notice dated 19.02.2021 during Covid pandemic period and the AO required the assessee to make compliance within a short period of 5 days during such difficult time. We find a strong merit in this very contention of Ld. AR that the non-compliance by assessee during exceptional period of Covid was a reasonable situation fit for relaxation from penalty in terms of section 273B. In fact, Ld. CIT(A) has also made these observations in his order “3.1.3 …. During the Covid Pandemic, the appellant should have filed reply or adjournment application before the assessing officer through e-proceedings”; “3.1.4 …. The AO has given sufficient time to furnish reply and if the appellant convey the reason of reasonable delays then generally the AO always allows additional times.
Page 5 of 7 & 10-15/Ind/2025 Assessment years: 2013-14 & 2014-15, 2016-17 to 2019-20 Thus, the Ld. CIT(A) does not and in fact cannot controvert the difficulties faced by public during Covid pandemic but he only insists that the assessee could file a reply through e-proceeding. The fact, however, remains that there was Covid pandemic and the assessee, as being claimed, was unable to file reply qua the queries raised by AO. The explanation of assessee has strength and we are inclined to accept the same. Now, the second contention raised by Ld. AR that the AO did not supply documents/material to assessee and therefore the assessee was not able to make compliance, also has some force. In nutshell, we find that there is a case of ‘reasonable cause’ as contemplated u/s 273B on account of Covid pandemic and therefore the assessee should not be saddled with the levy of penalty. We may also make a useful reference to the landmark decision of Hon’ble Supreme Court in Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (SC) holding thus while dealing a case of penalty imposed under Orissa Sales Tax Act, 1947:
……Penalty will not also be imposed merely because it is lawful to do so. 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. Those in charge of the affairs of the company in failing to register the company as a dealer acted in the honest and genuine belief that the company was not a dealer. Granting that they erred, no case for imposing penalty was made out.
Thus, considering the facts of case as discussed above in the light of provisions of section 273B as well as the above decision of Hon’ble Apex
Page 6 of 7 & 10-15/Ind/2025 Assessment years: 2013-14 & 2014-15, 2016-17 to 2019-20 Court in Hindustan Steels, we are inclined to delete the penalty imposed by AO and we do so. The assessee succeeds in the appeal of AY 2013-14 and so also appeals of all other assessment-years.
Resultantly, all these appeals are allowed.
Order pronounced in the open court on 08/08/2025.