Case Law Details
Naga Malleswari Mannava Vs ITO (ITAT Visakhapatnam)
ITAT Holds Section 271(1)(b) Proceedings Independent of Section 148 Reassessment Challenge; No Relief From Penalty Without Proving Reasonable Cause for Non-Compliance
Summary: The ITAT Visakhapatnam partly allowed the assessee’s appeal against penalty levied under Section 271(1)(b) of the Income Tax Act for non-compliance with notices issued under Section 142(1). The Assessing Officer had imposed a penalty of Rs.30,000 after treating non-compliance with three separate notices as three independent defaults. The CIT(A) confirmed the penalty. Before the Tribunal, the assessee argued that the notice issued under Section 148 for AY 2015-16 was barred by limitation under Section 149(1), rendering the assessment and consequential penalty proceedings invalid. However, the Tribunal held that proceedings relating to penalty under Section 271(1)(b) were independent of reassessment proceedings under Section 148. The Tribunal also noted that the assessee had neither disputed the non-compliance with notices nor established any reasonable cause under Section 273B. Nevertheless, taking a lenient view, the Tribunal treated the three instances of non-compliance as a single default and reduced the penalty from Rs.30,000 to Rs.10,000, granting relief of Rs.20,000 to the assessee.
Ground of Appeal: Whether penalty under section 271(1)(b) for non-compliance with notices issued under section 142(1) can be challenged on the ground that the notice under section 148 is allegedly time-barred, and whether multiple failures to comply with notices can be treated as a single default for penalty purposes.
Core Issue: The Tribunal considered whether penalty of ₹30,000 levied for failure to comply with three notices issued under section 142(1) was justified, and whether the assessee could avoid the penalty by contending that the reassessment notice under section 148 for AY 2015-16 was barred by limitation.
Facts: The Assessing Officer issued three notices under section 142(1) dated 29.11.2023, 19.12.2023 and 28.12.2023. The assessee did not respond to any of these notices and also failed to furnish any explanation showing “reasonable cause” under section 273B. The AO accordingly levied penalty of ₹10,000 for each default, aggregating to ₹30,000. The assessee argued before the Tribunal that the notice under section 148 itself was time-barred and therefore the consequential penalty lacked legal basis.
Findings of AO and CIT(A): The AO levied penalty of ₹30,000 under section 271(1)(b), which was confirmed by the CIT(A).
ITAT Findings: The Tribunal held that penalty proceedings under section 271(1)(b) are independent and are concerned only with whether there was non-compliance with statutory notices and whether the assessee had reasonable cause for such failure. Since the assessee neither disputed the defaults nor demonstrated any reasonable cause, the levy of penalty was justified. The contention regarding validity of the notice under section 148 was held to be a separate issue unrelated to the penalty proceedings and therefore irrelevant.
However, taking a lenient view, the Tribunal held that although three notices were issued, the defaults could be treated as one composite failure to comply with notices under section 142(1). Accordingly, the penalty was restricted to a single amount of ₹10,000.
Held: In the absence of reasonable cause, penalty under section 271(1)(b) is leviable for non-compliance with notices under section 142(1). Challenges to the validity of reassessment proceedings do not automatically invalidate such penalty proceedings. Nevertheless, where multiple defaults are part of one continuing non-compliance, the Tribunal may restrict the penalty to a single default.
Final Conclusion: The appeal was partly allowed. The penalty under section 271(1)(b) was sustained in principle but reduced from ₹30,000 to ₹10,000 by treating the three instances of non-compliance as one composite default.
FULL TEXT OF THE ORDER OF ITAT VISAKHAPATNAM
In the above cited appeal, the learned Assessing Officer [hereinafter in short “Ld.AO”] levied a penalty of Rs.30,000/- under section 271(1)(b) of Income Tax Act, 1961 [in short “the Act”] for non-compliance to notices issued under section 142(1) of the Act dated 29.11.2023, 19.12.2023 and 28.12.2023. The Ld. A.O. has also mentioned that the assessee has not submitted any reply to the statutory notices issued under section 142(1) of the Act and the assessee has also not submitted any response even to the notices served through VU reference. As the assessee failed to prove that there was a “reasonable cause” as per section 273B of the Act for non-compliance of notices issued under section 142(1) of the Act, the Ld. A.O. levied penalty under section 271(1)(b) of the Act. The penalty to be levied is Rs.10,000/- and on three occasions the assessee did not comply with the notices issued under section 142(1) of the Act and hence the Ld. A.O. imposed penalty of Rs.30,000/- treating that the assessee is in default for three notices and hence the penalty was computed at Rs.30,000/-.
2. Aggrieved by the order of penalty, the Ld. A.O. filed an appeal before the Ld. Commissioner of Income-tax [hereinafter in short “Ld.CIT(A)”] and the Ld.CIT(A) vide his order under section 250 of the Act dated 17.04.2025 concurred with the view of the Ld. A.O. and confirmed the penalty levied by the Ld. A.O. Consequently, the appeal of the assessee was dismissed by the Ld.CIT(A).
3. The assessee filed an appeal before the ITAT stating that the Ld.CIT(A) erred in confirming the penalty levied to the extent of Rs.30,000/- under the provisions of section 271(1)(b) of the Act on the ground that there is no compliance to the notice issued under section 142(1) of the Act. Subsequently the assessee has filed a petition requesting for admission of additional grounds of appeal wherein it was mentioned that for the A.Y. 2015-16 the notice under section 148 of the Act was issued on 05.04.2022 which is beyond the period of limitation prescribed under section 149(1) of the Act. Since the notice issued is barred by limitation, consequently the assessment framed thereon would be a nullity. Hence the consequential penalty proceedings under section 271(1)(b) of the Act has no legal foundation and it cannot be sustained. Since this is an issue which does not require any fresh verification of facts and all the details are already available on record, this additional ground may be taken on record and adjudicated, Ld. AR of the appellant submitted before the Bench.
4. The Learned Departmental Representative [hereinafter in short “Ld.DR”] has mentioned that the penalty under section 271(1)(b) of the Act levied by the Ld. A.O. is nothing to do with notice issued by Ld.AO under section 148 of the Act. The notice issued under section 148 of the Act and consequent assessment framed are all separate proceedings and it is not known what happened in the assessment for that assessment year in the appeal proceedings. Ld. AR of the appellant has also not mentioned anything about the outcome of the appeal on the issue of notice under section 148 of the Act. In view of the same, the Ld.DR has submitted that the penalty levied may be confirmed.
5. The contentions of both the parties are heard. The Bench concurs with the view of Ld.DR because the present proceedings under section 271(1)(b) of the Act are completely different from the issuance of notice under section 148 of the Act or 143(3) of the Act. The Ld. AR of the appellant did not dispute the fact that the assessee did not respond to the notices issued by the Revenue nor did he argue anything about the “reasonable cause” for not responding to the notices issued under section 142(1) of the Act. Since the issue under appeal is only with respect to levy of penalty for non-compliance of notices issued under section 142(1) of the Act, the same is to be adjudicated independent of the other issues raised by the appellant now, as they are not part of the penalty order. Any how, taking a lenient view, the penalty levied by the Ld. A.O. of Rs.30,000/- is reduced to Rs.10,000/- treating the three defaults as one default i.e., noncompliance to the notices issued under section 142(1) of the Act even though three separate notices were issued. In view of the same, the penalty order by the Ld. A.O. is reduced to Rs.10,000/- and the appellant gets relief of Rs.20,000/-.
6. In the result, appeal filed by the Assessee is partly allowed.
Order pronounced in the open court on 14th May, 2026.
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