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Facts
The assessee filed a return of income for AY 2015-16. The assessment was completed, and during this process, penalty proceedings were initiated for non-compliance with notices issued under Section 142(1) of the Income Tax Act. The Assessing Officer levied a penalty, which was confirmed by the CIT(A).
Held
The Tribunal noted that while there was a failure to comply with notices under Section 142(1), the assessee contended they were not aware of these notices. The Tribunal found merit in this plea, considering the notices were issued through the ITBA portal and the assessee's awareness of the assessment proceedings. The Tribunal held that penalty should not be imposed for each and every non-compliance but rather for the first instance, especially if there's no deliberate defiance.
Key Issues
Whether penalty under Section 271(1)(b) is leviable for non-compliance with notices issued under Section 142(1), when the assessee claims lack of awareness and reasonable cause.
Sections Cited
271(1)(b), 142(1), 273B
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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: DR. ARJUN LAL SAINI, AM. &
आदेश / O R D E R PER DINESH MOHAN SINHA JM;
Captioned appeal filed by assessee pertaining to Assessment Year 2015-16 (penalty), is directed against order passed by Commissioner of Income Tax (Appeal), vide order dated 25/07/2024, which in turn arises out of an order passed by the Assessing Officer dated 11.01.2024 u/s 271 (1) (b) of the Income Tax Act, 1961.
GROUNDS OF APPEALS: - 1. The Ld. CIT(A) erred in law as well as on facts in confirming penalty of Rs. 20,000 imposed by the Ld. AO u/s. 271(1)(b) of the Act.
Facts of the Case The assessee is an individual and filed his return of income for A.Y. 2015-16 on 06.10.2016 at an income of Rs. 2,62,340/-. Assessment proceedings in this case were completed u/s 147/144r.w.s. 144B of the IT Act vide order dated 18.05.2023 making an addition of Rs. 1,75,521 and assessed income of Rs.4,37,861/- Additions on account as unexplained expenditure u/s 69C of the Act.
While completing the assessment proceeding, penalty proceedings under section 272A(1)(d) of the Act was initiated for failing to comply with the notices u/s 142(1) of the Act dated 11.01.2023 & 06.04.2023.
Show cause notice u/s 272A(1)(d) was issued to the assessee. The assessee, requested for adjournment on 19.12.2023 on portal.
The reply of the assessee is not found to be tenable since no explanation is offered by the assessee regarding non-compliance of notices issued u/s 142(1) of the Act.
That the AO completed the penalty proceedings and levied the penalty for non-compliance of notices u/s 142(1) of the Act dated 11.01.2023 & 06.04.2023
That the assessee filed an appeal against the order of assessment before Ld. CIT(A) dated on 22/01/2024. The CIT(A) is dismissed with following remarks: “In view of the facts and circumstances of the case, and the prevailing position of law applicable on such facts, I find that the appellant has failed to comply with the notice(s) issued under section 142(1) of the Act, and that the appellant has not been able to establish that there was any reasonable cause for such failure, within the meaning of section 273B. The action of the A.O. in imposing penalty of Rs 20,000/- under section 271(1)(b) for non-compliance does not call for any interference. Accordingly, the levy of penalty is confirmed. These grounds of appeal
are dismissed. In the result, the appeal is dismissed.”
5. That the assessee field an appeal against the impugned order dated 25/07/2024 before this Tribunal.
(i) The Ld. A.R. of the assessee has submitted that the assessee has replied last notice dated: 26/04/2023 response on 29/04/2023 no penalty should be levied in the assessment proceedings. The AR further submitted that the assessment order is barred by limitation & prayed that kindly delete the penalty. (ii) On the contrary Ld. D.R. has relied on the order of the authority. acknowledge the part compliance made by the assessee during the assessment proceedings.
We have heard the rival submissions and perused the material available on record including order of the Ld. CIT(A). We acknowledge that the assessee has filed of written on income. Declaring income of Rs. 2,62,340/- on dated 06/10/2016. The case was reopen u/s. 148 and reopened assessment was completed u/s. 147 r.w.s. 144B & 144 on dated 18/05/2023 While making an assessment a penalty u/s. 271(1)(b) were initiated in the assessment order. The assessment order speak that the appellant has failed complied with statutory notice u/s. 142(1) of the Act para 3.4.1 of the order is reproduce: “ During the course of assessment proceedings notices u/s 142(1) of the IT Act dated 11.01.2023 and 06.04.2023 was issued to the assessee wherein details were sought for regarding the ongoing re-assessment proceedings for the period under consideration pertaining to the transactions made by the assessee for the year under consideration. However assessee did not submit any response to the notices issued u/s 142(1).” The appellant has tried in best possible manner to co-operate with department. please appreciate that non-compliance was not deliberate or willful on the part of the appellant, in fact appellant was not aware about the notice issued by AO 11.01.2023 & 26.04.2023 With respect to above we draw your honors kind attention to the decision of Hon'ble Apex Court rendered by a larger Bench comprising of three of their Lordships in the case of Hindustan Steel vs. State of Orissa in 83 ITR 26 held that that "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, 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. 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 Bonafide belief that the offender is not liable to act in the manner prescribed by the statute. The provisions of Section 271(1)(b) is of deterrent nature and not for earning revenue In support we hereby draw your honour's kind attention to the decision of Hon'ble ITAT Delhi in case of Smt. Rekha Rani v. Deputy Commissioner of Income-tax, Central Circle-8, New Delhi [2015] 60 taxmann.com 131 (Delhi Trib.) in which it was held that We have considered the submissions of learned DR and have perused the order of the Assessing Officer and the learned CIT(A). We find that there was no reasonable cause on the part of the assessee for not appearing on the different dates of hearing before the Assessing Officer in response to notice issued under Section 143(2) of the Act. However, we find that the default is same and, therefore, penalty of Rs.20,000/- could be imposed for the first default made by the assessee in this regard. The penalty under Section 271(1)(b) could not be imposed for each and every notice issued under Section 143(2), which remained not complied with on the part of the assessee. The provision of Section 271(1)(b) is of deterrent nature and not for earning revenue. Any other view taken shall lead to the imposition of penalty for any number of times (without limits) for the same default of not appearing in response to the notice issued under Section 143(2) of the Act. This does not seem to be the intention of the legislature in enacting the provisions of Section 271(1)(b) of the Act. In this view of the matter, we restrict the penalty levied under Section 271(1)(b) of the Act to the first default of the assessee in not complying with the notice under Section 143(2) of the Act. Accordingly, the penalty imposed is restricted to Rs.20,000/- as against Rs.50,000/- confirmed by the learned CIT(A). The grounds of appeal
of the assessee are thus partly allowed. Your honor may appreciate that the same view was also held by ITAT Ahmedabad in case of Mahendra J. Patel, Vadodara vs Income Tax Officer, Ward-2(1),, March, 2017 on 29. We have carefully considered the relevant and material facts on record, in respect of the issue raised in these Grounds of appeal, as brought out in the penalty order, the Statement of Facts, and the written submissions made during appeal proceedings. There is no dispute on the fact that the appellant has failed to comply with the statutory notice(s) issued under section 142(1) in the course of assessment proceedings, on various dates. During the penalty proceedings, notices were issued asking the appellant to show cause as to why penalty under section 271(1)(b) should not be imposed for the default of failure to comply with statutory notices. In response thereto, the appellant has not made any submission on merits of the penalty matter. Thus, the appellant was not able to prove before the AO, despite adequate opportunity being afforded, that there was any reasonable cause for his failure to comply with statutory notices, within the meaning of section 273B of the Act. The appellant has also taken a plea that he was not aware of the notice(s) under section 142(1), which were admittedly issued by the AO through the ITBA portal. However, appellant was aware that his case for the year under consideration had been taken up for scrutiny and assessment proceedings had commenced. The appellant was also having a registered account on the e-filing Portal, and the account was active, as it was being used by the appellant for filing returns of income.
We perused the order of assessment and relevant para no. 3.4.1 says that notice issued, but order is silent on the service of notice upon the assessee and also it was not clear how the notice sent to be assessee electronically or manually the assessee has no knowledge about the notice issued by the AO.
Therefore, there is a merit in the plea of the appellant since, the appellant has no knowledge of notice issued dated 11.01.2023 & 26.04.2023 under the act. In view of the above facts and circumstance case and in the interest of justice. We quash the penalty order.
Resultantly, this appeal is allowed for statistical purpose.