Income Tax Notices Sent to Old Address Without Evidence of Service: ITAT Deletes Section 271(1)(b) Penalty

Sumit Maheshwari Vs ITO (ITAT Delhi)

In the case of Sumit Maheshwari vs. Income Tax Officer (ITAT Delhi), the appeal arose from a penalty imposed under section 271(1)(b) of the Income Tax Act, 1961 for non-compliance with a notice issued under section 142(1) of the Act. The core issue was whether the penalty was justified given the circumstances surrounding the service of notices by the Income Tax Department.

Background and Arguments:

The assessee, Sumit Maheshwari, challenged the penalty levied on the grounds that notices, including the notice under section 142(1) and subsequent proceedings, were sent to his old address at 31, Chanakyapuri, Meerut. However, the assessee had long since shifted to a new address at 94-95, Chanakyapuri, Meerut, and had duly informed the Income Tax Department by filing his income tax returns for both the assessment years 2011-12 and 2012-13 with the updated address.

Despite the change in address being on record through these filings, the notices were consistently sent to the old address. Consequently, the assessee contended that since the notices were not received due to the incorrect address being used by the department, the penalty under section 271(1)(b) was not justified.

Proceedings and Findings:

1. Assessment and Penalty Imposition: The Assessing Officer completed the assessment under sections 144/147 of the Act on 12.12.2019. Subsequently, a penalty under section 271(1)(b) was imposed for non-compliance with the notice under section 142(1) issued on 31.07.2019.
2. Arguments Before ITAT: During the appeal before the Income Tax Appellate Tribunal (ITAT), the assessee reiterated that despite having provided the new address, all notices were sent to the old address, thereby not giving the assessee an opportunity to respond or comply.
3. ITAT’s Decision: The ITAT examined the facts and observed that while the penalty order was passed on the new address of the assessee (94-95, Chanakyapuri, Meerut), there was no conclusive finding either by the Assessing Officer or the CIT(A) regarding the service of the notice under section 142(1) of the Act.Crucially, the ITAT noted that the burden to prove service of notice lies with the Income Tax Department. Since there was no evidence to indicate that the notice dated 31.07.2019 was served on the assessee at either the old or the new address, the ITAT concluded that it cannot be presumed that the assessee deliberately avoided compliance.

   Moreover, the ITAT emphasized that the assessee had provided his correct address through his income tax returns for the relevant assessment years. Therefore, any failure to comply with notices sent to the old address was not due to the assessee’s negligence, but rather due to the department’s failure to update its records and communicate effectively.

4. Legal Precedents Cited: The assessee relied on the judgment of the Jurisdictional Allahabad High Court in the case of Suresh Kumar Sheetlani vs. ITO, where it was held that a notice served at the wrong address renders reassessment proceedings invalid. This was pivotal in establishing that the penalties imposed in this case were unjustified.

Conclusion:

Based on the above considerations, the ITAT allowed the appeal of the assessee, thereby deleting the penalty imposed under section 271(1)(b) of the Income Tax Act for the assessment year 2012-13. The decision underscored the importance of proper service of notices by the department and upheld the principle that penalties cannot be imposed when there is no evidence of deliberate non-compliance and where the department has failed to fulfill its obligation to communicate effectively with the taxpayer.

FULL TEXT OF THE ORDER OF ITAT DELHI

This appeal is filed by the assessee against the order of the Ld.CIT(Appeals)-NFAC, Delhi dated 18.01.2023 for the AY 2012-13 in sustaining the penalty levied u/s 271(1)(b) of the Act for non­compliance of the notice issued u/s 142(1) of the Act dated 31.07.2019. In spite of issue of notice, none appeared on behalf of assessee nor any adjournment was sought. Therefore, we proceed to dispose of this appeal on hearing the Ld. DR. On perusal of the record, we observe that the assessee filed brief synopsis which reads as under: –

SYNOPSIS

“Before the INCOME TAX APPEALATE TRIBUNAL, NEW DELHI-G BENCH

In the Matter of SUMIT MAHESHWARI, Meerut -PAN: AGHPM0003A (Appellant/Assessee) – V/S – INCOME TAX OFFICER, Ward 2(5), MEERUT.

Order dt. 25.08.2021 u/s 271(1)(b) of the Income Tax act 1961.

PAN: AGHPM0003A
Asst. Year: 2012-2013

SUBMISSION For: Appeal No., ITA NO: 779/DEL/2023 Fixed for hearing on 28.08.2023

1) 148 Notice and all subsequent proceedings completed Ex-party For AY 2012- 2013 on the old Address 31, Chanakyapuri, Meerut. Penalty u/s 271(1)(b) of Rs.10000/- also imposed for non-compliance. All notices were not received by assessee.

2) Assessee not received any notice from Income tax office due to shifted to new address (94-95, Chanakayapuri Meerut) since long. ITR were also filed on new address. ITR AY 2011-12 & 2012-2013 is attached.

3) No effort was made to serve the notice on assessee.

4) Assessee filed appeal against 271(1)(b) penalty of Rs.10000/-, but not relief by CIT(A).

5) Hence without service of notice u/s 271(1)(b) penalty is not justified. Because new address was available with Assessing officer, but no communication made on new address.

6) The assessee has relied on the judgement of JURISDICTIONAL ALLAHABAD HIGH COURT IN THE CASE OF SURESH KUMAR SHEETLANI VS. ITO – ITA NO. 413 OF 2011 DATED 14.08.2018 ,wherein it was held “Notice served at the wrong address renders reassessment proceedings invalid”. Full text of the judgment is enclosed. Our issue is squarely covered under this judgement.”

2. On perusal of the penalty order passed u/s 271(1)(b) of the Act, we noticed that penalty was levied for non-compliance of notice u/s 142(1) of the Act dated 31.07.2019. It is the contention of the assessee that none of the notices including notice u/s 148 of the Act were not served on the assessee as they were sent to old address even though the assessee filed returns for the assessment year under consideration and also for the immediately preceding assessment year i.e. 2011-12 mentioning the new address i.e. 94-95, Chanakyapuri, Meerut. On perusal of the order of the Ld.CIT(A), we observe that penalty was sustained for the reason that the assessee did not inform the Assessing Officer about change in address. We are not in agreement with the Ld.CIT(A)-NFAC as the assessee filed returns for the assessment years 2011-12 & 2012-13 mentioning the new address i.e. 94-95, Chanakyapuri, Meerut. However, the assessment was completed u/s 144/147 of the Act dated 12.12.2019. We further observe that the AO passed penalty order u/s 271(1)(b) of the Act on the new address i.e. 94-95, Chanakyapuri, Meerut. This goes to show that the new address of the assessee is in the knowledge of the Department. We further observe that there is no finding in the penalty order whether the notice dated 31.07.2019 issued u/s 142(1) of the Act was either served on the assessee. Even the Ld.CIT(A) also did not give a finding as to whether the notice was served on the assessee. In the circumstances, it cannot be presumed that the notice was served on the assessee and the assessee did not comply to such notice. Thus, this is not a case for levy of penalty for non-compliance. Thus, we delete the penalty u/s 271(1)(b) of the Act.

3. In the result, appeal of the assessee is allowed.

Order pronounced in the open court on 24/04/2024