Case Law Details
Bhavna Modi Vs ITO (ITAT Raipur)
ITAT Raipur held that penalty imposed under section 272A(1)(d) of the Income Tax Act unjustified when an assessment has been completed under section 143(3) of the Income Tax Act.
Facts- The assessee is an individual, have filed her Return of Income (ROI) on 05.09.2020, which was processed u/s 143(1). The case of the assessee was selected for limited scrutiny under the ‘CASS’. Accordingly, notice u/s 142 of the Act was issued and duly served upon the assessee. While culminating the assessment, AO have made the observation to initiate penalty proceedings u/s 270A of the I.T. Act for under reporting / misreporting of income along with penalty u/s 272A(1)(d) for non-compliances of notices u/s 143(2) / 142(1).
In penalty proceedings, notice u/s 274 r.w.s. 272A(1)(d) was issued to the assessee. Assessee’s reply was not found satisfactory by the AO, therefore, the penalty for non-compliance u/s 272A(1)(d) of the Act was imposed at Rs.10,000/- per default, thus, considering two defaults involved, the penalty is levied at Rs.20,000/-.
Conclusion- Held that the assessee failed to respond certain notices of the Ld. AO, which were issued u/s 143(2) and 142(1) of the Act, however, in response, subsequent notices, the assessee has made necessary replies and accordingly assessment was completed u/s 143(3), therefore, respectfully, following the analogy drawn in the decision referred to (supra), we find that the penalty-imposed u/s 272A(1)(d) of the Act is not justifiable in the present case, as the Ld. AO himself has deemed to have condoned the absence of assessee or his Authorized Representative on earlier occasions, subsequently the necessary information and evidences were furnished by the assessee to assist in the completion of the assessment and since assessment was completed u/s 143(3) of the Act, the penalty u/s 272A(1)(d) cannot be imposed.
FULL TEXT OF THE ORDER OF ITAT RAIPUR
The captioned appeal is filed by the assessee against the order of Commissioner of Income Tax (Appeals), NFAC, Delhi (in short “Ld. CIT(A)”), vide order u/s 250 of the Income Tax Act, 1961 (in short “The Act”) dated 22.04.2024 for the Assessment Year 2020-21, confirming the penalty u/s 272A(1)(d) imposed on the assessee by the Assessment Unit Income Tax Department, vide their order dated 16.02.2023.
2. The grounds of appeal raised by the Ld. AR are as under:
1. On the facts and in the circumstances of the case and in law, that the ld. CIT(A) has erred in sustaining the penalty of Rs.20,000/- imposed by the ld. AO u/s 272A(1)(d) for non-compliance of notices/questionnaires issued u/s 142(1).
2. The appellant craves leave, to add, urge, alter, modify or withdraw any grounds before or at the time of hearing.
3. Briefly stated, the assessee is an individual, have filed her Return of Income (ROI) on 05.09.2020, which was processed u/s 143(1). The case of the assessee was selected for limited scrutiny under the ‘CASS’. Accordingly, notice u/s 142 of the Act was issued and duly served upon the assessee. In due course, notices u/s 142(1) along with detailed questionnaires were issues to the assessee on 25.10.2021, 10.02.2022, 21.02.2022 and 14.03.2022. In response, assessee have made submissions through e-proceedings on 16.02.22, 03.03.22 and 04.03.22, after deliberation certain additions were made by the Ld. AO, which are not the subject matter of present appeal. While culminating the assessment, Ld. AO have made the observation to initiate penalty proceedings u/s 270A of the I.T. Act for under reporting / misreporting of income along with penalty u/s 272A(1)(d) for non-compliances of notices u/s 143(2) / 142(1) issued on 29.06.2021, 25.10.2021 and 12.03.2022. Later on, penalty proceedings were initiated by the Ld. AO i.e., Assessment Unit, Income Tax Department wherein it is observed that during the course of assessment proceedings, notice u/s 143(2) of the Act dated 29.06.2021 and notice u/s 142(1) of the Act dated 25.10.2021 were issued to the assessee seeking clarification and further details on the issue, in respect of which the case was selected for scrutiny. However, the assessee has not responded to the said notices, therefore, penalty proceedings u/s 272A(1)(d) was initiated for non-compliances to those notices. In penalty proceedings, notice u/s 274 r.w.s. 272A(1)(d) was issued to the assessee on 01.08.2022, thereby the assessee was requested to explain, why an order imposing penalty u/s 271A(1)(d) of the Act for non-compliance to the above referred notices should not be made. No response was furnished by the assessee, therefore, a further notice in this regard was issued to the assessee on 30.01.2023, to which a response is filed by the assessee contending that she has filed an appeal before the Ld. CIT(A), and therefore, request to wait for disposal of the case from the said authority. Ld. AO verified details available on record and found that the assessee has filed an appeal before the Ld. CIT(A), however, she has not raised any ground in respect of initiation of penalty proceedings u/s 272A(1)(d) of the Act. In this situation, a further notice was issued to the assessee asking her to show cause as to why penalty u/s 272A(1)(d) of the Act should not be imposed, however assessee had again filed a reply reiterating that the appeal has been filed and has requested to stay the proceedings till the disposal of the appeal. Assessee’s reply was not found satisfactory by the Ld. AO, therefore, the penalty for non-compliance u/s 272A(1)(d) of the Act was imposed at Rs.10,000/- per default, thus, considering two defaults involved, the penalty is levied at Rs.20,000/-.
4. Aggrieved by the imposition of penalty by the Ld. AO, assessee preferred an appeal before the Ld. CIT(A), but with no success, the appeal is dismissed, therefore, assessee carried the matter before us challenging the decision of Ld. CIT(A).
5. At the outset, Ld. AR of the assessee submitted that, the Ld. CIT(A) had erred in sustaining the penalty of Rs.20,000/- imposed on the assessee by the Ld. AO u/s 272A(1)(d) for non-compliance of the notice in repose issued u/s 142(1). Whereas the assessee has furnished all the necessary information during the course of assessment proceedings in response to subsequent notices issued by the Ld. AO and the assessment was completed u/s 143(3) r.w.s. 144B of the Act. It was the submission that the issue is squarely covered by the following judgments:
Rambhai Kanjibhai Patel vs. The DCIT, Central Circle-2, Surat in ITA No. 106 to 110/SRT/2023 dated 11.05.23, wherein it has been held by the coordinate division bench of ITAT, Surat, that:
We note that ‘Reasonable cause’ as applied to human action is that which would constrain a person of average intelligence and ordinary prudence. It can be described as probable cause. It means an honest belief founded upon reasonable grounds, of the existence of a state or circumstances, which assuming them to be true, would reasonably lead any ordinary prudent and cautious man, placed in the position of the person concerned, to come to the conclusion that the same was the right thing to do. The cause shown has to be considered. The word ‘reasonable’ has in law the prima facie meaning of reasonable with regard to those circumstances of which the actor, called on to act reasonably, knows or ought to know. The reasonable cause can be reasonably said to be a cause which prevents a man of average intelligence and ordinary prudence, acting under normal circumstances, without negligence or inaction or want of bona fides [Azadi Bachao Andolan v. UOI [2001] 116 Taxman 249 (Delhi)]. The words ‘reasonable cause’ in section 273B must necessarily have a relation to the failure on the part of the assessee to comply with the requirement of the law which he had failed to comply with. We note that during the assessment stage, the assessee has made sufficient compliance of notices issued by the assessing officer. Moreover, no penalty u/s.271(1)(b) of the Act could be levied when an assessment has been completed u/s143(3) of the Act, wherein the ld. AO is deemed to have condoned the absence of the assessee or his authorised representative on earlier occasions when subsequently, the details were furnished by him and the assessments were ultimately completed u/s143(3) of the Act. Hence, we deem it fit that this is not a fit case for levy of penalty u/s.271(1)(b) of the Act. Therefore, we direct the AO to delete the said penalty. Accordingly, the grounds raised by the assessee are allowed.
Saleem Ahmed Khan vs. Income Tax Officer in ITA Nos.88,89 & 98/JAB/2022 dated 13.09.2023, wherein it has been held that:
II. Section 271(1)(b), read with sections 142 and 143, of the Income tax Act, 1961 – Penalty- for failure to comply with notice u/s 142(1) (Scope of provision) Assessment year 2014-14 – Assessing Officer levied penalty upon assessee under section 271(1)(b) for non-compliance of notice u/s 142(1)-Whether since assessment was completed u/s 143(3), penalty u/s 271(1)(c) could not be levied – Held, yes [Para 16] [In favour of assessee]
6. Backed by aforesaid submissions and the ration of decision from the aforesaid case laws, wherein it is held that, in a circumstance when an assessment has been completed u/s 143(3) of the Act, the Ld. AO is deemed to have condoned the absence of the assessee or his authorized representative on earlier occasions when subsequently, the details were furnished by him and the assessments were ultimately completed u/s 143(3) of the Act. Therefore, penalty for non-compliance at certain occasions cannot be made. Ld. AR requested to delete the penalty.
7. On the contrary, Ld. Sr. DR on behalf of the revenue have vehemently supported the order of revenue authorities.
8. We have considered the rival submissions, perused the material available on record and case laws relied upon by the assessee. Admittedly, in the present case, the assessee failed to respond certain notices of the Ld. AO, which were issued u/s 143(2) and 142(1) of the Act, however, in response, subsequent notices, the assessee has made necessary replies and accordingly assessment was completed u/s 143(3), therefore, respectfully, following the analogy drawn in the decision referred to (supra), we find that the penalty-imposed u/s 272A(1)(d) of the Act is not justifiable in the present case, as the Ld. AO himself has deemed to have condoned the absence of assessee or his Authorized Representative on earlier occasions, subsequently the necessary information and evidences were furnished by the assessee to assist in the completion of the assessment and since assessment was completed u/s 143(3) of the Act, the penalty u/s 272A(1)(d) cannot be imposed. Under such facts and circumstances, considering the ratio of law followed in various judicial decision, we find it appropriate to set aside the order of Ld. CIT(A), and direct the Ld. AO to delete the penalty.
9. Consequently, the contentions raised by the Ld. AR under the grounds of appeal in present case are allowed in favour of the assessee.
10. In result, appeal of the assessee in ITA No. 298/RPR/2024, stands allowed in terms of our aforesaid observations.
Order pronounced in the open court on 16/08/2024.
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