Case Law Details
Manjeet Kaur Vs ITO (ITAT Jaipur)
In the case of Manjeet Kaur vs. ITO, a crucial matter was brought before the Income Tax Appellate Tribunal (ITAT) in Jaipur. The central issue at hand was the imposition of a penalty under Section 271(1)(b) of the Income-tax Act, 1961. The appeal, filed by the assessee, contested the penalty imposed by the ld. CIT(A) and questioned the validity of the penalty under the circumstances.
Detailed Analysis: The assessment in question was finalized on September 29, 2021, under Section 144 r.w.s 147 of the Income-tax Act, 1961, with an income of Rs. 20,57,003/-. During the assessment proceedings for the assessment year 2013-14, the assessee faced challenges in complying with the notices issued under Section 142(1) dated September 16, 2021. As a result, penalty proceedings under Section 271(1)(b) were initiated through show-cause notices issued under Section 274 r.w.s. 271(1)(b) of the I.T. Act, 1961, dated September 29, 2021.
The critical point of contention was that the assessee did not respond to these notices through the e-portal. Subsequently, after the introduction of the Faceless Penalty Scheme in 2021, the assessee was served another notice dated January 17, 2022, with a request to upload submissions as per the Faceless Penalty Scheme’s mandate. In response, the assessee requested an adjournment until the decision of CIT Appeal faceless.
The Assessing Officer (AO) considered the request but decided to impose a penalty of Rs. 10,000 under Section 271(1)(b) of the Act for non-compliance with the notice under Section 142(1) dated September 16, 2021. The ld. CIT(A) affirmed this penalty.
However, during the course of the appeal, the assessee’s representative argued that the penalty was imposed without considering the reasonable cause for non-compliance. The notice was issued during the Covid-19 pandemic, and the time provided to respond was exceptionally short, including a weekend, making it practically impossible to comply with the notice. The AO, in their view, did not properly consider these extenuating circumstances.
In their arguments, the assessee’s representative cited the Supreme Court’s decision in Hindustan Steel Ltd. vs. State of Orissa (1972) 83 ITR 26, emphasizing that penalties should not be imposed for technical or minor breaches when there is a bona fide belief that the offender is not liable to act as prescribed by the statute.
Conclusion: The ITAT, after careful consideration of the entire case and keeping in view the decision of the Supreme Court, found in favor of the assessee. They concluded that there was a reasonable cause for non-compliance with the notice dated September 16, 2021, considering the prevailing Covid-19 circumstances and the short response time, including non-working days.
As a result, the penalty imposed under Section 271(1)(b) of the Act, amounting to Rs. 10,000, was deleted. This case serves as a reminder that penalties under tax laws must be imposed judiciously and only in cases of willful non-compliance, not due to genuine difficulties or bona fide belief.
FULL TEXT OF THE ORDER OF ITAT JAIPUR
This appeal filed by the assessee is directed against the order of the ld. CIT(A) dated 29-07-2023,National Faceless Appeal Centre, Delhi [ hereinafter referred to as (NFAC) ] for the assessment years 2013-14 wherein the grievance of the assessee is that the ld. CIT(A) has erred in confirming the levy of penalty of Rs.10,000/- u/s 271(1)(b) of the Act .
2.1. Brief facts of the case in this case are that the assessment was completed on 29.09.2021 u/s 144 r.w.s 147 of the Income-tax Act, 1961 at income of Rs.20,57,003/-. During the course of assessment proceedings for A.Y. 2013-14, the assessee failed to comply with the notices issued u/s 142(1) dated 16.09.2021. Hence, Penalty proceeding u/s 271(1)(b) was initiated vide show cause notices u/s 274 r.w.s. 271(1)(b) of the I.T. Act, 1961 dated 29.09.2021 issued to the assessee for non compliance of above notices issued to him u/s 142(1) of the I.T. Act, 1961. The assessee has not furnished any response on e-portal. It is noted that after Faceless Penalty Scheme, 2021 which was notified by the Central Board of Direct Taxes(CBDT) on 12.01.2021; and in connection with the penalty proceedings initiated vide notice dated 29.09.2021 as mentioned above, the assessee was served another notice dated 17.01.2022 with request to upload his submissions as per mandate of Faceless Penalty Scheme. In response the assessee has submitted as under :-
“respected sir, the assessee has filed form 35 so kindly adjourn the case till the decision of CIT Appeal faceless.”
The reply of the assessee has been considered by the AO and it is found that the assessee has not submitted reply on the merits that the assessee has not complied with the any of the notice issued to her during the assessment proceedings. In these circumstances and facts of the case, the AO had no alternate but to impose penalty of Rs. 10,000/- for the default of notice u/s 142(1) dated 16.09.2021 of the I.T. Act.
Therefore, the AO imposed a penalty u/s 271(1)(b) of the Act of Rs.10,000/- for non-compliance of notice issued to assessee u/s 142(1) of the Act.
2.2. Aggrieved by the order of the AO, the assessee preferred an appeal before the ld. CIT(A)s who confirmed the action of the AO with following narration.
‘’6.12. The appellant was, therefore, required to attend to statutory notice issued u/s 142(1) and for such failure to attend income tax proceedings the penalty u/s 271(1)(b) is hereby confirmed.”
2.3. Now the assessee is in appeal before us against the order of the ld. CIT(A) who confirmed the penalty u/s 271(1)(b) of the Act amounting to Rs.10,000/-.
2.4. During the course of hearing, the ld. AR of the assessee submitted that the Ld. CIT(A) confirmed the levy of penalty by holding that video conferencing as sought by the assessee could not be provided due to technical glitches and the assessee has not given any reasonable cause for non compliance of notice dt. 16.09.2021. It is further submitted that AO issued notice i.e. only one notice u/s 142(1) dt. 16.09.2021 to submit the reply on or before 21.09.2021 and completed the assessment on 29.09.2021 without even mentioning whether the notice is served on the assessee or not. In fact the notice was not received by the assessee and even the notice which was issued during Covid period providing less than 5 days time was not sufficient to comply with the notice. Hence, only because the notice was not complied with, it cannot be a reason to impose the penalty.
2.5. During the course of hearing, the ld. DR relied upon the order of the ld. CIT(A).
2.6 We have heard both the parties and perused the materials available on record. The crux of the issue is that the AO imposed the penalty of Rs.10,000/- u/s 271(1)(b) of the Act for non-compliance of notice u/s 142(1) dated 16-09-2021. It is also noted from the AO’s order dated 15-03-2022 u/s 271(1)(b) of the Act wherein the assessee made a request before him as under:-
‘’respected sir, the assessee has filed form 35 so kindly adjourn the case till the decision of CIT Appeal faceless.”
However, it appears that the AO had not considered the above request of the assessee and impose the penalty with this narration.
‘’In these circumstances and facts of the case , I have no alternate but to impose penalty of Rs. 10,000/- for the default of notice u/s 142(1) dated 16.09.2021 of the I.T. Act. Therefore, I hereby impose a penalty u/s 271(1)(b) of the Act of Rs.10,000/- for noncompliance of notice issued to assessee u/s 142(1) of the Act.
The Bench has also taken into consideration the order of the ld. CIT(A) as to confirming the penalty of Rs.10,000/- u/s 271(1)(b) of the Act. The Bench thus observed that penalty u/s 271(1)(b) is subject to section 273B which provides that no penalty shall be imposable if the assessee proves that there was a reasonable cause for the said failure. In the present case it can be seen that when the notice u/s 142(1) dt. 16.09.2021 was issued, the entire country was grappling with Covid 2019 and thus this notice did not come to the notice of assessee. Further the time given to furnish the reply was very short considering that in between two days were Saturday & Sunday. Thus there is a reasonable cause for non compliance of notice dt. 16.09.2021. Reliance is placed of Hon’ble Supreme Court in case of Hindustan Steel Ltd. Vs. State of Orissa in (1972) 83 ITR 26 where at Para 5 of the order the Court held that “an order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceeding and penalty will not ordinarily be imposed unless the party obliged, either acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act or where the breach flows from a bona fide belief that the offender is not liable to act in the manner prescribed by the statute.” Hence, taking into consideration the entire conspectus of the case and also in view of the decision of Hon’ble Supreme Court in the case of Hindustan Steel Ltd.vs State of Orissa (supra), we do not concur with the findings of the ld. CIT(A) and thus the penalty confirmed by the ld. CIT(A) u/s 271(1)(b) of the Act is directed to be deleted.
3.0 In the result, the appeal of the assessee is allowed.
Order pronounced in the open court on 03/10/2023
