AADINATH SECURITIES PVT LTD,MUMBAI vs. ITO WARD 4(1)(3), MUMBAI

Ld. CIT (A) too has confirmed the said penalty on the ground that assessee had failed to comply with the statutory notices issued on various dates during assessment proceedings and nowhere assessee had denied that notices were not served upon him nor there was any plausible explanation for non-compliance of notice.

Before us ld. Counsel submitted that when assessee was issued a notice u/s. 143(2), assessee has filed objection that assessee’s case has been reopened on a wrong facts and the transaction which has been stated in the ‘reasons recorded’ have already been offered to tax and therefore, there was no escapement of income. Further, assessee had also filed reply and details as and when required. The chronology of events and the remarks for each date of compliance and the replies filed before the AO during the course of assessment proceedings as highlighted before the ld. CIT (A) are reproduced hereunder:-

Date Event Reply Date Remark 31.03.2021 Notice u/s.148 of 31.03.2021 Return was filed in 4 & 4005/Mum/2023 M/s. Aadinath Securities Pvt. Ltd. Income Tax was issued response to Notice issued u/s.148. 28.06.2021 Notice u/s 143(2) of 22.03.2022 Assessee filed objection Income Tax Act, 1961 and brought to the were issued and knowledge of Ld. AO that reason Recorded for case is reopen on wrong reopening were facts and Income from provided. The case transaction executed was reopened on the through M/s Latin information from ITD Manharlal Securities Pvt System that assessee Ltd. Rs. 1272701 9/- were had entered into already offered for tax. And fictitious transactions when no escapement, then through M/s Wellworth provision of section 148 Shares & Stock cannot be invoked. Broking Ltd. amount Rs.145000/- and assessee failed to offer this income and income remain undisclosed.

Thus, according to ld. Counsel assessee had filed reply in response to various show-cause notices and barring one or two notices, assessee had made due compliance and filed all the details including participating in the video conferencing offered by the ld. AO at the request of the assessee. Ld. Counsel further pointed out that before the authorities below assessee had duly submitted that there was delay in response to the notice and not that notices had not been responded. Reason for delay was stated as under:- a) Time taken for retrieving old data b) Due to heavy losses and small-scale business operation after COVID, office was not regular. c) Appellant had no employee and only old-age director's was handling all the affairs of appellant. They are not familiar with online technicalities. d) But, later on with help of CA Himanshu Gandhi all details were filed and duly acknowledge by Ld. AO in assessment order. e) Even, appellant appeared in Video Conferencing also which is mentioned to Page No. 16 of Assessment order also.

Thus, he submitted that it is not an issue of non-compliance of notice but delayed response to the said notices.

On the other hand, ld. DR pointed out that the ld. AO had duly mentioned about the issuance of notices, date fixed for compliance and non-compliance made by the assessee on all such notices and therefore, the ld. AO has rightly levied the penalty for non-compliance of such notices and it is not necessary that assessment should have been completed u/s.144.

We have heard submissions of the parties and also perused the relevant record placed before us. From the perusal of the chronology of events which is also evident from the facts and material on record and also as discussed in the impugned orders, we find that the penalty has been levied for non- compliance of three notices u/s.142(1) dated 26/11/2021, 24/12/2021 and 17/01/2022. Although it is correct that assessee had not complied the date fixed in the notice u/s. 142(1), however, the assessee had filed all the details in response to the said show-cause notice on 24/02/2022 and also on 20/03/2022. Further, in response to show-cause notice also assessee had filed the details and also brought to his knowledge that all the transactions which has been alleged had already been offered to tax and part of profit and loss account. The remarks in the chronology of events clearly justify the compliance made by the assessee before the ld. AO. Thus, it is not a case of failure to comply with the notice, albeit there is failure to respond on the date mentioned in the notice. Delay in 9 & 4005/Mum/2023 M/s. Aadinath Securities Pvt. Ltd. late response have been explained that; firstly, it was an old matter and assessee took time for retrieving the old date; secondly, assessee was having heavy losses due to small scale business operation after Covid and during the Covid period office of the assessee was also not opened. Apart from that, assessee has no employee and director was old and was the only person who was handling the affairs of the assessee company and was not aware of any online technicalities of notices sent through online. It was later on when assessee sought for assistance of a Chartered Accountant; the assessee compiled and filed all the details before the ld. AO which has been duly acknowledged. Thus, it cannot be held that assessee has purposefully defied the compliance of notices u/s. 142(1) and there was sufficient and reasonable cause in filing the details belatedly. Accordingly, under these facts and circumstances and looking for the grounds for delay in filing the response and the details in compliance of the notices, we do not find that it is a fit case to levy penalty and accordingly, in the interest of justice, the penalty levied by the ld. AO is deleted for the A.Y.2014-15 and A.Y.2015-16. Accordingly, both the appeals of the assessee are allowed.

In the result, both the appeals of the assessee are allowed. Order pronounced on 24th April, 2024.