Case Law Details
Lila Lila Chayal Vs DCIT (ITAT Jodhpur)
No Section 272A(1)(d) Penalty for Initial Non-Compliance After AO Accepts Final Assessment Details; ITAT Cancels Section 272A(1)(d) Penalty Because AO Made No Adverse Addition; Penalty Under Section 272A(1)(d) Deleted After Assessee Filed Detailed Compliance.
The appeals were filed by multiple assessees before the Income Tax Appellate Tribunal (ITAT), Jodhpur, against separate orders passed by the Commissioner of Income Tax (Appeals), Jaipur-5 for Assessment Year 2022-23. Since all the appeals involved identical facts and common issues, they were heard together and disposed of through a consolidated order, with ITA No. 812/Jodh/2025 treated as the lead case.
The principal issue in all the appeals related to the validity of penalty orders passed under Section 272A(1)(d) of the Income Tax Act for alleged non-compliance with notices issued under Section 142(1) of the Act. The assessees challenged the confirmation of penalty of Rs. 10,000/- by the CIT(A), contending that the appellate authority failed to consider the reasons for non-compliance in light of principles of natural and substantial justice.
In the lead case, the assessee had filed the return of income on 26.07.2022 declaring total income of Rs. 3,73,890/-. The case was selected for scrutiny assessment. During assessment proceedings, the Assessing Officer (AO) issued notices under Section 142(1) requiring the assessee to furnish details and information. According to the AO, there were six instances of non-compliance with the statutory notices. Consequently, a penalty show-cause notice was issued and a penalty of Rs. 10,000/- under Section 272A(1)(d) was levied. However, the assessment itself was completed under Section 143(3) of the Act by accepting the returned income declared by the assessee without any additions or adverse findings.
The assessee challenged the penalty before the CIT(A), but the appeal was summarily rejected. The CIT(A) observed that the assessee had no explanation to offer and that there was no factual basis for the claims raised in the appeal. Accordingly, the appellate authority confirmed the penalty imposed by the AO.
Before the Tribunal, the assessee’s counsel submitted that the initial non-compliance occurred due to heavy workload relating to audit work, income tax return filing, and pending assessment proceedings. It was argued that the assessee later furnished detailed replies and supporting documentary evidence during the course of assessment proceedings. The counsel emphasized that the AO considered these submissions and ultimately completed the assessment under Section 143(3) by accepting the returned income. On this basis, it was contended that the AO had effectively condoned the earlier instances of non-compliance. The assessee therefore requested deletion of the penalty imposed under Section 272A(1)(d).
The Departmental Representative relied on the orders passed by the lower authorities but did not specifically controvert the submissions made on behalf of the assessees.
After considering the submissions and examining the material on record, the Tribunal observed that the issue of penalty under Section 272A(1)(d) was common across all appeals on identical facts. It noted that although the assessee failed to comply with notices issued under Section 142(1) during the initial stage of assessment proceedings, detailed compliance was subsequently made by filing replies along with documentary evidence.
The Tribunal further observed from the assessment order that the AO had verified the replies filed by the assessee and found them tenable. The assessment order recorded that the assessee was an individual deriving income from agriculture and interest income, both of which had been properly disclosed in the return of income. The AO accepted the explanations and documents furnished by the assessee and made no adverse observations or additions while completing the assessment under Section 143(3).
Based on these facts, the Tribunal held that sufficient compliance had ultimately been made by the assessee. It observed that when an assessment is completed under Section 143(3) after accepting the explanations and returned income, the AO is deemed to have condoned earlier absence or non-compliance by the assessee or the authorized representative. Therefore, levy of penalty under Section 272A(1)(d) was not justified in such circumstances.
The Tribunal relied on the decision of the coordinate bench at Surat in the case of Ramabhai Kanjibhai Patel Vs. DCIT for support. Accordingly, it directed the AO to delete the penalty imposed under Section 272A(1)(d). Since the facts and issues in ITA Nos. 813 to 821/Jodh/2025 were identical to the lead case, the Tribunal applied the same reasoning and findings to those appeals as well.
FULL TEXT OF THE ORDER OF ITAT JODHPUR
These captioned appeals have been filed by assessees against the separate order of the Commissioner of Income Tax, Appeal, Jaipur-5 [hereinafter referred to as CIT(A)] dated 12.08.2025 and 15.07.2025 with respect to Assessment Year 2022-23.
2. The assessees have raised common issues in the grounds of appeal, therefore, the ground of appeal are reproduced as per ITA Nos. 812 to 821/Jodh/2025:
- That on the facts and in the circumstances of the case, the Id CIT (A) grossly erred in upholding the validity of penalty order passed by the Ld AO.
- That on the facts and in the circumstances of the case the Ld CIT(A) grossly erred in confirming the penalty of Rs. 10,000/- u/s 2714(1)(d) of the Act.
- That on the facts and in the circumstances of the case the Ld CIT(A) ought to have considered the reason for non-compliance of notice in the light of principle of natural & substantial justice.
- That on the facts and in the circumstances of the case the Ld CIT(A) grossly erred in recording the contrary findings in appellate order while confirming the penalty imposed by AO.
- That the petitioner may kindly be permitted to raise any additional or alternative grounds at or before the time of hearing.
- The petitioner prays for justice & relief
3. Since the appellants have raised a sole and common issue challenged on identical facts in these appeals, therefore, all these appeals were heard together and disposed of by this consolidated order for the sake of brevity. The ITA No. 812/Jodh/2025 is taken as a lead case for discussion of the facts and adjudication of the issues.
4. The appellant assesse has filed its return of income for the year under consideration disclosing total income of Rs. 3,73,890/- on 26.07.2022. The case of the assesse was selected for scrutiny. During the course of assessment proceedings, the Assessing Officer (in short the “AO”) has issued notice u/s 142(1) of the Act, requiring the assesse to furnish details, information/submissions from time to time in all six cases where notices issued u/s 142(1) of the Income Tax Act. The AO stated that a penalty show cause notice has also been issued for noncompliance of notice u/s 142(1) and levied a penalty of Rs. 10,000/- u/s 272A(1)(d) for six non-compliances to the said statutory notices. However, the assessment has been completed u/s 143(3) of the Income Tax Act accepting the returned income shown by the assessee at Rs. 3,73,890/-.
5. Aggrieved assessee went in appeal before the Ld. CIT(A) who has summarily rejected the appeal of the assessee by observing that the appellant has no explanation to offer in the matter and there is no factual basis of the claim raised in the grounds of appeal and accordingly, he confirmed the penalty u/s 272A(1)(d) of the IT Act of Rs. 10,000/-.
6. The Ld. Counsel for the assessee has submitted that it was due to overload of the work of audit and ITR filing and pending assessment proceedings that the early notices remained non-complied during the course of assessment proceedings. However, the detailed compliance have been furnished with a written reply in the course of assessment proceedings with the supporting documentary evidence to assist the AO for the purpose of completion of the assessment after considering the submissions of the assessee. The AO has accepted the returned income of the assessee by passing regular assessment order u/s 143(3) of the Act. Thus, the AR contended that the details furnished by the assessee and assessments finally completed u/s 143(3) of the Act evidences that the AO has deemed condoned the non-compliance of the notices by the assesse on the earlier occasions. Accordingly, he requested that the penalty levied u/s 272A(1)(d) may kindly be deleted.
7. The Ld. DR on the other hand rely on the impugned order, however, she did not controvert the appellants contentions.
8. We have heard both the sides and perused the material on record. Admittedly, the issues of levy of penalty u/s 272A(1)(d) is common on identical facts in all the appeals. It is seen that in the early part of the assessment proceedings, the assessee could not make compliance to the notices issued u/s 142(1) of the IT Act. Subsequently, the assessee has made detailed compliance by way of furnishing a detailed reply with the support of the documentary evidence in the course of assessment proceedings. From the assessment order passed by the AO for the year under consideration, it is evident that after considering the submissions of the assessee, the AO has observed that the assessee is an individual entity and derived his income from agriculture in addition to that he has also derived income from other sources i.e. interest income which have been shown in the ITR for the year under consideration. The AO further stated in the assessment order that the reply filed by the assessee has been verified from the material available on record and the same has been found tenable and placed on record. After considering the detailed reply filed by the assessee, the AO has made no adverse observation or drawn any adverse inference and accepted the income disclosed by the assessee in its return of income filed u/s 139(1) of the Act.
9. Thus, it is evident from the assessment order that assessee has made sufficient compliance of the notices issued by the AO culminating into acceptance of returned income of the assessee by the AO. In our view, no penalty u/s 272A(1)(d) could be levied when the assessment order has been completed u/s 143(3) of the Act, wherein the AO is deemed to have condoned the absence of assessee or his Authorized Representative (AR) on earlier occasions by subsequently accepting the details furnished by the assessee and that assessment were being completed u/s 143(3) of the Act by accepting the returned income in particular. Our view gets support from the decision delivered by coordinate bench Surat in the case of Ramabhai Kanjibhai Patel Vs. DCIT in ITA Nos. 106 to 110/srt/2023 with respect to assessment year 2013-14 to 2017-18 dated 11.05.2023.
10. We, therefore, direct the AO to delete the said penalty levied u/s 272A(1)(d) of the Act. Thus the ground of the appeal of the assessee is allowed.
11. The issue raised in ITA Nos. 813 to 821/Jodh/2025 are exactly identical on facts as that discussed in ITA No. 812/Jodh/2025 and, therefore, our observation and finding given in ITA No. 812/Jodh/2025 shall apply to ITA Nos. 813 to 821/Jodh/2025 in mutatis mutandis, ordered accordingly.
12. In the result, these appeals filed by the assessee in ITA Nos. 812 to 821/Jodh/2025 are allowed.
Order pronounced in the open court on 30/04/2026.
Author Bio
