RSRG DEVBUILD P. LTD,INDORE vs. INCOME TAX OFFICER 4(1), INDORE

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ITA 6/IND/2025Status: DisposedITAT Indore17 July 2025AY 2014-154 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 failure to comply with the notice under Section 142(1) of the Act occurred due to the hospitalization and demise of the assessee's regular counsel. This reasoning, as presented by the assessee and uncontroverted by the revenue, constituted a 'reasonable cause' for the failure. The Tribunal agreed that the assessee deserved the benefit of Section 273B, which provides that no penalty shall be imposable if the assessee proves that there was a reasonable cause for the failure. Consequently, the Tribunal quashed the penalty imposed by the Assessing Officer (AO) and allowed the assessee's appeal. The issue regarding the pendency of the quantum appeal was implicitly resolved by quashing the penalty on merits.

What were the facts?

The assessee, RSRG Devbuild Private Limited, is in appeal against the order of the Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi, dated 26.12.2024. This order upheld a penalty of Rs. 10,000/- imposed by the Income Tax Officer (ITO), 4(1), Indore, under Section 271(1)(b) of the Income-tax Act, 1961, for the assessment year 2014-15. The penalty was levied for failure to comply with a notice issued under Section 142(1) of the Act. The assessee's grounds of appeal challenge the legality of the NFAC's order, citing non-receipt of physical notices, and assert that the non-compliance was due to the hospitalization and subsequent demise of their counsel, constituting a reasonable cause. The assessee also argued that the penalty should not have been maintained while the quantum appeal was pending.

What were the issues?

1. Whether the order passed by the Ld. NFAC is illegal and bad in law because notices were not served physically but issued on e-mail, and if the failure to comply with notice u/s 142(1) due to hospitalization and demise of the counsel constitutes a reasonable cause for non-compliance, thereby entitling the assessee to the benefit of Section 273B and cancellation of penalty under Section 271(1)(b)? (Mixed question of law and fact, turning on Section 271(1)(b) and Section 273B). Assessee's Contention: The assessee argued that the notices were not served physically, only via e-mail, rendering the order illegal. Crucially, the non-compliance with the Section 142(1) notice was due to the hospitalization and subsequent demise of their regular counsel, Shri Sandeep Deshpande. This constituted a reasonable cause for failure, entitling them to the benefit of Section 273B, and thus the penalty should be cancelled. They also argued that no reply could be filed to the penalty notice under Section 274 r.w.s. Section 271(1)(b) due to the counsel's demise. Revenue's Contention: The Revenue, through the learned Senior Departmental Representative, did not raise any objection to the submissions and prayer made by the assessee's counsel.

Which sections of the Income-tax Act were involved?

Section 271(1)(b),Section 142(1),Section 273B,Section 274

AI-generated summary — verify with the full judgment below

आदेश/O R D E R

Per B.M. Biyani, A.M.:

1.

Feeling aggrieved by order of first-appeal dated 26.12.2024 passed by learned Commissioner of Income-Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [“CIT(A)”] by which the penalty-order dated 01.09.2022 passed by ITO, 4(1), Indore [“AO”] imposing a penalty of Rs. 10,000/- u/s 271(1)(b) of Income-tax Act, 1961 [“the act”] has been upheld, the assessee has filed this appeal on following grounds:

RSRG Devbuild Private Limited Assessment year 2014-15 “1. The order of the Ld. NFAC is illegal and bad in law since the notices were not served physically but issued on e-mail. 1.1 The Ld. CIT NFAC has erred in passing the order the notice 142(1) was issued which could not be complied with because of hospitalisation of the counsel who ultimatly passed away. Since, there was a reasonable cause non compliance and as such the penalty levied may please be cancelled.

2. The Ld. CIT NFAC has erred in maintaining the penalty u/s 271(1)(b) when the quantum appeal is pending before the Ld. CIT(A).

3. The penalty u/s 271(1)(b) may please be cancelled.

4.

The assessee craves to amend, alter or delete any of the ground of appeal.”

2.

Heard the learned Representatives of both sides and the case records perused.

3.

Ld. AR for assessee at first carried us to the penalty order dated 01.09.2022 passed by AO to demonstrate that the AO has imposed penalty for assessee’s failure to comply with the notice dated 13.03.2022 u/s 142(1) of the Act. Thereafter, he submitted with a heavy heart that the said failure on the part of assessee had in fact occurred due to the hospitalization and demise of the regular counsel of assessee, Shri Sandeep Deshpande (son of Ld. AR himself). Therefore, Ld. AR submitted that there was a reasonable cause on the part of assessee for occurrence of failure and the assessee is entitled to the benefit of section 273B which must be given. Ld. AR further submitted that due to the demise of counsel, no reply could be filed to the AO in response to the notice issued u/s 274 r.w.s. section 271(1)(b) for Page 2 of 4 the provision of section 273B.

4. Ld. DR for revenue was fair enough in not raising any objection to the submissions and prayer made by Ld. AR.

5.

We refer the provision of section 273B reading as under:

“273B. Notwithstanding anything contained in the provisions of clause (b) of sub-section (1) of section 271, ……., 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.”

6.

In present case, we find that as per explanation made by Ld. AR, the failure to comply with the notice u/s 142(1) issued by AO has occurred due to hospitalization and demise of regular counsel of assessee. This very reasoning was also mentioned by assessee in the “Statement of Facts” filed to the CIT(A) in Form No. 35 and also raised in Ground No. 1.1 before us (re- produced above). The reasoning given by assessee remains uncontroverted by revenue. We agree that the reasoning given by assessee constituted a ‘reasonable cause’ of failure on the part of assessee and the assessee deserves benefit of section 273B as noted above. Accordingly, giving the benefit of section 273B to assessee, we quash the penalty imposed by AO and allow this appeal of assessee. The assessee succeeds in this appeal.

7.

Resultantly, this appeal of assessee is allowed.

Order pronounced in the open court on 17/07/2025

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