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Facts
The assessee, a proprietor of M/s Shreenathji Enterprise, was found to have used the concern's account for rotation of funds and accommodation entries. The case was reopened under section 148 of the Income Tax Act, and notices under section 142(1) were issued multiple times, which the assessee failed to comply with. Consequently, a penalty of Rs. 30,000/- was imposed by the Assessing Officer for each of the three defaults.
Held
The CIT(A) upheld the penalty, noting the assessee's failure to comply with the notices and lack of reasonable cause. The assessee's counsel argued that the non-compliance was due to the consultant's mistake, and that the assessee, being a farmer and illiterate, was dependent on the consultant. The Tribunal acknowledged that the assessee made subsequent compliance and directed the Assessing Officer to impose a penalty of Rs. 10,000/- for one default, deleting penalties for the other two.
Key Issues
Whether the penalty imposed under Section 271(1)(b) of the Income Tax Act for non-compliance with notices is justified, and if the reduction in penalty amount is warranted.
Sections Cited
271(1)(b), 148, 142(1), 250
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC”
Before: DR. ARJUN LAL SAINI
सुनवाई क" तार"ख /Date of Hearing : 14/05/2025 घोषणा क" तार"ख /Date of Pronouncement : 05/08/2025 आदेश/Order Per Dr. Arjun Lal Saini, A.M Captioned appeal filed by the assessee, pertaining to Assessment Year 2013-14, is directed against the order passed under section 250 of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) by National Faceless Appeal Centre (NFAC), Delhi/Commissioner of Income-tax (Appeals) [in short, “Ld.CIT(A)”], dated 24.03.2025, which in turn arises out of a penalty order passed u/s 271(1)(b) of the Act, on 15.09.2022.
The grounds of appeal
raised by the assessee are as follows: “1. The Ld. CIT (A) erred in law as well as on fact in upholding penalty of Rs.30,000 imposed by ld. assessing officer u/s.271(1)(b) of the Act.”
3. Brief facts qua the issue are that assessee is a proprietor of M/s Shreenathji Enterprise and engaged in business of manufacturing of brass parts. The assessee A.Y: 13-14 Anila N Sangani, filed his return of income for A.Y. 2013-14, showing total income at Rs.2,57,100/-. Subsequently, the Investigation Wing of the Department has revealed that the proprietary concern account was used for rotation of funds and giving accommodation entries to the beneficiaries. The assessee has taken accommodation entries to the tune of Rs.4,52,27,117/-. The assessee`s case was opened after recording the reasons and obtaining prior approval for issuance of notice u/s 148 of the Act from Ld.PCIT, Jamnagar on 31.03.2021. In response thereto assessee did not reply. Thereafter, notice u/s 142(1) of the Act, were issued to assessee, three times. The assessee did not make compliance of these notices, therefore, penalty of Rs.30,000/- was imposed by assessing officer u/s 271(1)(b) of the Act, for each three defaults.
4. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before CIT(A). The CIT(A) observed that there is no dispute on failure of assessee to comply with the notices issued u/s 142(1) of the Act during the assessment proceedings, on various dates. The Ld. CIT(A) held that appellant has not been able to show a reasonable cause even during the appellate proceedings. The appellant was having a registered account on the e-filing portal which was active because assessee is using it for filing returns of income. Hence, the Ld.CIT(A) dismissed the appeal and confirmed the levy of penalty of Rs.30,000/- for three occasions, (non-compliance), as the appellant failed to adduce any valid reason for such failure.
5. Aggrieved by the order of Ld. CIT(A), the assessee filed present appeal before the Tribunal.
The Ld. Counsel for the assessee, at the outset stated that assessee’s case under consideration, the penalty imposed by Assessing Officer u/s 271(1)(b) of the Act is on account of non-compliance of notice during assessment A.Y: 13-14 Anila N Sangani, proceedings and Assessing Officer imposed penalty of Rs.30,000/- on account of three defaults. The Ld. Counsel for the assessee stated that in subsequent default, assessee has made compliance. Therefore, penalty may be imposed only Rs.10,000/- for one time default and for remaining two defaults the penalty of Rs.20,000/- may be deleted.
On the other hand, Ld.Senior DR for the Revenue submitted that penalty imposed by Assessing Officer regarding three defaults of Rs.30,000/-, u/s 271(1)(b) of the Act, should be confirmed.