Case Law Details
Ganeshi Lal Narayan Das Vs DCIT (Exemption) (ITAT Agra)
In the case of Ganeshi Lal Narayan Das vs. DCIT (Exemption), the Income Tax Appellate Tribunal (ITAT) Agra addressed the issue of a penalty levied under Section 271(1)(b) of the Income-tax Act, 1961. The crux of the case was whether the penalty imposed on the assessee was justified given the timing and handling of the notices and objections involved.
Background: The assessee, Ganeshi Lal Narayan Das, had filed his original return of income for the assessment year 2010-11 on 29th September 2010, declaring nil income. The return was scrutinized, and an assessment order under Section 143(3) was passed on 25th May 2012, accepting the returned income. Subsequently, on 30th March 2017, a notice under Section 148 was issued to reopen the case.
In response, the assessee filed a reply on 4th April 2017, seeking the reasons for the reopening. Upon receiving the reasons, the assessee raised objections on 16th May 2017, challenging the jurisdiction of the Assessing Officer under Section 147, referencing the Supreme Court judgment in G.K.N. Driveshafts (I) Ltd. However, the Assessing Officer did not dispose of these objections and instead issued a notice under Section 142(1) on 24th July 2017, calling for further explanations and scheduling a hearing for 8th August 2017.
Key Events and Dispute: The assessee contended that the notice dated 24th July 2017 was not received. Subsequently, on 25th October 2017, the Assessing Officer issued a show cause notice proposing to levy a penalty under Section 271(1)(b) for non-compliance with the notice dated 24th July 2017. The assessee responded on 1st November 2017, indicating that the notice was received only on 30th October 2017 at 3:00 PM, by which time the penalty order had already been passed on the same day.
The assessee argued that he was under the bona fide belief that the Assessing Officer would first address the objections raised on 16th May 2017 before proceeding with any penalty. Despite this, the Assessing Officer levied a penalty of Rs. 10,000 under Section 271(1)(b).
Appeal and ITAT Decision: The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that the penalty was unjust as the objections had not been disposed of and the penalty was imposed on the day the notice was received. The CIT(A) upheld the penalty, leading to a further appeal to the ITAT.
When the matter was heard by the ITAT, the Departmental Representative (DR) relied on the CIT(A)’s order but could not effectively counter the assessee’s arguments regarding the sequence of events and the bona fide belief.
The ITAT, considering the facts, observed that the penalty order was indeed passed on the same day the notice was received by the assessee. This, coupled with the legitimate expectation that the objections would be addressed first, led the ITAT to conclude that the penalty was unjustified. The tribunal emphasized that the assessee was waiting for the disposal of objections, as per the guidance from the Supreme Court in the G.K.N. Driveshafts case, before responding to the penalty notice.
Conclusion: In conclusion, the ITAT Agra held that no penalty was leviable under the given circumstances. The tribunal directed the department to delete the penalty, thereby allowing the appeal in favor of the assessee.
FULL TEXT OF THE ORDER OF ITAT AGRA
Present appeal of the assessee is arising from the order of ld. CIT(Appeals), NFAC, Delhi dated 19.01.2023 having DIN: ITBA/NFAC/S/250/2022-23/1048920181(1) for assessment year 2010-11.
2. The short issue involved in this appeal is whether the Assessing Officer was justified in levying penalty of Rs.10,000/- u/s. 271(1)(b) of the Income-tax Act, 1961. It is the case of the Assessing Officer that the assessee could not appear on 08.08.2017 in compliance to notice dated 24.07.2017 issued u/s. 142(1) of the Income-tax Act and hence, the Assessing Officer issued a show cause notice dated 25.10.2017 to the assessee proposing to levy penalty u/s. 271(1)(b) of the Income Tax Act.
3. Brief facts of the case, which are coming out from the paper book filed by the assessee, are that in this case, the assessee filed its original return of income on 29th September, 2010 declaring nil income. The original return filed by the assessee was selected for scrutiny and on 25.05.2012, an order of assessment u/s. 143(3) had been passed wherein, the returned income of the assessee has been accepted. Thereafter, on 30th March, 2017, notice u/s. 148 of the Income Tax Act was issued to the assessee and case of the assessee was reopened. On 04.04.2017, the assessee filed a reply before ld. Assessing Officer and sought copy of reasons recorded. Upon the receipt of reasons recorded, the assessee vide its letter dated 16th May, 2017 filed its objections, challenging the jurisdiction of the Assessing Officer u/s. 147 in terms of the judgment of Hon’ble Supreme Court in G.K.N. Driveshafts(I) Ltd., 259 ITR 19. Thereafter on 24th July, 2017, the Assessing Officer without disposing of the objections of the assessee dated 16.05.2017, issued notice u/s. 142(1) of the Income-tax Act on 24.07.2017 calling for certain explanations of the assessee and fixed the matter for 08.08.2017. This notice u/s. 142(1) has not been received by the assessee, as contended by the assessee. Thereafter, on 25.10.2017, the Assessing Officer issued notice u/s. 271(1)(b) and sought reply of the assessee as to why penalty u/s. 271(1)(b) cannot be levied upon the assessee for its failure to attend the proceedings on 08.08.2017. On 1st November, 2017, the assessee responded to the notice u/s. 271(1)(b) and pointed out that the impugned notice was received by the assessee society on 30th October, 2017 at 3.00 p.m., the date on which the penalty order levying penalty u/s. 271(1)(b) amounting to Rs.10,000/- was already passed by the Assessing Officer, meaning thereby, the assessee contended that it has not received the notice till 30.10.2017. The assessee further contended that the objections of the assessee have not been disposed of by the Assessing Officer and the assessee was waiting for the disposal order of his objections instead of penalty notice. However, dissatisfied with the reply of the Assessing Officer, the Assessing Officer had levied penalty.
4. Aggrieved with the order of Assessing Officer, the assessee filed appeal before ld. CIT(Appeals) and contended that the assessee was under the bona fide belief that the Assessing Officer will proceed in the matter as per the guidelines of Hon’ble Supreme Court in the case of GKN Drive Shafts (supra). However, ld. CIT(Appeals) affirmed the order of the Assessing Officer. Now, the assessee is in appeal before us.
5. Today, when the matter was called for hearing, none appeared on behalf of the assessee. An adjournment application was filed. Considering the small quantum of penalty, the Bench rejected the adjournment application and proceeded with the matter.
6. Ld. DR relied upon the order of ld. CIT(Appeals), particularly, para-7 of the CIT(Appeals) order. However, he could not refute the submissions of the assessee made before the Assessing Officer as well as ld. CIT(Appeals).
7. After considering the submissions of ld. DR, replies of the assessee as annexed in the paper book as well as considering the fact that, by the time the assessee was served with the notice of proposed penalty, i.e., 30.10.2017, the Assessing Officer had already levied the penalty on 30.10.2017. We also appreciate that the assessee was under the bona fide belief that the Assessing Officer will proceed in the matter after disposing of the objections of the assessee. Therefore, in the facts and circumstances of the case, we hold that no penalty is leviable and we direct the department to delete the penalty.
8. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 03.06.2024 on conclusion of hearing.
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