2 No penalty for non-compliance when Assessment was made after considering reply of assessee

Case Law Details

Case Name : Hanuman Prasad & Sons Vs DCIT/ACIT/ITO (ITAT Allahabad)
Appeal Number : ITA No. 20/ALLD/2022
Date of Judgement/Order : 13/09/2022
Related Assessment Year : 2017-18

Hanuman Prasad & Sons Vs DCIT/ACIT/ITO (ITAT Allahabad)

In this case assessee has not only replied the notice but also replied to the letter issued by AO. After considering the reply of the assessee, the Assessing Officer framed the assessment under section 143(3) on 28th December, 2019. Once the assessee has made the compliance though after some delay but it was well before the assessment order was framed and the penalty order dated 10.1.2022. Therefore, it is not a case of non-compliance on the part of the assessee to the notice issued under section 142(1) dated 18.11.2019 but the compliance was made belatedly. Hence, the assessee made the compliance and the assessment was framed after considering the reply and document filed by the assessee then it does not fall in the category of non-compliance by the assessee at all. Hence, in the facts and circumstances of the case when the assessee finally complied with the notice and the Assessing Officer has duly considered the reply and the documents filed by the assessee while framing the assessment, then the subsequent penalty levied by the Assessing Officer is not justified. Even otherwise, when this is the year of changing the mode of assessment proceedings from physical to digital /electronically then the delay in compliance due to change in the mode of communication and proceedings is a bonafide reasons and not deliberate. Accordingly, the penalty levied by the Assessing Officer under section 272A(1)(d) is deleted.

FULL TEXT OF THE ORDER OF ITAT ALLAHABAD

This appeal by the assessee is directed against the order dated 15.06.2022 of CIT(A) (National Faceless Appeal Centre, Delhi) arising from penalty order passed u/s 272A(1)(d) of the Act for the assessment year 2017-18. The assessee has raised the following grounds:-

“1- That in any view of the matter penalty imposed u/s 272A(1)(d) of the IT Act imposing penalty of Rs. 10,000/ vide order dated 10-01-2022 is bad both on the facts and in law.

2. That in any view of matter the ld. CIT(A) was wrong in passing the order ex-parte without providing reasonable opportunity to the assessee and the order is not a speaking order in the eyes of law.

3. That in any view of matter during assessment proceeding the assessee made the necessary compliance on each and every filed written submission in compliance to notice and thereafter assessment was framed u/s 143(3) of the Act hence it is incorrect to state that there was non-compliance therefore penalty as imposed is highly unjustified.

4. That in any view of the matter both the two lower authorities failed to appreciate the facts properly and without verifying the facts decided the appeal when assessee made necessary compliance during assessment proceeding hence imposition of penalty is highly unjustified.

5. That in any view of the matter the assessee reserves his rights to take any fresh ground of appeal before hearing of appeal.”

2. The assessee is a partnership firm and filed its return of income for the year under consideration on 22nd October, 2017 declaring total income of Rs. 44,680/-. The assessment was framed under section 143(3) on 28th December, 2019. During the course of assessment proceedings, the Assessing Officer was of the view that the assessee has not complied with the notice under section 142(1) dated 18th November, 2019 and consequently initiated the penalty proceedings by issuing a show cause notice under section 274 r.w.s. 272A(1)(d) of the Income Tax Act. The Assessing Officer levied the penalty of Rs. 10,000/-, vide order dated 10.1.2022.

3. Aggrieved by the penalty levied under section 272A(1)(d) , the assessee filed an appeal before the CIT(A) but could not succeed.

4. Before the Tribunal, the learned AR of the assessee has submitted that the assessee has duly complied with the notice under section 142(1) dated 18th November, 2009 and filed the reply as well as other requisite details and documents. The Assessing Officer has recorded this fact at page no. 2 and 3 of the assessment order. Thus, the learned AR of the assessee has submitted that when the assessee has complied with the notice under section 142(1) and filed its reply to the queries raised by the Assessing Officer and also attached the documents which were considered by the Assessing Officer while framing the assessment, then there is no default on the part of the assessee so far as the compliance of the notice is concerned. He has further submitted that the Assessing Officer has not recorded any satisfaction in the assessment order for initiation of penalty proceedings under section 272A(1)(d) of the Act therefore, the levy of penalty is not valid and liable to be quashed. In support of his contention, he has relied upon the decision of the Bombay Benches of the Tribunal dated 10.3.2022 in the case of Triumph International Finance India Limited vs. Dy. Commissioner of Income Tax, Central Circle-7(1), Mumbai in ITA No. 1870/Mum/2020 and submitted that this is the year of starting of e-assessment and notice through online/electronically therefore, due to initial year of shifting towards digital and electronic mode, the mistake for not responding to the same is a bonafide

5. On the other hand, the learned DR has submitted that though the assessee has filed the reply to notice under section 142(1) dated 18.11.2019 but the same was filed on 20.12.2019 and after the show cause notice issued by the Assessing Officer under section 274 r.w.s. 272A(1)(d) of the Income Tax, therefore, there is a clear non-compliance of the notice issued under section 142 wherein the assessee was required to make the compliance on or before 22nd November, 2019 but the assessee filed the reply on 20th December, 2022. He has relied upon the orders of the authorities below.

6. I have considered the rival submissions as well as relevant material on record. The Assessing Officer has levied the penalty of Rs. 10,000/- under section 272A(1)(d) on account of non-compliance of notice under section 142(1) issued on 18.11.2019. The Assessing Officer has recorded all the facts relating to issuing the notice and reply filed by the assessee as well as the show cause notice issued under section 274 r.w.s. 272A(1)(d) in para 2 as under:-

“2. Thereafter, a system generated notice u/s 142(1) of the IT Act, with annexed questionnaire, requiring details/information and explanations & relevant evidences, was issued on 08.07.2019, fixing the date for compliance on or before 15.07.2019. The said notice was duly served/ delivered to the assessee through its e-mail as per system record Again, the assessee made no compliance by the date fixed. In the meantime, system generated notice u’s 133(6) of the I.T. Act was issued to concerned bank, calling for copies of bank statement(s) and certain other documents. Further, opportunity was afforded to the assessee by issuing a system generated notice u/s 142(1) on 17.07.2019, fixing the date for compliance on 24.07.2019 and duly served/ delivered to the assessee through its email. In response, the assessee requested for adjournment. The assessee’s request for adjournment was not accepted and the assessee was informed through this office system generated letter on 18.07.2019 to furnish reply by the date already fixed. In response, the assessee furnished online reply on 29.07.2019 and sent documents through post. Further queries were given to the assessee through notice u/s 142(1) issued on 18.11.2019, fixing the date for compliance on or before 22.11.2019 and served /delivered on assessee’s email. The assessee failed to comply on or before the date fixed. In view of persistent non-compliance of statutory notice u/s 142(1) a show cause notice u/s 274 rws 272A(1)d) of the Act was issued on 05.12.2019, fixing the date for compliance on 09.12.2019 and served/ delivered on assesee’s email. In response, the assessee filed reply to the queries of notice u/s 142(1) and attached documents, which are placed on record.”

7. In response to the earlier letter dated 18.7.2019, the assessee furnished online reply on 29th July, 2019 and sent documents through post. The Assessing Officer issued further queries vide notice under section 142(1) issued on 18.11.2019 and fix the date of compliance on or before the 22.11.2019. Thus, it is clear that the Assessing Officer has given only four days to the assessee to comply with the said notice and after 22.11.2019. The Assessing Officer initiated the penalty proceedings by issuing the show cause notice under section 274 r.w.s. 272A(1)(d) on 5.12.2019. After the said show cause notice, the assessee filed the reply to the queries raised by the assessee vide notice under section 142(1) dated 18.11.2019. Thus, it is clear that the assessee complied with the notice under section 142(1) dated 18.11.2019 though the compliance was belated and not within the date prescribed in the said notice. It is clear that only four days were given by the Assessing Officer to the assessee for compliance but the assessee finally made the compliance on 20th December, 2022 which was duly recorded by the Assessing Officer in para 5.2 as under:-

“5.2 The assessee has replied to the above queries as under:

Reply dated 29th July, 2019-query 5

“The cash deposit in bank account are the sales proceeds of the business which are deposited in bank at regular intervals. The said cash deposit in bank are duly accounted for in books of account and reflected in the audit report also. The said account is old account and in existence for last number of years. However the response regarding cash deposit could not be furnished as the assessee was not aware about the online compliance but the fact is that cash deposited in bank account are from disclosed sources”.

Reply dated 20th December, 2019-query no. 1, 2 & 10

That as per query no. 1 month wise details of opening cash, cash in hand, cash sales, cash withdrawals from bank, cash expenses the same is enclosed as per chart.

That as per query no.2 month wise opening stock, purchases and sales and closing stock in value is enclosed. Due to voluminous item, day to day stock position is not maintained but in earlier years in absence of stock register trading result has been accepted.

That as per query no. 10 cash book, ledger etc. and bill voucher for verification.” 4

8. Therefore, the assessee has not only replied the notice dated 18.11.2019 but also replied to the letter dated 18.7.2019 also. After considering the reply of the assessee, the Assessing Officer framed the assessment under section 143(3) on 28th December, 2019. Once the assessee has made the compliance though after some delay but it was well before the assessment order was framed and the penalty order dated 10.1.2022. Therefore, it is not a case of non-compliance on the part of the assessee to the notice issued under section 142(1) dated 18.11.2019 but the compliance was made belatedly. Hence, the assessee made the compliance and the assessment was framed after considering the reply and document filed by the assessee then it does not fall in the category of non-compliance by the assessee at all. Hence, in the facts and circumstances of the case when the assessee finally complied with the notice and the Assessing Officer has duly considered the reply and the documents filed by the assessee while framing the assessment, then the subsequent penalty levied by the Assessing Officer is not justified. Even otherwise, when this is the year of changing the mode of assessment proceedings from physical to digital /electronically then the delay in compliance due to change in the mode of communication and proceedings is a bonafide reasons and not deliberate. Accordingly, the penalty levied by the Assessing Officer under section 272A(1)(d) is deleted.

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

Order pronounced in the open Court on 13.09.2022 at Allahabad.

Download Judgment/Order

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