SHYAM KUMAR SADASHIVAN PILLAI,MUMBAI vs. INCOME TAX OFFICER, CIRCLE 27(3)(1), NAVI MUMBAI

All the email notices delivered promptly at the address sandhyapillai1976@gmail.com and the notice has also been issued through speed post through Centralized Communication centre vide speed post No. Speed Post No: JA162069686IN on 25.01.2023. But the assessee has chosen not to respond to the notices issued from time to time. This clearly shows that the assessee has not co-operated with the reassessment proceedings and not filed even the basic details within the time allowed in the notices.

The ld. Authorized Representative (AR) reiterated the submissions made before the CIT(A). The ld. AR further submitted that the AO has levied the penalty for the reason that the first four notices dated 28.10.2022, 22.12.2022, 10.01.2023 & 25.01.2023 have not been responded by the assessee but failed to take notice that the subsequent notices have been responded. The ld. AR also submitted that the assessee has filed the return of income and discharged the tax liability thereon and has filed all the details before the AO. The ld. AR argued that the AO though has stated that the assessee has responded to subsequent notices has levied the penalty only for the reason that the first four notices have not been responded. The ld. AR further argued that it is an undisputed fact that the email Id to which the notices have been sent is that of assessee's wife and therefore the assessee's claim that he did not come to know of the issue of notice has merits. The ld. AR also argued that by filing the return of income and furnishing all the relevant details before the AO, there is a substantial compliance on the part of the assessee and that there is no intentional non-compliance. Therefore, the ld. AR prayed that the penalty may be deleted.

The ld. Departmental Representative (DR) on the other hand argued that the first four notices were issued over a period of one year and that the assessee did not comply with any of these notices. Accordingly, the ld. DR supported the order of the lower authorities. The ld. DR fairly conceded to the request of the ld. AR that Shyam Kumar Sadashivam Pillai the penalty appeal could be remitted back to the CIT(A) to be decided along with the quantum appeals.

We heard the parties and perused the material on record. The AO reopened the assessment of the assessee based on the information that the assessee has sold a property during the year under consideration for Rs.91,40,000 and that no return of income has been filed. The AO issued notices under section 142(1) on various dates and the assessee filed the return of income under section 148 in response to last of the notices. The assessee paid the tax due on the income returned and filed all the relevant details before the AO. The fact that the assessee has responded to the last of the notices under section 142(1) and has filed the details was had been acknowledged by the AO in the order passed under section 147 r.w.s.144B. In the penalty proceedings also the AO considers these facts but proceeds to levy penalty for non-compliance of first 4 notices at Rs.10,000 per notice. While considering the issue of penalty under section 271(1)(b) of the Act, it is relevant to look at the provisions of section 273B of the Act which contains provisions to state that the penalty cannot be imposed under certain circumstances. The provisions of Section 273B read as under – Penalty not to be imposed in certain cases. 273B. Notwithstanding anything contained in the provisions of clause (b) of sub- section (1) of section 271, section 271A, section 271AA, section 271B, section 271BA, section 271BB, section 271C, section 271CA, section 271D, section 271E, section 271F, section 271FA, section 271FAB, section 271FB, section 271G, section 271GA, section 271GB, section 271H, section 271-I, section 271J, clause (c) or clause (d) of sub-section (1) or sub-section (2) of section 272A, sub-section (1) of section 272AA or section 272B or sub-section (1) or sub-section (1A) of section 272BB or sub-section (1) of section 272BBB or clause (b) of sub- section (1) or clause (b) or clause (c) of sub-section (2) of section 273, 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.

From the plain reading of the above section it is clear that the penalty under section 271(1)(b) cannot be levied if the assessee is able to prove that there was a reasonable clause for failure to respond to the notice under section 142(1) of the Act. In the context of the penalty provisions including the provisions of Section 271(1)(b), the word "reasonable cause" would mean a cause which prevents a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or lack of bona fide. In the light of the above legal position we will now look at the assessee's case. Assessee is a non-resident Indian and has been living out side India for the last 30 years. The assessee during the year under consideration sold a house property for a consideration of Rs.91,40,000/-. The assessee's contention is that the he was under the bonafide belief that being a non- resident, there is no requirement to file the return of income. The assessee is also contending is that the notice of reopening and the notice under section 142(1) were sent to the email id of assessee's wife who missed to take note of the first 4 notices. The assessee is further contending that subsequently when the assessee came to know of such notices he immediately complied with the same. We in this regard notice that the assessee has furnished the return of income under section 148 along with discharging the tax liability and vide letter date 22.04.2024 the assessee has filed the relevant details pertaining the sale of property, bank details, details of return of income etc., before the AO. We further notice that the AO in the proceedings under section 147 acknowledged the fact that the assessee has responded to the notice on 24.02.2024 (refer page 2 and 4 of order under section 147 r.w.s.144B) but still the AO vide order dated 20.03.2023 completed the assessment under section 147 r.w.s 144B without considering the case on merits.

During the penalty proceedings the assessee has brought to these facts to the notice of the AO that he has filed the relevant details before the AO in the reassessment proceedings and therefore penalty under section 271(1)(b) is not warranted. The ld DR in this regard argued that the reassessment proceedings were completed under section 147 r.w.s.144 and therefore the assessee cannot take the plea that the details submitted thereby not warranting penalty. However we are unable to appreciate this contention of the ld DR since the penalty under section 271(1)(b) is levied for the failure on the part of the assessee to comply with the notices issued under section 142(1) and in the given case it is an undisputed fact that the assessee has responded to the last of such notices (refer para 2 of AO's order extracted in the earlier part of this order). Therefore we are inclined to agree with the contention that there is no deliberate non-compliance to respond to the notice under section 142(1) by the assessee. Further the contention that being a non-resident the assessee did not come to know of the notices sent to his wife's id is a reasonable cause also has merits.

It is relevant here to quote the below observations of the Hon'ble Supreme Court in the case of Hindustan Steel Ltd. v. State of Orissa [(1972) 83 ITR 26 (SC)] – "Penalty is not to be imposed if there is no conscious breach of law. An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding, and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or guilty of conduct, contumacious or dishonest, or acted in conscious disregard to 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

From the facts it is clear that there is no willful and complete failure on the part of the assessee to respond to the notices and given that the assessee has in fact responded to the last of the notices we are of the view that the levy of penalty under section 271(1)(b) for failure to respond to the first 4 notices by the assessee is not justified. Therefore we direct the AO to delete the penalty levied.

In the result, the appeal is allowed.