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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Shri Waseem Ahmed & Shri Siddhartha Nautiyal
आदेश/ORDER PER : SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER:-
This assessee’s appeal for A.Y. 2010-11, arises from order of the National Faceless Appeal Centre (NFAC), Delhi dated 22-12-2022, in proceedings under section 250 of the Income Tax Act, 1961; in short “the Act”.
Page No 2 M/s. Dharti Traders Vs. ITO
The assessee has taken the following grounds of appeal:- “1. Ld. CIT(A) erred in law as well as on facts in passing the appellate order u/s. 250 of the Income Tax Act, 1961 in haste and without giving reasonable opportunity of being heard to the appellant.
2. Ld. AO erred in law as well as on facts in leavying penalty u/s. 271(1)(b) of the act of Rs. 40,000/- and Id. CIT(A) erred in law as well as on facts in confirming the same.”
3. The brief facts of the case are that the return of income was filed by the assessee for assessment year 2010-11 on 15-10-2010. Subsequently, the assessment order was passed ex-parte u/s 144 r.w.s. 147 of the Act. The Ld. Assessing Officer issued as many as four notices to the assessee during the course of assessment proceedings. The assessee did not comply with any of the notices and consequently, the assessment order was passed ex-parte under section 144 of the Act, on the basis of material available on record. The AO passed penalty under section u/s 271(1)(b) of the Act for non- appearance dated 12-04-2018 and levied penalty totaling to � 40,000/- (� 10,000/- for each of the four defaults for non-appearance).
In appeal, the Ld. CIT(Appeals) dismissed the assessee’s appeal with the following observations:
“5.2. It is seen from the penalty order, the AO has clearly stated the reasons for levying of penalty u/s 271(1)(b). The AO has stated that the assessee has defaulted in compliance of the statutory notice u/s 148/142(1) of the Act during the course of assessment proceedings and no reasons for such non-compliance have been furnished by the assessee. The assessment order was passed u/s 144 r.w.s. 147 of the I.T. Act, 1961, on 06.11.2017. It is also seen that during the penalty Page No 3 M/s. Dharti Traders Vs. ITO proceedings, the assessee has failed to respond to the notice issued u/s 271(1)(b) of the Income Tax Act, 1961.
5.3. Further, it may be noted that even during the current appellate proceedings, the appellant failed to prove his case against the penalty levied by the AO despite getting opportunity to substantiate the grounds of appeal. Considering these facts, it is concluded that it is a fit and strong case for levying of penalty u/s 271(1)(b). Therefore, penalty of Rs 40,000/- levied u/s 271(1)(b) is confirmed and grounds are dismissed.”
5. Before us, Ld. Counsel for the assessee stated that the non-compliance was owing to the fact that notices were received by the employee of the assessee at the shop, which remained closed for a year or so approximately. The notices were handed over to the assessee as when the shop opened again. The above facts were submitted before Ld. CIT(A), but he dismissed the appeal of the assessee without assigning any reason whatsoever. In response, DR relied upon the observations made by Ld. CIT(Appeals) in the appellate order.
We have heard the rival contentions and perused the material on record. In the instant case, we observe that the assessee had submitted before Ld. CIT(Appeals) that he could not cause appearance since the shop was closed for a year or so, and there was no mala-fide intention on part of the assessee for non-appearance before the Ld. Assessing Officer during the course of assessment proceedings. However, while dismissing the assessee’s appeal, Ld. CIT(Appeals) has not made any mention of the contention of the assessee that the non-appearance was caused due to assessee’s shop being closed and further Ld. CIT(Appeals) never commented upon or questioned Page No 4 M/s. Dharti Traders Vs. ITO the veracity of submissions made by the assessee to account for his non- appearance. Accordingly, looking into the facts of the instant case, in the interests of justice, we are restricting the penalty to only one default on part of the assessee for non-appearance u/s 271(1)(b) of the Act and the penalty levied for multiple defaults is directed to be deleted. In the case Smt. Rekha Rani v. DCIT 60 taxmann.com 131 (Delhi - Trib.), the Delhi ITAT held that penalty under section 271(1)(b) cannot be imposed for each and every notice issued under section 143(2), which remained not complied with on part of assessee, but it should be restricted to first default only. While passing the order, the Delhi ITAT observed as below:
“We have considered the submissions of learned DR and have perused the order of the Assessing Officer and the learned CIT(A). we find that there was no reasonable cause on the part of the assessee for not appearing on the different dates of hearing before the Assessing Officer in response to notice issued under Section 143(2) of the Act. However, we find that the default is same and, therefore, penalty of Rs. 10,000/- could be imposed for the first default made by the assessee in this regard. The penalty under Section 271(1)(b) could not be imposed for each and every notice issued under Section 143(2), which remained not complied with on the part of the assessee. The provision of Section 271(1)(b) is of deterrent nature and not for earning revenue. Any other view taken shall lead to the imposition of penalty for any number of times (without limits) for the same default of not appearing in response to the notice issued under Section 143(2) of the Act. This does not seem to be the intention of the legislature in enacting the provisions of Section 271(1)(b) of the Act. In case of failure of the assessee to comply with the notice under Section 143(2) of the Act, the remedy with the Assessing Officer lies with framing of "best judgement assessment" under the provisions of Section 144 of the Act and not to impose penalty under Section 271(1)(b) of the Act again and again. In this view of the matter, we restrict the penalty levied under Section 271(1)(b) of the Act to the first default of the assessee in not complying with the notice under Page No 5 M/s. Dharti Traders Vs. ITO
Section 143(2) of the Act. Accordingly, the penalty imposed is restricted to Rs. 10,000/- as against Rs. 50,000/- confirmed by the learned CIT(A). The grounds of appeal of the assessee are thus partly allowed.”
7. In the result, the penalty for non-appearance is directed to be restricted to the first default on part of the assessee in not complying with the notice of hearing i.e. to � 10,000/- only.
In the result, the appeal of the assessee is partly allowed.
Order pronounced in the open court on 26-04-2023