2021 (3) TMI 160 - AT - Income Tax

Penalty U/s 271(1)(b) - non-appearance of the assessee before the A.O. - non service of notice to assessee - as argued no notices either u/s 143(2) or 142(1) of the Act were ever served upon the assessee - HELD THAT - Assessee at that relevant time was posted at Jaipur and since all the notices issued by the Revenue were served at Pali and Kakari but were never personally served upon the assessee as at that particular time, the assessee was posted at Jaipur, therefore, service of notices could not be taken effect upon the assessee and because of this reason, the said notices U/s 143(2) and 142(1) of the Act could not be complied with by the assessee. Revenue has not been able to demonstrate before us that even a single notice was ever served upon the assessee. However, even as per the order of the A.O., notice was served either upon one Shri Rajesh Davera or upon one Shri Raghverder but no notice was served upon the assessee and the order of penalty passed u/s 271(1)(b) of the Act even do not mention the relation of said alleged Shri Rajesh Davera and Shri Raghverder with the assessee - non-receipt of notice by the assessee was the reasons for non-compliance of notices which according to us is a reasonable cause , therefore, in our view, penalty u/s 271(1)(b) of the Act could not be imposed. Thus non-appearance of the assessee before the A.O. or non-compliance of the notices issued was only because of non-receipt of the notices by the assessee and therefore, in our considered view, the same was a reasonable cause as has also been held in the case of Woodward Governor India P Ltd. Vs CIT ( 2001 (4) TMI 34 - DELHI HIGH COURT wherein it was held that levy of penalty is not automatic and the absence of a reasonable cause is necessary. As only source of income of the assessee is from salary from Government of Rajasthan on which TDS has all ready been deducted and apart from this there is no other source of income of the assessee. Hence, there could not be any intention upon the assessee for skipping the service of notices. It was proved that there was reasonable cause for the assessee in failure to comply with the provisions of Section 271(1)(b) of the Act as the non-appearance of the assessee before the A.O. was only because of the non-receipts of the notices. - Decided in favour of assessee.

Summary

Issues Involved
1. Imposition of penalty under Section 271(1)(b) of the Income Tax Act, 1961.
2. Delay in filing the appeal and its condonation.
3. Validity of service of notices under Sections 143(2) and 142(1) of the Income Tax Act, 1961.

Detailed Analysis

1. Imposition of Penalty under Section 271(1)(b) of the Income Tax Act, 1961
The penalty under Section 271(1)(b) was imposed by the Assessing Officer (A.O.) on the grounds that the assessee failed to comply with notices issued under Sections 143(2) and 142(1) of the Income Tax Act, 1961. The assessee's return for the assessment year 2011-12 declared a total income of ?12,80,870, and the case was selected for scrutiny. Despite multiple notices, the assessee did not respond, leading the A.O. to levy a penalty of ?40,000 for non-compliance.

2. Delay in Filing the Appeal and Its Condonation
The assessee appealed against the penalty order but faced a delay of 624 days in filing the appeal before the Commissioner of Income Tax (Appeals) [CIT(A)]. The CIT(A) dismissed the appeal on the grounds of delay, stating that the assessee failed to justify the condonation of delay with sufficient cause. The assessee argued that the delay was due to not receiving the original order and having to obtain a certified copy, which justified the delay.

3. Validity of Service of Notices under Sections 143(2) and 142(1)
The assessee, an Additional Chief Judicial Magistrate in Rajasthan Judicial Services, was transferred multiple times across various districts in Rajasthan. The notices under Sections 143(2) and 142(1) were issued to her addresses in Pali and Kekri, but she was posted in Jaipur at those times. The assessee argued that the notices were not personally served to her, and hence, she could not comply with them. The A.O. claimed that notices were served to individuals named Shri Rajesh Davera and Shri Raghverder, but their relationship to the assessee was not clarified.

Judgment Analysis

Condonation of Delay
The Tribunal acknowledged the principles laid down by the Hon’ble Supreme Court in the case of Collector, Land Acquisition Vs. Mst. Katiji, emphasizing a liberal approach towards condonation of delay to ensure substantial justice. The Tribunal found the assessee's reasons for delay to be bona fide and not an attempt to save limitation in an underhand way. Consequently, the delay of 62 days in filing the present appeal was condoned, and the appeal was admitted for hearing.

Imposition of Penalty
The Tribunal examined the facts and found that the notices were not served at the correct address where the assessee was posted at the relevant times. The non-receipt of notices was considered a "reasonable cause" for non-compliance. The Tribunal relied on precedents, including the Delhi ITAT's decision in Balram Kumar Mahendra Vs ITO, which held that non-receipt of notice constitutes a reasonable cause for non-compliance, thus invalidating the penalty.

Validity of Service of Notices
The Tribunal noted that the Revenue failed to demonstrate that any notice was personally served on the assessee. The notices were served to individuals whose relationship with the assessee was not established. The Tribunal concluded that the non-receipt of notices by the assessee was a reasonable cause for non-compliance, and therefore, the penalty under Section 271(1)(b) could not be imposed.

Conclusion
The Tribunal directed the A.O. to delete the penalty imposed under Section 271(1)(b) of the Income Tax Act, 1961, as the non-compliance was due to non-receipt of notices, which constituted a reasonable cause. The appeal was allowed in favor of the assessee.

Order Pronouncement
The order was pronounced in the open court on 24th February, 2020.