Case Law Details
Ishoo Narang Vs ACIT (ITAT Hyderabad)
Income Tax Appellate Tribunal (ITAT) of Hyderabad upheld a penalty imposed on Ishoo Narang due to deliberate and willful disobedience non-compliance of notice under section 271 of the Income Tax Act.
Analysis: In this case, Ishoo Narang, an individual and director of two companies, failed to respond to notices from the Assessing Officer (AO) under sections 142(1) and 271(1)(b) of the Act. Despite several opportunities, Narang did not file any reply, leading the AO to impose a penalty of Rs. 10,000.
Narang argued that the failure was due to circumstances beyond his control and that there was no willful attempt on his part for non-compliance to the notice. However, the ITAT observed that Narang’s failure to comply constituted a deliberate and willful disobedience. The penalty under section 271(1)(b) is a technical one, usually levied when there is willful default on the part of the assessee.
An interesting point to note is that the penalty was upheld despite Narang eventually complying with the notice. This indicates that the ITAT takes the timeline of responses seriously and expects taxpayers to comply with the requirements promptly.
Conclusion: The case of Ishoo Narang Vs ACIT underscores the importance of timely compliance with notices under the Income Tax Act. It is a stark reminder for taxpayers to respect the stipulated timelines for responding to notices from tax authorities. The ITAT’s verdict makes it clear that penalties can be levied for delays, even when the assessee eventually complies. It is thus crucial for taxpayers to promptly respond to any communication from the tax authorities to avoid such penalties.
FULL TEXT OF THE ORDER OF ITAT HYDERABAD
This appeal filed by the assessee is directed against the order dated 15/07/2022 of the learned CIT (A)-NFAC, Delhi relating to A.Y. 2014-15.
2. The assessee raised the following grounds of appeal:
“1. Order of the Ld. CIT(A) is erroneous both on facts and in law to the extent the order is prejudicial to the interest of the appellant.
2. The Ld. CIT(A) ought to have appreciated that the Assessing Officer erred in levying penalty of Rs. 10,000/- u/s 271 (1)(b) of the Act without appreciating the facts of the case.
3. The Ld. CIT(A) ought to have appreciated that the assessing officer erred in not considering the replies filed by the assessee online in response to notices issued u/s 142(1) and 271(1)(b) of the Act on 25.10.2018, 29.1 0.2018 and 1 0.2018.
4. The Ld. CIT(A) ought to have appreciated that the impugned failure on the part of the appellant was due to circumstances beyond the control of the appellant and that there was no willful attempt on the part of the appellant for non-compliance to the Notice.
5. The Ld. CIT(A) ought to have appreciated that there is a reasonable cause for the impugned failure and that the provisions of section 273B of the Act would apply to the appellant’s case for the year under consideration.
6. The Ld. CIT(A) ought to have appreciated that the Assessing officer erred in not providing proper opportunity of being heard to the appellant before passing the order u/s 271 (1)(b) of the Act, by imposing penalty of Rs. 10,000.
7. The appellant may add or alter or amend or modify or substitute or delete and/or rescind all or any of the grounds of appeal at any time before or at the time of hearing of the appeal.”
3. Facts of the case, in brief, are that the assessee is an individual and director of M/s. Kyori Oremin and Kyori Infrastructure. He filed his return of income for the A.Y 2014-15 on 25.7.20 14 admitting income of Rs.94,22,920/-. The said return was treated as invalid by CPC due to pending e-verification by the assessee and therefore, was not processed. Accordingly, notice u/s 148 of the Act was issued to the assessee on 23.3.2018 and served on the assessee.
4. Thereafter, the Assessing Officer issued statutory notice u/s 142(1) dated 31.7.2018 and date of hearing fixed by the Assessing Officer on 16.08.20 18. As there was no compliance from the side of the assessee, notice u/s 271(1)(b) dated 8.9.20 18 was issued to the assessee to show cause why penalty u/s 271(1)(b) should not be levied for non-compliance of notice u/s 142(1). In spite of giving several opportunities, the assessee had not responded, hence a penalty of Rs. 10,000 /- was imposed on the assessee for his negligence.
5. The learned AR for the assessee submitted that the Assessing Officer imposed penalty u/s 271(1)(b) of the Act and upheld by the learned CIT (A), drew the attention of the Bench to page 14 and 15 of the order passed by the learned CIT (A). It was the contention of the learned AR that the assessee had filed the reply to the show cause notice issued in the quantum proceedings and had also filed the return of income in response to the notice issued u/s 142 of the Act. It was further submitted that the Assessing Officer, after considering the record available on record has passed the order u/s 143/147 of the I.T. Act.
6. Per contra, the learned DR submitted that the assessee has failed to submit the reply before the Assessing Officer as and when called for by the Assessing Officer. It was submitted that the assessee had not replied to the show cause notice u/s 142(1) dated 3 1.07.2018 asking the assessee to submit his reply. Due to non-compliance of notice by the assessee, the Assessing Officer issued show cause notice u/s 271(1)(b) of the Act on 8.9.2018 proposing to levy a penalty of Rs.10,000/-. Despite various opportunities, the assessee had not replied to such notices issued and served for imposing the penalty, hence the Assessing Officer had imposed the penalty.
7. We have heard the rival arguments made by both the sides and perused the available material on record. Admittedly, the Assessing Officer had issued notice u/s 142(1) of the Act asking the assessee to submit the document on 3 1/07/2018. However, the assessee has failed to comply with the notice and on the next date of hearing i.e. 8.9.2018, the Assessing Officer issued show-cause notice u/s 271(1)(b) of the Act. Admittedly, the assessee has filed the response to the notice vide letter dated 13.10.2018 and had also submitted the requisite information as called for in the show cause notice dated 13.10.2018. Before that, the Assessing Officer based on the documents filed by the assessee completed the assessment u/s 144/147 of the I.T. Act vide order dated 8.10.2018. The moot question is whether there was a compliance by the assessee in response to the notice u/s 142(1) or not. The record shows that the Assessing Officer made the addition u/s 144 r.w.s l47 of the Act in the hands of the assessee which was upheld learned CIT (A). Though the learned CIT (A) in the order has mentioned that the reply was filed by the assessee after passing the order dated 8.10.2018 by the Assessing Officer on 13.10.2018 and before the ACIT, Circle 2(1) Hyderabad. In our view the penalty levied u/s 271(1)(b) of the Act is a technical penalty and normally is required to be levied when there is a willful default on the part of the assessee for noncompliance in filing the document/information in response to the notice of the Assessing Officer. In the present case, the assessee, despite several opportunities, had not filed any reply before the Assessing Officer. Though, subsequently, the assessee has complied with the same. In our view, once there is deliberate or willful default on the part of the assessee then the penalty should be imposed.
8. During the course of argument, it was submitted before us that the Assessing Officer had passed the order u/s 143(3) r.w.s. 147 of the Act, when it was so represented before us, we had made it clear that the penalty is required to be deleted, however, on verification, we find that the Assessing Officer had passed the order u/s 144 r.w.s. 147 of the Act and not u/s 143(3) r.w.s 147 of the Act. In the light of these facts, we are of the opinion that the judgment/decision on the strength of which we had expressed deletion of penalty are not applicable, as there is deliberate and willful disobedience by the assessee in filing the response before the Assessing Officer, even after receiving the notice u/s 142(1) of the Act. Hence, we uphold the penalty imposed by the Assessing Officer.
9. In the result, the appeal of the assessee is dismissed.
Order pronounced in the Open Court on 15TH June, 2023.
