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Facts
The AO levied a penalty of Rs. 10,000/- under Section 271(1)(b) for non-compliance with a notice issued under Section 142(1) during assessment proceedings. The assessee sought adjournment but failed to respond, later claiming the requested information was voluminous and indicating no intention to avoid proceedings. The CIT(A) upheld the penalty but erroneously stated the penalty was Rs. 20,000/-.
Held
The Tribunal found that the CIT(A) made a perverse order by stating wrong facts regarding the penalty amount and failed to examine the assessee's reasonable cause under Section 273B. Considering the assessee's submission about the voluminous nature of information and no intention to avoid proceedings, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty.
Key Issues
Whether the penalty levied under Section 271(1)(b) for non-compliance with Section 142(1) notice was justified, especially when the assessee claimed reasonable cause under Section 273B.
Sections Cited
271(1)(b), 142(1), 143(3), 273B, 274
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Income Tax Appellate Tribunal, RAIPUR BENCH, RAIPUR
Before: SHRI PARTHA SARATHI CHAUDHURY & SHRI ARUN KHODPIA
आदेश / ORDER
PER PARTHA SARATHI CHAUDHURY, JM:
This appeal preferred by the assessee emanates from the order of the Ld.CIT(Appeals)/NFAC, Delhi dated 24.03.2025 for the assessment year 2016-17 as per the grounds of appeal on record.
2. In this case, penalty of Rs.10,000/- was levied by the A.O u/s. 271(1)(b) of the Income Tax Act, 1961 as enumerated in the said order which is extracted as follows for the sake of completeness: “During the course of the assessment proceedings u/s 143(3) of the I. Tax Act, 1961 for A.Y. 2016-17, a notice u/s.142(1) of the Act was issued to the assessee on 25.06.2018 via ITBA portal. Vide the notice; the assessee was required to furnish some document on 29.06.2018. On 29.06.2018, the assessee requested to adjourn the date for next 10 days which was duly considered and the next date of hearing was fixed on 09.07.2018. However, no reply was furnished by the assessee on or before the stipulated date. Further, the assessee did not furnish any reason/explanation in respect of the show-cause notice dated 13.07.2018 fixing hearing date on 17.07.2018. The assessee made no submission nor any submission in respect of the delay was furnished. It is, therefore, clear that the assessee has no explanation/justification for the non- compliance of the notice u/s 142(1) of the Act dated 25.06.2018.”
That as per notice u/s.142(1) of the Act along with questionnaire, the assessee was required to furnish certain documents to the department and due to such failure on the part of the assessee, the said penalty u/s. 271(1)(b) of the Act has been levied on the assessee.
In this regard, the Ld. CIT(Appeals)/NFAC has held and observed as follows: “5.1 The AO has noted in the penalty proceedings that during the course of the assessment proceedings u/s 143(3) of the I. Tax Act, 1961 for A 2016-17, a notice u/s 142(1) of the Act was issued to the assessee on 25.06.2018 via ITBA portal requiring he assessee to furnish some document on 29.06.2018, whereas the assessee sought adjournment on 29.06.2018 for next 10 days which was duly considered and the next date of hearing was fixed on 09.07.2018. However, no reply was furnished by the assessee on or before the stipulated date. Further, during the penalty proceedings the assessee was issued with show cause notice on 13.07.2018 calling the appellant to furnish the reason/explanation for the above non-compliance. Since the assessee had not responded to the said notice, it was concluded that the assessee has no explanation/justification for the non- compliance of the notice u/s.142(1) of the Act dated 25.06.2018 on satisfying that the assessee has failed to comply with the notice under sub-section (1) of section 142 of the Income-tax Act, 1961 dated 25.06.2018, penalty of Rs.10,000/- was levied vide order u/s 271(1)(b) I.T. Act on 18.07.2018. 5.2 During the appellate proceedings, the appellant has ground of appeal stating that the AO has erred in levying of penalty, whereas the appellant has not submitted any valid reason preventing him from responding to the statutory notices twice. The appellant, in the penalty proceedings has only stated that the assessment order during the proceedings of which the penalty was levied is under appeal and hence, the penalty order may be kept abeyance. whereas the appellant has not adduced any reasonable cause which had prevented him from complying with the statutory notices on two occasions, and also not furnished material evidences in this regard. Further, the appellant had not brought on record any material evidence to prove his claims. 5.3 The provisions of section 271(1)(b) of I.T. Act under which penalty is levied, pertains only to "non-compliance" to the statutory notices and has no relevance to the assessment proceedings and the issues involved therein, as reproduced below:
"In any person fails to comply with notice u/s 142(1) or 143(2) or fails to comply with direction issued u/s 142(2A), he shall pay, by way of penalty, a sum of Rs.10,000/- for each such default or failure" 5.4 Hence, the appellant's failure to furnish any justification towards non-compliance to the notice, shows that the appellant had no reasonable cause to show as to why she did not respond to the notice u/s 142(1) dated 25.06.2018, which was duly served on the registered email of the appellant, for which the penalty u/s 271(1)(b) of I.T. Act was initiated. 5.5 In these circumstances, the AO was right in levying penalty of Rs.20,000/- u/s 271(1)(b) of I.T. Act, towards non- compliance to the notices u/s 142(1) dated 25.06.2018, as the appellant failed to adduce any valid reason for such failure, in spite of adequate opportunities given during the penalty proceedings, and hence the action of the AO needs no intervention from the appellate authorities and the same is upheld. The grounds of appeal raised by the appellant on these issues lack merits and requires to be dismissed.
6. In the result, the appeal of the assessee is dismissed.”
4. If we read the order of penalty u/s.271(1)(b) of the Act simultaneously with the findings of the Ld. CIT(Appeals)/NFAC, it would be absolutely clear that while upholding the order of penalty by the Ld. CIT(Appeals)/NFAC, there has been no application of mind and even the facts have been mentioned in wrong manner by it. The penalty has been levied for Rs.10,000/- u/s. 271(1)(b) of the Act whereas the Ld. CIT(Appeals)/NFAC at Para 5.5 noted that “the A.O was right in levying penalty of Rs.20,000/- u/s. 271(1)(b) of the Act”. This shows a gross negligence on the part of the Ld. CIT(Appeals)/NFAC in appreciating the facts in the case and appropriate application of mind. That penalty imposable for violation of Section 271 of the Act is not mandatory and if such failure to comply with the said provision is due to some reasonable cause as explained by the assessee then as per Section 273B of the Act, the said penalty may not be imposable. Therefore, the Ld. CIT(Appeals)/NFAC should have also examined the issue from this perspective also which action he had failed to do.
5. That as per the record, the assessee had made submissions which are extracted as follows: “Though the due compliance had been made without any default, the learned AO had issued the show cause notice u/s 274 read with section 271(1)(b) through e-portal on 13.07.18 to explain in writings on or before 03.40 PM ON 17.07.18 as why an order imposing penalty on you should not be made u/s 271(1)(b) of the IT Act. In compliance to the notices u/s 142(1) Dtd. 25.6.2018 as well as the show cause notice u/s 274 read with section 271(1)(b) respective reply had been filed through e-portal on 17.07.18 explaining as under: Acknowledgement Number: 17071810148403 Since the requisite information was huge it is not possible to file all the information as desired in a short span of time. However i have no intention to avoid the proceedings and the same will be produced personally if permitted. Therefore no penalty should be initiated against me and oblige. However, the learned AO had imposed the penalty of Rs. 10,000/- without taken into consideration of responses to the notice of Sec. 142(1) and show-cause notice issued and imposed penalty in the order.”
6. The assessee had filed reply through e-portal dated 17.07.2018 and submitted that the requisite information as sought for by the department was not possible to file in a short span of time and at the same time there is no intention on the part of the assessee to avoid the proceedings. That without considering the fairness of the submissions of the assessee or any merit in the grievance brought out by the assessee without any such verification on the next date i.e. 18.07.2018, the A.O passed order levying penalty u/s.271(1)(b) of the Act. As examined first of all the Ld. CIT(Appeals)/NFAC had made perverse order by stating wrong facts regarding quantum of penalty and secondly, there was no examination conducted in terms with Section 273B of the Act.
7. Considering the totality of the facts and circumstances, we set-aside the order of the Ld. CIT(Appeals)/NFAC and direct the A.O to delete penalty from the hands of the assessee.
As per the above terms grounds of appeal raised by the assessee are allowed.
In the result, appeal of the assessee is allowed. Order pronounced in the open court on 26th day of June, 2025.