Shamji Kanji Zaru Vs DCIT (ITAT Mumbai)
For AYs 2015-16 to 2021-22, penalties of ₹20,000 per year were levied for alleged non-compliance with notices under sections 143(2)/142(1) in assessments completed ex-parte under section 153C read with section 144. Importantly, in all these years the Assessing Officer ultimately accepted the returned income and made no additions, resulting in nil tax demand (as reflected in the year-wise returned vs. assessed income table).
The assessee explained that the e-mail ID registered on the tax portal belonged to a relative, who did not forward the notices; the assessee became aware only on noticing the assessment order later and promptly took corrective steps. Only two notices were issued with a very short response window of five days.
The Tribunal held that since no incriminating material was found and the assessments ended exactly at the returned figures, non-reply to notices made no difference to the outcome. The breach was therefore merely technical/venial. Relying on the Supreme Court in Hindustan Steel Ltd. and several ITAT decisions, it reiterated that penalty is discretionary and should not be imposed for a mere technical lapse or bona fide failure, especially when there is no tax effect and no wilful defiance.
Observing that penalising the assessee in such circumstances offends principles of natural justice and proportionality, the Tribunal directed deletion of penalty under section 272A(1)(d) for all the years. All the assessee’s appeals were allowed
FULL TEXT OF THE ORDER OF ITAT MUMBAI
