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Facts
The assessee expired on 04/03/2011, prior to the assessment year 2012-13. Despite this, assessment proceedings under section 147 were initiated, and notices were issued. Penalty proceedings under sections 271F and 271(1)(b) were initiated for non-filing of return and non-compliance with notices.
Held
The Tribunal held that there was a reasonable cause for the non-filing of the return and non-compliance with notices due to the assessee's death and the procedural complexities of appointing a legal heir. The notices were also issued in the name of the deceased assessee, and there was no material on record to show the legal heir was properly brought on record.
Key Issues
Whether penalties under sections 271F and 271(1)(b) are leviable when the assessee had expired prior to the assessment year and before the initiation of proceedings, and if there was reasonable cause for non-compliance.
Sections Cited
271F, 271(1)(b), 273B, 139(1), 147, 148, 142(1), 274
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “F” BENCH, MUMBAI
Before: SHRI B R BASKARAN & SHRI SANDEEP SINGH KARHAIL
The present appeals have been filed by the legal heir on behalf of the assessee challenging the separate impugned orders of even date 18/12/2023, passed under section 250 of the Income Tax Act, 1961 ("the Act") by the learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi, [“learned CIT(A)”], which in turn arose from the penalty orders
Sankarlingam Sankar through His Legal Heir Ganesh Shankar ITAs no.706 & 708/Mum./2024 passed under section 271F and 271(1)(b) of the Act, for the assessment year 2012-13.
Since both the appeals pertain to the same assessee arising out of similar factual matrix, therefore, as a matter of convenience, these appeals were heard together and are being decided by way of this consolidated order.
In ITA. No. 706/Mum./2024, the assessee has raised the following grounds: - “1. The NFAC erred in dismissing the appeal of the assessee challenging penalty order levying penalty u/s 271(1)(b) on the ground of delay without appreciating that there was a reasonable cause for delay in filing appeal and hence the delay in filing appeal before the NFAC be condoned.
2. The NFAC failed to appreciate that penalty u/s 271(1)(b) of Rs.5,000/- is not leviable as reopening is bad in law as same is done on dead person and there was reasonale cause for not filing the same and hence the case of the assessee is covered by section 273B of the Act and hence the penalty of Rs.5,000/- u/s 271F may be deleted.”
In ITA. No. 708/Mum./2024, the assessee has raised the following grounds: - “1. The NFAC erred in dismissing the appeal of the assessee challenging penalty order levying penalty u/s 271(1)(b) on the ground of delay without appreciating that there was a reasonable cause for delay in filing appeal and hence the delay in filing appeal before the NFAC be condoned.
2. The NFAC failed to appreciate that penalty u/s 271(1)(b) of Rs.10,000/- is not leviable as reopening is bad in law as same is done on dead person and there was reasonale cause for not filing the same and hence the case of the assessee is covered by section 273B of the Act and hence the penalty of Rs.5,000/- u/s 271F may be deleted.
3. The NFAC failed to appreciate that penalty u/s 271(1)(b) of Rs.10,000/- is not leviable as there was reasonable cause for non-compliance and hence the case of the assessee is covered by section 273B of the Act and hence the penalty of Rs.10,000/- u/s 271(1)(b) may be deleted.”
Sankarlingam Sankar through His Legal Heir Ganesh Shankar ITAs no.706 & 708/Mum./2024
The only grievance of the assessee, in the present appeals, is against the levy of penaly u/s 271F and 271(1)(b) of the Act.
We have considered the submissions of both side and perused the material available on record. The brief facts of the case are that the assessee’s PAN for the assessee under consideration was selected for scrutiny on the basis of the information received from NMS Portal of the ITD System. Accordingly, proceedings, u/s 147 of the Act were initiated and notice u/s 148 of the Act was issued to the assessee. During the assessment proceedings, notice u/s 142(1) of the Act were issued to the assessee on 14/10/2019 to make its submission with respect to the queries raised. However, in the absence of any response from the assessee, the Assessing Officer (“AO”) vide order dated 03/12/2019 passed u/s 144 read with section 147 of the Act made an addition of Rs.77,18,990/-. Meanwhile, since the assessee did not file his return of income for the year under consideration as per the provisions of section 139(1) of the Act, penalty proceedings u/s 271F of the Act were initiated and show cause notice u/s 274 read with section 271F of the Act was issued on 03/12/2019. Further, since the assessee also did not respond to the notices issued u/s 142(1) of the Act, the penalty proceedings u/s 271(1)(b) of the Act were initiated and show cause notice u/s 274 read with section 271(1)(b) of the Act was issued on 03/12/2019. After the introduction of the Faceless Penalty Scheme, 2019, another show cause notices were issued to the assessee to explain as to why the penalty u/s 271F and 271(1)(b) of the Act should not be levied. In response to the aforesaid notices, Mr. Ganesh Shankar, legal heir of the assessee, submitted that the assessee has expired Page | 3
Sankarlingam Sankar through His Legal Heir Ganesh Shankar ITAs no.706 & 708/Mum./2024 on 04/03/2011. The legal heir of the assessee also submitted the Death Certificate of the assessee. Thereafter, the wife of the assessee, Mrs. Gayatri Shankar also filed a letter dated 26/03/2022 reiterating the aforesaid facts and also admitting that the no Income Tax Return for the assessment year 2012- 13 has been filed, since the assessee has expired. The AO, after considering the aforesaid submission, passed the penalty order dated 27/03/2022 u/s 271F of the Act and held that the assessee’s legal heir has no valid reasons for non-filing the return of income u/s 139(1) of the Act. The AO further held that the assessee’s legal heir has neither voluntary filed the return of income nor furnished any reasonable cause which preventive him for doing so, therefore, the assessee’s legal heir has defaulted by not filing the return of income. Accordingly, the AO levy of penalty of Rs.5,000/- u/s 271F of the Act.
As regards, the non compliance with the notice issued u/s 142(1) of the Act, the AO vide penalty order dated 27/03/2022, passed u/s 271(1)(b) of the Act held that the assessee’s legal heir has failed to comply with the notice u/s 142(1) of the Act and has commited a default u/s 271(1)(b) of the Act. Accordingly, the AO levy of penalty of Rs.10,000/- u/s 271(1)(b) of the Act.
It is evident from the record that there is no dispute regarding the fact that the assessee, i.e. Mr. Sankarlingam Sankar, has expired on 04/03/2011, i.e. before the commencement of the relevant financial year 2011-12, and much before the due date of filing the return of income as per the provisions of section 139(1) of the Act, as well as also much before the issuance of notice on 14/10/2019 u/s 142(1) of the Act. It is also evident from the record that Sankarlingam Sankar through His Legal Heir Ganesh Shankar ITAs no.706 & 708/Mum./2024 the upon receipt of the penalty notices, pursuant to transition under the Faceless Penalty Scheme,2019, the legal heir of the assessee responded to the notices and fursnised the details as called for. At this stage, it is worth noting that there is no material available on record to show that after the death of the assessee, his legal heir was brought on the record, and therefore all the notices were sent in the name of the assessee, who had already expired on 04/03/2011. Further, the process of appointment of legal heir also requires fulfilment of certain procedure. Thus, considering the aforesaid facts and circumstances, we are of the view that there was a reasonable cause within the meaning of the provisions of section 273B of the Act, for not filing the return of income as per the provisions of section 139(1) of the Act, and also for not complying with the notice issued u/s 142(1) of the Act on 14/10/2019. Therefore, we direct the deletion of penalty levied u/s 271F as well as u/s 271(1)(b) of the Act. As a result, the grounds raised by the assessee in both appeals are allowed.
In the result, both appeals by the assessee are allowed. Order pronounced in the open Court on 25/07/2024