Case Law Details
Ashish Daulatrm Sariya Vs NFAC (ITAT Indore)
The Income Tax Appellate Tribunal (ITAT), Indore, adjudicated an appeal filed by the assessee against an order of the National Faceless Appeal Centre (NFAC) for Assessment Year 2012–13. The dispute concerned a penalty of ₹20,000 imposed under Section 271(1)(b) of the Income-tax Act, 1961 for non-compliance with statutory notices issued during assessment proceedings.
The case originated from reassessment proceedings under Sections 147 and 144, where the Assessing Officer (AO) determined that income had escaped assessment based on information regarding cash deposits aggregating to ₹11,17,844 in the assessee’s savings bank account. The AO issued multiple notices, including those under Section 142(1), providing opportunities for the assessee to furnish explanations. Despite notices dated 18.07.2019, 21.10.2019, and a final notice dated 17.11.2019, the assessee did not comply or provide the required information. Consequently, the assessment was completed ex parte under Section 144.
Subsequently, penalty proceedings under Section 271(1)(b) were initiated for failure to comply with notices. A penalty of ₹20,000 was imposed for non-compliance with notices dated 18.07.2019 and 17.11.2019. The assessee challenged this penalty before the CIT(A), which dismissed the appeal, holding that the assessee had clearly failed to respond to the notices during assessment proceedings.
In the second appeal before the Tribunal, the assessee contended that the penalty was unjustified and that certain notices were not properly evidenced. The assessee relied on additional documents, including an affidavit and information obtained under the RTI Act, to argue that some notices were not reflected in the assessment order. The Departmental Representative, however, supported the orders of the lower authorities and emphasized that notices are generally served electronically, requiring taxpayers to regularly monitor the income tax portal.
During the hearing, both parties engaged in discussion regarding the issue. Subsequently, both the Authorised Representative and the Departmental Representative agreed that a reduced penalty of ₹10,000 would meet the ends of justice.
The Tribunal, after considering the records and submissions, noted the consensus between both parties. It held that in the circumstances of the case, reducing the penalty would be appropriate to bring finality to the matter. The Tribunal emphasized that for relatively small penalty amounts, a consensus-based approach helps avoid prolonged litigation.
Accordingly, the Tribunal reduced the penalty from ₹20,000 to ₹10,000. The appeal was partly allowed, modifying the order of the CIT(A) to the extent of the penalty amount.
FULL TEXT OF THE ORDER OF ITAT INDORE
This is an appeal filed by the Assessee Under Section 253 of the Income Tax Act, 1961 (hereinafter referred to as the “Act” for sake of brevity) before this Tribunal as and by way second appeal. The assessee is aggrieved by order bearing Number ITBA/NFAC/S/ 250/2024-25/1069852312(1) dated 22.10.2024 passed by Ld. CIT(A), passed U/s 250 of the Act which is hereinafter referred to as the “impugned order”. The relevant Assessment Year is 2012-13 and the corresponding previous year period is from 01.04.2011 to 31.03.2012.
2. FACTUAL MATRIX
2.1 That as and by way of an assessment order made u/s 147 r.w.s. 144 of the Act, the assessee’s total income exigible to tax was assessed & computed at Rs.11,17,884/-. The revenue had information basis AIR that for the assessment year under consideration the assessee had deposited sum of Rs.10,67,884/-in cash his SB A/c. The Revenue also had information that there was a transaction of Rs.50,000/– in cash in the said A/c. Hence the aggregate sum of Rs.11,17,844/- had escaped the assessment according to the Revenue.
2.2 That before passing the aforesaid assessment order the Ld. AO had given three opportunities to the assessee on 29.03.2019, 19.07.2019 & 21.10.2019 but the assessee did not avail any such opportunities.
2.3 That on 18.07.2019 the Ld. AO had also issued notice to the assessee u/s 142(1) of the Act & had also given to the assessee time till 26.07.2019 for the compliance but the assessee failed to do any compliance. Yet another notice dated 21.10.2019 was issued to the assessee for the compliance but the assessee failed to do so any compliance. It is recorded in the aforesaid order that the Ld. AO due to aforesaid act of non compliance by the assessee intended to initiate the proceedings u/s 271(1)(b) of the Act. It is also recorded in the aforesaid order that the assessee had not filed any ITR u/s 139(1) of the Act and hence a separate proceeding is contemplated u/s 271F too. It is also recorded in the aforesaid order that after above opportunities letters/notices were issued, the assessee was also issued a final notice dated 17.11.2019 for compliance on or before 22.11.2019. It was also further stated therein that if the necessary compliance is not done by the assessee then the assessment would be done u/s 144 of the Act. Even to these two notices (supra) the assessee remained non compliant.
2.4 That the aforesaid assessment order u/s 147/144 is dated 12.12.2019 which is hereinafter referred to as the “Impugned Assessment Order.”
2.5 That the assessee on 22.03.2024 (form 35) received an order u/s 271(1)(b) of the Act bearing No. ITBA/PNL/F/271(1)(6)/2021-22/1036163868(1) dated 05.10.2021 wherein a penalty of Rs.20,000/- was imposed upon him u/s 271(1)(b) of the Act for non-compliance of notice(s) u/s 142(1) dated 18.07.2019 & 17.11.2019. That the aforesaid order dated 05.10.2021 is hereinafter referred to as the “Impugned Penalty Order.”
2.6 That the assessee being aggrieved by the aforesaid “Impugned Penalty Order” prefers the first appeal u/s 246A of the Act before Ld. CIT(A) who by the Impugned Order has dismissed the 1st appeal of the assesee on the grounds & reasons stated therein. The core grounds and reasons for the dismissal of the 1st Appeal was as under:-
“6. Decision
6.1 I have considered the facts of the case and the submission of the appellant and after adjudicating the same, the appeal is decided as under:
6.2 Ground No 1 to 4 of the appeal pertains to the penalty order u/s 271(1)(b) of the Act. The contention of the appellant regarding the same is not acceptable on merit as the penalty u/s 271(1)(b) of the Act does not relates to the quantum appeal. On perusal of penalty order, it is clear that during assessment proceedings, appellant has not complied to the notices dated 18.07.20198 17.11.2019. Therefore, the contention of the appellant is not acceptable on merit. Accordingly, Ground No. 1 to 4 of the appeal is dismissed.
7. In the result, the appeal is dismissed.”
2.7 That the assessee being aggrieved by the “Impugned Order” has preferred the instant second appeal before this Tribunal & and has raised following grounds of appeal in Form no.36 against the “Impugned Order” which are as under:
“1.HUMBLE PRAYERS For these grounds and such other grounds 1 that may be urged before or during the hearing of the appeal it is most humbly prayed that this Hon. Tribunal may be pleased to:
2. On the facts and circumstances of the case and in law, the Ld. National Faceless Appeal Centre (NFAC) erred in upholding the 2 penalty of Rs. 20,000/- imposed by the Learned National Faceless Assessment Centre under section 271(1)(b) of the Income-tax Act, 1961.
3. On the facts and circumstances of the case and in law, the Ld. NFAC erred in upholding, the penalty order passed under section 271(1)(b) which is erroneous, bad in law, unjustified, illegal and void ab initio.
4. That penalty order passed u/s 271(1)(b) is arbitrary. 4 unwarranted and not backed by facts on records and contrary to the principles of justice.
5. The appellant craves leave to add to, alter, amend, vary or delete all or any of the above grounds of appeal.
3. Record of Hearing
3.1 The hearing in the matter took place before this Tribunal on 22.10.2025 when Ld. AR for and on behalf of the assessee contended that the impugned order is illegal, not proper and is bad in law. It thus deserves to be set aside. The Ld. AR has placed on record of this tribunal a brief synopsis containing 3 pages. An affidavit dated 17.10.2025 of the assessee was too placed on record. Additional pages from page no.30 to 40 of appeal memo which is serially numbered from page 3 to 29 were too tendered. An order u/s 7(1) of RTI Act 2005 dated 09.09.2025 of ITO(1)(1) and CPIO, Ujjain from pages 41 to 44 was also tendered. A copy of order in case of Smt. Rekha Rani vs. Dy CIT, CC-8, New Delhi reported in (2015) 60 taxmann.com 131(Delhi -Tribunal) was also given. Basis above documents the Ld. AR submitted before the Tribunal that no notice(s) u/s 142(1) dated 21.10.2019 (P33) & dated 21.10.2019 (P35) are shown in the Ld. AO order. Reliance was placed on RTI order dated 09.09.2025 (supra). Reliance was placed on judgment of Smt. Rekha Rani case (supra). It was urged that penalty of Rs.20,000/- be dropped. Per contra Ld. DR supported the orders of the lower authorities i.e. Ld. AO and CIT(A). A brief debate took place in the Tribunal that notice(s) in income tax proceedings are now-days sent through electronic mode and the assessee and his counsel(s) are expected in new age to see the I.T. Portal regularly. A little later both the Ld. AR and Ld. DR however agreed that a penalty amount of Rs.10,000/- would meet the ends of justice. Hearing was then concluded.
4. Observations & findings & conclusions
4.1 We now have to decide the legality, validity and proprietary of the “impugned order” basis records of the case.
4.2 We have perused the records of the case and have heard the rival contentions.
4.3 We basis records of the case & after hearing & upon examining the contentions of the parties are of the considered opinion that there was near unanimity between the Ld. AR & Ld. DR on issue of penalty of Rs.10,000/- would meet the requirements of ends of justice. Under these facts & circumstances, we reduce the penalty by Rs.10,000/- so that issue closes & attains the finality. On trivial issues wherein small amount of the penalty is imposed a consensus approach as shown in the hearing held on 22.10.2025 is best approach as litigation does not get prolonged & the issue attains finality.
Order
7. In view of the aforesaid, the “Impugned Order” whereby the penalty of Rs.20,000/- is confirmed is reduced to 10,000/-.
8. In the result, appeal of the assessee is partly allowed.
Order pronounced by putting on notice board in terms of Rule 34 of ITAT, Rules, 1963, on 29/10/2025.
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