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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI CHANDRA MOHAN GARG & SHRI B.M. BIYANI
आदेश / O R D E R
Per B.M. Biyani AM:
Feeling aggrieved by appeal-order dated 16.03.2022 passed by learned CIT(A)- NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of penalty-order dated 27.06.2017 passed by learned ITO, Ward-1(2), Bhopal [“Ld. AO”] u/s 271(1)(b) of Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2009-10, the assessee has filed this appeal on following effective ground:
“1. That on the facts and in the circumstances of the case of the assessee, the Ld. Commissioner of Income Tax was not justified in confirming the imposition of penalty of Rs. 10,000/- under section 271(1)(b) of the Act.” Page 1 of 6
Krishna Developers ITANo.93/Ind/2022 Page 2 of 6
Heard the learned Representatives of both sides and case-records perused.
On perusal of penalty-order, it is observed that the Ld. AO has given multiple opportunities vide notices dated 02.03.2016, 08.04.2016 and 01.11.2016 to the assessee during the course of assessment-proceedings undertaken by Ld. AO for the relevant AY 2009-10. However, finding non- response from assessee, the Ld. AO not only completed assessment u/s 144 of the act but also initiated proceeding to impose penalty u/s 271(1)(b). It is further on record that even the hearings fixed by Ld. AO vide notices dated 05.12.2016 and 12.06.2017 before imposing penalty, also remained un- responded by assessee. In fact, the notice dated 12.06.2017 sent through speed-post was returned with the remark “the assesee is NOT KNOWN”. Observing such state of affairs, the Ld. AO imposed a penalty of Rs. 10,000/- u/s 271(1)(b) of the act.
Against penalty-order, the assessee went in appeal to Ld. CIT(A). However, the Ld. CIT(A) did not grant any relief by observing and holding thus:
3.2 Decision:- From the above it is noticed that during the course of assessment proceedings the AO issued notice u/s 148 of the Act on 02.03.2016 and again notices dated 08.04.2016 and 01.11.2016 u/s 142(1) but none of them were complied with. Non-Compliance by assessee resulted in completion of assessment u/s 144 r.w.s. 147 on 05.12.2016. Observing consistent non- compliance, penalty proceedings u/s 271(1)(b) of the Act was imitated 05.12.2016 by issuing notice u/s 274 r.w.s. 271(1)(b). Hearing nothing from the assessee the AO provided one more opportunity. But again no compliance was made.
Thus, during entire proceeding of assessment as well as penalty proceedings the assessee has not cooperated with the Department. Even during appellant Page 2 of 6
Krishna Developers ITANo.93/Ind/2022 Page 3 of 6 proceedings the assessee made no compliance despite sufficient opportunities was allowed to him to furnish his submission along with supporting documentary evidence in support of his grounds of appeal. From these facts, it can be safely concluded that the appellant has got no valid reasons for his non- compliance to notices issued during assessment and penalty proceedings. Accordingly, the penalty of Rs.10,000/- imposed u/s 271(1)(b) of the Act by assessing officers is confirmed and the ground of appeal no. 1 & 2 is dismissed.”
5. Now, aggrieved by appeal-order passed by Ld. CIT(A), the assessee has come in appeal before us.
Before us, the Ld. AR has filed following Written-Submission and also reiterated the same during the hearing:
“The assessee is a partnership firm formed on 23.02.2007. The partnership firm was having its office in the BDA Complex at 7 No Stop, Shivaji Nagar, Bhopal. Due to some unavoidable legal issues the office at BDA Complex got closed. All the notices issued by the AO were sent on the closed address and could not be served on the assessee. The assessment order, the notices issued for initiation of penalty proceedings and the penalty orders also could not be served on the assessee for the same reasons. Thus, the assessee was never aware of any pending proceedings against him. The assessee first came to know about the same on 23.12.2018 when a letter dated 18.12.2018 for recovery of outstanding demand was served by TRO-1, Bhopal on Dr. Ajay Shankar Mehta who was one of the partners of the partnership firm at his residential address. The assessee immediately took note of the issue and submitted an application before the TRO-1, Bhopal on 24.12.2018 informing him that the assessee is not aware of any such demand and the details of it may kindly be provided. Copy of letter is enclosed. The TRO informed the assessee that the order was passed by ITO-1(2), Bhopal and the assessee immediately wrote a letter to ITO-2(1), 26.12.2018 submitting that the assessee is not aware of any assessment made against him and requesting for supply of the copy of assessment order. Copy of the letter enclosed. The AO on verification of his records found that all the orders passed by them assessment order u/s 144, penalty order u/s 271(1)© and u/s 271(1)(b)]
Krishna Developers ITANo.93/Ind/2022 Page 4 of 6 remained unserved and the assessee's copy of the order was available on records in original which was than served on the assessee on 08.03.2019. Thus, no compliance could be made on the notices issued by the department as the assessee was not aware of these notices and none of the notices were ever served on the assessee firm or any-of its partners. Thus, the inability of the assessee to make compliances to the notices issued was neither deliberate nor intentional. Further non service of the notices on the assessee or any of its partners constitutes reasonable cause for failure in making the compliance. Under the circumstances the penalty levied is requested to be cancelled.”
Ld. AR pleaded that the assessee could not make compliances of the notices sent by Ld. AO as the notices never reached to him owing to the closure of office premises. Ld. AR submitted that the default had occurred due to a reasonable cause, without having any malice or willful attention to disobey the law, and hence the penalty is not imposable by virtue of section 273B of the Act. Accordingly, Ld. AR prayed to delete the penalty.
Ld. DR strongly supported the penalty-order and claimed that the Ld. AO has rightly imposed penalty because the assessee had committed default by not complying with the statutory notices and such default attracted section 271(1)(b) of the act. Accordingly, the Ld. DR prayed to uphold the penalty.
We have considered rival submissions of both sides and perused the orders of lower authorities as well as the material placed before us by Ld. AR on behalf of assessee. We observe that though there were statutory notices sent by Ld. AO which remained un-responded by the assessee, but the non- response was due to the reason that the impugned notices could not be served upon the assessee owing to closure of office premises. The factum of closure of office is also corroborated by the reporting made by Ld. AO in the penalty-order itself which states that the notice dated 12.06.2017 sent through speed-post was returned with the remark “the assesee is NOT KNOWN”. Thus, we do not find any malice or intention of assessee in not making compliances. It is further coming from the documents placed before us in the form of letters exchanged between the assessee and the department that the assessee was unaware of the statutory notices till the TRO started recovery proceedings. Page 4 of 6
Krishna Developers ITANo.93/Ind/2022 Page 5 of 6 Thus, we find that there was a reasonable cause on the part of assessee for not being able to comply with the notices and hence the present case fits in section 273B according to which no penalty shall be imposed u/s 271(1)(b) if the assessee proves a reasonable cause. Taking into account the facts placed before us and having regard to the legal provision of section 273B, we deem it fit to quash the penalty imposed by Ld. AO. We order accordingly.
In the result, Assessee’s appeal is allowed. 1.
Order pronounced on 6/12/2022 by placing the result on the Notice Board as per Rule 34(4) of the Income Tax (Appellate Tribunal) Rule, 1963.