2022 (3) TMI 713 - AT - Income Tax

Levy of penalty under section 272A(1)(d) - non-compliance of the notice issued under section. 142(1) - HELD THAT - Department was gradually moving towards e-assessments and the notices were being served to the assessee online/electronically and the year 2019 being the first year of this shift from physical to electronic mode coupled with the fact that assessee was not carrying out any business operations during the relevant period and hence, was working on minimal employees, the employees of the assessee failed to take not of the notice issued electronically. We are satisfied that the assessee has been able to show reasonable cause for not responding to the initial notice issued under section 142(1) of the Act. It is pertinent to mention here that subsequently on learning about ongoing assessment proceedings, the assessee appeared before the Assessing Officer and furnished the requisite details. Assessing Officer after taking note of the documents/submissions of the assessee has passed the assessment order under section 143(3) of the Act . It is not a case of absolute non-appearance of the assessee before the Assessing Officer. Appellate authority has rejected the explanation furnished by the assessee for non-compliance of the notice issued under section 142(1) of the Act merely for the reason that during penalty proceedings under section 272A(1)(d) of the Act, the assessee has not stated the reasonable cause. We are not in agreement with the findings of CIT(A). The assessee has explained that about ongoing assessment proceedings the assessee came to know only on receipt of order u/s. 272A(1)(d) of the Act and demand notice. The explanation furnished by the assessee before the CIT(A) and before the Tribunal is consistent. We are satisfied that non-appearance of the assessee in response to the initial notice under section 142(1) of the Act was not deliberate. The year 2019 being the initial year of shift towards digital and electronic mode, the mistake appears to be bonafide. The assessee has been able to show reasonable cause for the failure to comply with statutory notice u/s. 142(1) of the Act. Thus, in our view penalty levied u/s. 272A(1)(d) of the Act is unsustainable. The Assessing Officer is directed to delete the penalty - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 272A(1)(d) of the Income Tax Act, 1961 for non-compliance to notice under section 142(1) of the Act for Assessment Year 2017-18.

Analysis:
1. The appellant challenged the penalty imposed for non-compliance with a notice issued under section 142(1) of the Income Tax Act, 1961. The appellant argued that the notice was served electronically during a period when the company was minimally staffed and not actively engaged in business operations. The appellant contended that they were unaware of the electronic notices due to the transition to e-assessment in 2019. The appellant promptly responded to the notice upon becoming aware of it, engaging their Chartered Accountant and providing the required information to the Assessing Officer, leading to the completion of the assessment under section 143(3) of the Act. The appellant asserted that the non-compliance was not deliberate but due to genuine reasons. The appellant also relied on a Tribunal decision to support their case.

2. The Department, represented by Dr. P. Daniel, argued that the appellant deliberately failed to appear before the Assessing Officer and that the explanations provided for non-appearance were an afterthought, as no such explanation was given earlier. The Department contested the appellant's claim of unawareness of the electronic notices, emphasizing the lack of explanation for non-compliance before the Assessing Officer.

3. The Tribunal considered both sides' submissions and noted that the penalty was imposed for non-compliance with the notice under section 142(1) of the Act, which was served electronically. Given the circumstances of the transition to e-assessment in 2019 and the appellant's minimal business activities during that time, the Tribunal found that the appellant had shown a reasonable cause for not responding to the initial notice promptly. The Tribunal highlighted that the appellant had cooperated after becoming aware of the assessment proceedings, appearing before the Assessing Officer and providing the necessary details, leading to the assessment order under section 143(3) of the Act. The Tribunal disagreed with the CIT(A)'s rejection of the appellant's explanation, concluding that the non-appearance was not deliberate, especially considering the shift to digital modes in 2019. Consequently, the Tribunal directed the Assessing Officer to delete the penalty, deeming it unsustainable.

4. In conclusion, the Tribunal set aside the impugned order and allowed the appeal by the assessee, emphasizing that the penalty under section 272A(1)(d) of the Act was unwarranted given the circumstances and the appellant's actions upon becoming aware of the assessment proceedings.

Judgment: The impugned order was set aside, and the appeal by the assessee was allowed.