2025 (2) TMI 610 - AT - Income Tax

Penalty u/s. 272A(1)(d) - failure to comply with notice u/s. 142(1) or 143(2) or failure to comply with the direction issued u/s. 142(2A) - assessee s case was selected for scrutiny based on the verification of data pertaining to cash deposits during demonetization period - HELD THAT - The assessee in his reply has stated that he is neither cognizant of law and its intricacies and had submitted the details of bank statements after which the AO passed the assessment order and the penalty order thereafter. CIT(A) in the quantum appeal has upheld the addition made by the ld. AO for which the assessee submitted that the assessee has not preferred an appeal against the said order. Assessee from the statement of ld. AR seems to be a small-time fruit vendor selling fruits on the pavements and presumably is unaware of the proceedings but nevertheless made compliance before the lower authorities if not proper compliance. Had the assessee been vigilant about the consequences of such proceedings and had the privilege of engaging counsels to represent his case he would have as well challenged the addition made by the ld. AO and upheld by the ld. CIT(A) which amounts to in lacs of rupees which for a small vendor like the assessee is exorbitant. It is not a case of non-compliance in toto but is merely a case of lack of sufficient compliance . Thus as revenue cannot take undue advantage of the inability of the assessee and taking cognizance of the same we deem it fit to direct the ld. AO to delete the impugned penalty levied in assessee s case for the abovementioned observations. Appeal filed by the assessee is allowed.

Summary

The appeal in this case was filed by the assessee challenging a penalty of Rs. 50,000 imposed under section 272A(1)(d) of the Income Tax Act, 1961. The penalty was levied for non-compliance with statutory notices issued under sections 142(1) and 143(2) of the Act. The assessee, an individual selling fruits on pavements with a modest income, had not filed his income tax return for the relevant assessment year. The case was selected for scrutiny based on cash deposits made during the demonetization period.The Assessing Officer (AO) passed a best judgment assessment order determining the total income at Rs. 11,89,370 after adding cash deposits made in specific bank accounts. Subsequently, penalty proceedings were initiated for non-compliance with statutory notices. The first appellate authority upheld the penalty imposed by the AO, leading the assessee to appeal to the Appellate Tribunal.During the appeal, the assessee's representative argued that the non-compliance was not intentional, emphasizing the assessee's limited income, lack of a permanent address, and lack of awareness about legal procedures. The Departmental Representative supported the lower authorities' decisions.The Tribunal noted that the penalty was imposed for failure to comply with multiple notices and directions under the Act. While the assessee had eventually submitted written responses during the proceedings, the compliance was not deemed sufficient. The Tribunal acknowledged the assessee's limited understanding of legal matters and the substantial amount of the addition upheld by the lower authorities. The Tribunal questioned whether the implementation of the law considers the diverse backgrounds and capacities of individuals. Citing judicial decisions emphasizing fairness in tax administration, the Tribunal directed the AO to delete the penalty considering the circumstances of the case.Ultimately, the Tribunal allowed the appeal, directing the deletion of the penalty imposed on the assessee. The decision was pronounced in open court on 14.02.2025.