Laxmi Narain Kesrwani Vs DCIT (ITAT Delhi)
One Missed Notice, Later Full Compliance: Delhi ITAT Deletes Penalties
Reasonable Cause and Subsequent Cooperation Secure Relief
In Laxmi Narain Kesrwani v. DCIT, ITA Nos. 4431/Del/2026 and 4432/Del/2026, concerning Assessment Years 2019-20 and 2020-21, the Delhi Tribunal deleted penalties of ₹10,000 for each year under section 272A(1)(d).
The assessee admitted receiving the notices and failing to respond initially. However, he explained that the default arose because his counsel’s assistant was unavailable. He subsequently furnished the required replies and cooperated in the reassessment proceedings.
The Tribunal accepted the explanation as plausible when considered alongside the subsequent conduct. Applying section 273B, it held that the penalties were unsustainable.
The Bench comprising Shri Ramit Kochar, Accountant Member, and Shri Raj Kumar Chauhan, Judicial Member, pronounced its common order on 1 October 2026. Both appeals were allowed.
Notices Were Received but Not Complied With
Separate reassessment proceedings under section 147 were initiated for the two assessment years.
During those proceedings, the Assessing Officer issued notices under section 142(1), both dated 29 May 2025. The assessee did not comply with them.
There was no dispute concerning service. The order expressly records that the notices had been received and that the initial non-compliance was admitted.
The Assessing Officer initiated penalty proceedings and, through separate orders dated 7 November 2025, imposed ₹10,000 for each assessment year under section 272A(1)(d).
The Commissioner (Appeals)-27, New Delhi, confirmed both penalties through orders dated 27 March 2026. The assessee challenged those decisions before the Tribunal.
Thus, the appeal concerned whether the explanation and later cooperation justified relief from an established default.
Assessee Subsequently Furnished the Required Replies
The assessee’s representative emphasised that the initial failure did not continue throughout the proceedings.
For Assessment Year 2019-20, replies were furnished on 11 November 2025, 5 February 2026 and 12 February 2026. Subsequent replies were also filed for Assessment Year 2020-21 and recorded in the corresponding assessment order.
The Assessing Officer himself acknowledged the submissions in paragraph 2.2 of the assessment orders.
Both reassessments were ultimately completed on 25 February 2026 under section 147 read with section 143(3). They were not completed as ex parte best judgment assessments under section 144.
The assessee relied on this distinction to demonstrate that he had participated in the proceedings and supplied the information sought by the Assessing Officer.
Unavailability of Counsel’s Assistant Explained the Default
The explanation offered was that compliance with the notices dated 29 May 2025 could not be made because the assistant of the assessee’s counsel was unavailable.
The representative submitted that, once the initial difficulty passed, the assessee cooperated and furnished complete replies.
This explanation was not considered in isolation. The Tribunal evaluated it against the documented subsequent participation and the Assessing Officer’s own acknowledgment of the replies.
It found that the assessee had not remained continuously in default. Although the earlier failure was admitted, the later conduct supported the credibility of the explanation.
The Department, meanwhile, relied on the Commissioner (Appeals)’ orders sustaining the penalties.
Relief in Other Proceedings Provided Additional Context
The assessee also produced records showing favourable treatment of similar defaults in other proceedings.
For Assessment Year 2023-24, the Commissioner (Appeals) had deleted a ₹10,000 penalty under section 272A(1)(d), and the Assessing Officer had given effect to that relief.
For Assessment Year 2016-17, the Assessing Officer had dropped penalty proceedings under section 271(1)(b) concerning non-compliance with a notice dated 29 May 2025.
Similar proceedings were also dropped in the case of Vivek Kesarwani, belonging to the same group, for Assessment Years 2015-16 and 2016-17.
The assessee relied on Globus Infocom Limited v. DCIT, ITA No. 738/Del/2014, dated 29 June 2016, and Modern Paper Marts Private Limited v. ITO, ITA No. 3502/Del/2023, dated 20 June 2024, where penalties were stated to have been deleted in similar circumstances.
These matters formed part of the background considered by the Tribunal.
Section 273B Protected the Plausibly Explained Default
The Tribunal expressly noted that section 272A(1)(d) is subject to section 273B.
It accepted the explanation as reasonable and plausible, particularly because the assessee subsequently cooperated and furnished the requisite details.
The completion of reassessments under section 143(3) read with section 147, rather than section 144, supported the finding that the assessee had participated meaningfully.
Considering the entire material and conduct, the Tribunal directed deletion of both ₹10,000 penalties.
Author’s Comments
The decision illustrates the importance of supporting a reasonable-cause explanation with documented subsequent conduct. The assessee’s later replies, their acknowledgment in the assessment orders and completion of regular reassessments strengthened his case.
The ruling should not be understood as making every assessment under section 143(3) an automatic ground for cancelling a notice-default penalty. Here, the Tribunal accepted a specific explanation and evaluated it with the full record.
Similarly, the unavailability of a counsel’s assistant was accepted on these facts, rather than declared sufficient in every case.
The practical lesson is to establish both why the initial default occurred and how the assessee subsequently remedied the non-compliance. A plausible explanation supported by actual cooperation can attract the protection of section 273B.
Cases Discussed
- Globus Infocom Limited v. DCIT, ITA No. 738/Del/2014, order dated 29.06.2016 (ITAT Delhi) — Relied upon by the assessee in support of deletion of penalty in similar circumstances involving non-compliance with statutory notices.
- Modern Paper Marts Private Limited v. ITO, ITA No. 3502/Del/2023, order dated 20.06.2024 (ITAT Delhi) — Relied upon by the assessee for deletion of penalty in similar circumstances.
FULL TEXT OF THE ORDER OF ITAT DELHI
Both theses appeals are filed by the assessee against separate appellate order(s) passed by Learned Commissioner of Income Tax (Appeals)-27, New Delhi Delhi [CIT(A), in short) both dated 27.03.2026 in Appeal No. CIT(A), Delhi-27/10993/2018-19 and CIT(A),Delhi-27/10709/2019-20 for assessment years 2019-20 and 2020-21 respectively, confirming penalty levied by Assessing Officer(In short “AO”) u/s 272A(1)(d) of the Income-tax Act,1961(hereinafter called “the 1961 Act”) of Rs.10,000/- in each of the aforesaid assessment years , vide separate penalty orders, both dated 07.11.2025 passed by the AO u/s 272A(1)(d) of the 1961 Act (DIN:ITBA/PNL/F/272(1)(d)/2025-26/1082375253(1) and DIN:ITBA/PNL/F/272A(1)(d)/2025-26/ 1082377724(1) respectively).
2. Facts in both the cases are similar and hence these appeals are taken up together and decided by this common order. Separate proceedings for framing reassessment u/s 147 were initiated by the AO for both the assessment years 2019-20 and 2020-21 respectively, which culminated into two separate assessment orders, both dated 25.02.2026 passed by the AO u/s 147 r.w.Sec 143(3) of the 1961 Act with respect to both the assessment years viz. ay’s: 2019-20 and 2020-21. During the course of re-assessment proceedings conducted by the AO , Statutory notices were issued by the AO , inter-alia, u/s 142(1) of the Act, but there were non-compliance by the assessee to the separate notices both dated 29.05.2025 issued by the AO for ay’s 2019-20 and 2020-21 respectively, against which separate penalty proceedings u/s 272A(1)(d) of the 1961Act were initiated by the AO for the aforesaid assessment years. It is an admitted position that the aforesaid notices were served on the assessee and also that there was a non-compliance by the asssessee to the aforesaid notices issued by the AO u/s 142(1) both dated 29.05.2025 , which culminated into separate penalty orders both dated 07.11.2025 passed by the AO levying penalty of Rs.10,000/- for each of the aforesaid assessment years against the assessee. The Ld. CIT(A) has confirmed the penalty vide separate appellate orders both dated 27.03.2026 for ay’s: 2019-20 and 2020-21 respectively . Aggrieved , the assessee has filed two separate appeals with the Delhi Tribunal. During the course of hearing before us, the Ld. Counsel for the assessee submitted that the assessment orders were passed by the AO u/s 147 r.w.s 143(3) of the Act. It was pointed out that the assessment was not framed u/s 144 of the 1961 Act as the assessee has duly complied with the subsequent notices issued by the AO during the course of reassessment proceedings , as later on the assessee filed all the replies. Our attention was drawn to the reply filed on 11.11.2025 for assessment year 2019-20(Page No. 42 of the assessment order), reply dated 05.02.2026 filed for ay:2019-20(Page No.44 of the assessment order) and reply dated 12.02.2026 filed for ay:2019-20( Page No. 47 of the assessment order). Similarly replies were filed for ay:2020-21 which are recorded in the assessment order for ay:2020-21. It was submitted that the assessee has duly complied with all the requirements of the AO , and has submitted the complete replies during the assessment proceedings. It was submitted that this fact is also recorded by the AO in its assessment order in para 2.2 that the assessee has duly filed replies during the course of re-assessment proceedings. Thus, it was submitted that due to some unavoidable reasons, the assessee could not file replies in response to the notices issued by the AO u/s 142(1) both dated 29.05.2025 for ay’s:2019-20 and 2020-21, but later on the assessee duly complied with the notices issued by the AO from time to time during assessment proceedings, and filed the replies before the AO which were taken on record by the AO and the assessment was framed u/s 143(3) r.w.sec 147 of the 1961 Act. It was submitted that thus, it could not be said that due to the continuous non-compliance of the assessee, the assessment was framed by the AO ex-parte u/s 144 of the 1961 Act, but rather the assessment was framed u/s 147 r.w.s. 143(3) of the 1961 Act. The Ld. Counsel for the assessee also pointed out that in the case of the assessee itself for assessment year 2023-24 , the ld. CIT(A) has deleted the penalty of Rs. 10,000/- levied by the AO u/s 272A(1)(d) for non compliance of notice u/s 142(1) , vide orders dated 31.12.2025, copy of appeal effect order dated 09.04.2026 passed by the AO is placed on record in file(DIN & Letter No. ITBA/PNL/M/250/2026-27/1088372374(1)(copy placed on record in file). It was submitted that AO has dropped penalty proceedings initiated u/s 271(1)(b) of the 1961 Act for non compliance of notice issued by the AO u/s 142(1) dated 29.05.2025 for assessment year 2016-17 in the case of the assessee iteself, vide orders dated 23.03.2026 (DIN: ITBA/ PNL/F/271(1)(b)_1/2025-26/1087784057(1)(copy placed on record in file) . It was submitted that similarly in the case of Mr. Vivek Kesarwani ( belonging to the same group) , the AO has dropped penalty proceedings initiated u/s 271(1)(b) of the 1961 Act for assessment years 2015-16 and 2016-17 for non compliances of notices issued by the AO u/s 142(1) of the 1961 Act(copies placed on record in file: DIN : ITBA/PNL/F/271(1)(b)_1/2026-27/1093832820(1) dated 23.09.2026 for assessment year 2016-17 and DIN: ITBA/PNL/F/271(1)(b)_1/2026-27/1093819618(1) for assessment year 2015-16).
2.2The ld. Counsel for the asessee submitted that due to non-availability of the assistant of the counsel for the assessee, the compliance could not be made to notices issued by the AO u/s 142(1) dated 29.05.2025, but later on the assessee duly co-operated and complied with the directions of the AO and filed complete replies.The Ld. Counsel for the assessee also relied upon the order(s) of Tribunal in the case of Globus Infocom Limited v. DCIT, in ITA No.738/Del/2014 order dated 29.06.2016, and in the case of Modern Paper Marts Private Limited v. ITO , vide order dated 20.06.2024 in ITA No.3502/Del/2023, where under similar circumstances penalty was deleted.
3. The Ld. Sr. DR on the other hand, relied upon the orders of the Ld. CIT(A).
4. We have considered rival submissions and perused the materials available on record. The facts are briefly recorded in the preceding para’s of this order, and are not repeated. We have observed that the separate re-assessment proceedings were initiated by the AO against the assessee u/s 147 of the 1961 Act, for both the assessment years 2019-20 and 2020-21. Separate notices have been issued by the AO u/s 142(1) of the 1961 Act , dated 29.05.2025 for both the aforesaid assessment years, but there was no compliance of the notices dated 29.05.2025 by the assessee. This led to imposition of penalty of Rs. 10,000/- each for both the assessment years by the AO u/s 272A(1)(d) of the 1961 Act vide separate orders, which later stood confirmed by ld. CIT(A) by separate orders. It is also equally true that after the non compliance to notices issued by the AO u/s 142(1) dated 29.05.2025, the assessee later came forward and participated in the assessment proceedings by filing replies from time to time. The details are recorded in preceding para’s of this order The Ld. AO passed assessment order u/s 147 r.w.s. 143(3) of the Act, and no best judgment assessment u/s 144 were passed. The AO himself has recorded in the assessment order(s) that the assessee has filed replies before him during reassessment proceedings vide para 2.2 of the assessment orders. Thus, it could not be said that the assessee continued to be in default , although it is an admitted position that the assessee received notices dated 29.05.2025 u/s 142(1) of the 1961 Act but did not comply with the said notices. It is explained that due to non availability of assistant of counsel for the assessee, the compliance could not be made.The explanation given by the assessee is plausible more-so keeping in view subsequent conduct of the assessee wherein the assessee duly co-operated with the AO and filed replies as required by the AO. The assessment order was not passed exparte u/s 144 of the 1961 Act as best judgment assessment. The AO has himself dropped penalty proceedings in the case of the assessee as well Shri Vivek Kesarwani belonging to the same group . The details are in preceding para’s of this order. Section 272A(1)(d) is subject to Section 273B. The reasonable explanation is given by the assessee which is a plausible explanation, and further conduct of the assessee was to co-operate with AO and submit all the requisite details as called for by the AO. After considering the entire material on record and after considering the conduct of the assessee, we are of the considered view that the penalty levied by the AO is not sustainable , and we hereby order deletion of penalty levied by the AO to the tune of Rs. 10,000/- each u/s 272A(1)(d) for assessment years 2019-20 and 2020-21respectively , and hence we order deletion of the aforesaid penalty for both the assessment years 2019-20 and 2020-21 respectively. We order accordingly.
5. In the result, both the appeals filed by the assessee are allowed.
Order is pronounced in the Open Court on 01.10.2026.
