2025 (4) TMI 284 - AT - Income Tax

Levy of penalty u/s 271(1)(b) - assessee has not filed any plausible explanation for non-compliance of the notices neither at the time of assessment proceedings penalty proceedings nor during the appellate proceedings - HELD THAT - As in the present case no material has been brought on record by the Revenue to ignore the email addresses considered as registered email address as per the provisions of clauses (i) and (ii) of Explanation (t) to section 144B of the Act and to send the notice u/s 142(1) of the Act at the email address which can be considered to fall within the last clause i.e. clause (vi) of Explanation (t) to section 144B of the Act. Since in the present case the statutory notice dated 08/02/2023 issued u/s 142(1) of the Act was not sent on the email addresses which are also recognised as registered email address for the purpose of electronic communication between the National Faceless Assessment Centre and the assessee and falls within the first two categories of registered email address as per the provisions of Explanation (t) to section 144B of the Act we find merits in the submission of the assessee in not responding to the notice dated 08/02/2023 issued under section 142(1) of the Act. The explanation of the assessee falls within the scope of reasonable cause within the meaning of the provisions of section 273B of the Act for failure to respond to the notice issued u/s 142(1) of the Act. Therefore we direct the deletion of the penalty levied under section 271(1)(b). As a result the grounds raised by the assessee in its appeal are allowed.

Summary

ISSUES PRESENTED and CONSIDERED

The primary issue considered in this judgment is whether the penalty imposed under section 271(1)(b) of the Income Tax Act, 1961, was justified. This involves several sub-issues:

1. Whether the statutory notices were properly served on the assessee's registered email address as per the provisions of the Act.

2. Whether the non-receipt of the notice under section 142(1) constitutes a "reasonable cause" under section 273B for non-compliance.

3. Whether the assessee was given a fair opportunity for a personal hearing.

ISSUE-WISE DETAILED ANALYSIS

1. Service of Statutory Notices

- Legal Framework and Precedents: The relevant provisions are section 144B and section 271(1)(b) of the Act. Explanation (t) to section 144B defines "registered email address" for electronic communication purposes.

- Court's Interpretation and Reasoning: The Tribunal noted that the "registered email address" includes the email address in the electronic filing account and the one in the last income tax return. In this case, the assessee updated her email address in the Income Tax Portal and provided it in her latest return, which should have been used for communication.

- Key Evidence and Findings: The assessee provided evidence of updating her email address on the portal and in her last filed return. The notices were sent to an outdated email address of a former consultant.

- Application of Law to Facts: The Tribunal found that the notices were not sent to the correct "registered email address" as defined by the Act, thus supporting the assessee's claim of non-receipt.

- Treatment of Competing Arguments: The Revenue argued that the notices were sent to an email address initially provided by the assessee. However, the Tribunal emphasized the need to use the updated email address per the statutory definition.

- Conclusions: The Tribunal concluded that the notices were not properly served, thus supporting the assessee's claim of non-receipt.

2. Reasonable Cause for Non-Compliance

- Legal Framework and Precedents: Section 273B provides that no penalty shall be imposed for failure to comply with a notice if there is a "reasonable cause."

- Court's Interpretation and Reasoning: The Tribunal reasoned that the failure to send notices to the correct email address constituted a "reasonable cause" for the assessee's non-compliance.

- Key Evidence and Findings: The Tribunal found that the statutory notice was not sent to the email addresses recognized as "registered email address" under the Act.

- Application of Law to Facts: The Tribunal applied the definition of "reasonable cause" and found that the assessee's explanation met this standard.

- Treatment of Competing Arguments: The Revenue's argument that the assessee should have updated her address was countered by evidence of the update and the statutory definition of "registered email address."

- Conclusions: The Tribunal concluded that the assessee's non-compliance was due to a "reasonable cause," warranting the deletion of the penalty.

3. Opportunity for Personal Hearing

- Legal Framework and Precedents: The principles of natural justice require that parties be given a fair opportunity to present their case.

- Court's Interpretation and Reasoning: The Tribunal did not specifically address this issue in detail, as the decision on the other issues rendered it moot.

- Key Evidence and Findings: The Tribunal focused on the non-service of notices and reasonable cause, which were sufficient to decide the appeal.

- Application of Law to Facts: The Tribunal's decision to allow the appeal was primarily based on the service of notices and reasonable cause, rather than procedural fairness.

- Treatment of Competing Arguments: The Tribunal's decision did not hinge on this issue, and thus competing arguments were not extensively analyzed.

- Conclusions: The Tribunal allowed the appeal based on the substantive issues, making a detailed analysis of this procedural issue unnecessary.

SIGNIFICANT HOLDINGS

- The Tribunal held that the statutory notices must be served on the "registered email address" as defined by the Act. Failure to do so constitutes a valid reason for non-compliance.

- The Tribunal established that the non-receipt of a notice due to incorrect service can fall within the scope of "reasonable cause" under section 273B, justifying the deletion of penalties under section 271(1)(b).

- The Tribunal directed the deletion of the penalty, emphasizing the importance of adhering to statutory definitions and procedural fairness.

- Verbatim Quote: "Therefore, in the present case, no material has been brought on record by the Revenue to ignore the email addresses considered as 'registered email address' as per the provisions of clauses (i) and (ii) of Explanation (t) to section 144B of the Act and to send the notice under section 142(1) of the Act at the email address which can be considered to fall within the last clause, i.e., clause (vi) of Explanation (t) to section 144B of the Act."

- The appeal was allowed, and the penalty under section 271(1)(b) was deleted, reinforcing the principle that procedural errors in notice service can invalidate penalties for non-compliance.