2022 (9) TMI 971 - AT - Income Tax

Levy of penalty u/s 272A(1)(d) - non-compliance of notices u/s 143(2) - non-compliances by the assessee of the notices issued by the AO u/s 143(2) and 142(1) during assessment proceedings - HELD THAT - The assessee is a retired Professor from Banaras Hindu University. He is still actively involved with various eminent universities and institutions, evidence is placed on record. It is also claimed that due to his engagements with these universities/institutions, he is keeping busy and also requires travels which keeps him away from home town. The switchover of assessment proceedings to electronic mode and now faceless assessments are very laudable steps initiated by GOI, but at the same time there will be some teething problems for the citizens to adapt to new situations especially the older generation which is required to be kept in mind while imposing penalty. The bonafide or other wise malafide of non compliance is also required to be kept in mind. The tax and interest are statutory levies, while penalty imposable u/s 272A(1)(d) is subject to Section 273B. Thus, if the taxpayer is able to demonstrate reasonable cause for failure then no penalty is exigible. If in each case for failure to comply with statutory notices issued by the authorities , the penalty is mandatorily to be imposed u/s 272A(1)(d) on the tax-payers, Section 273B will become otiose. It all depends upon the facts and circumstances of the case which requires investigation of complete facts, so as to ascertain that whether the tax-payer is able to demonstrate the reasonable cause as is contemplated u/s 273B or not. The Authorities must look into the entire facts and then arrive at conclusion whether it is a fit case for imposition of penalty u/s 272A(1)(d). Thus, we consider it fit to set aside the appellate order passed by CIT(A) and restore this matter back to the file of CIT(A) for fresh adjudication, after considering all the relevant facts and circumstances , and then arrive at conclusion whether it is a fit case for levy of penalty u/s 272A(1)(d) - Needless to say that proper and adequate opportunity of being heard be provided by ld. CIT(A) to the assessee in set aside remand proceedings.

Summary

Issues Involved:
1. Non-compliance with statutory notices under Sections 143(2) and 142(1) of the Income-tax Act, 1961.
2. Levy of penalty under Section 272A(1)(d) of the Income-tax Act, 1961.
3. Consideration of reasonable cause for non-compliance under Section 273B of the Income-tax Act, 1961.

Detailed Analysis:

1. Non-compliance with statutory notices under Sections 143(2) and 142(1) of the Income-tax Act, 1961:

The assessee filed an e-return of income on 19th July 2017, declaring a total income of Rs. 25,60,940/-. The case was selected for limited scrutiny due to cash deposits and withdrawals during the year. Statutory notices under Sections 143(2) and 142(1) were issued by the Assessing Officer (AO) but were not complied with by the assessee. The AO claimed that notices were served through the registered email of the assessee, but there was no response. The AO issued multiple notices, which also remained uncomplied with, leading to the best judgment assessment under Section 144, wherein an addition of Rs. 60,00,000/- was made to the income of the assessee as unexplained money under Section 69A.

2. Levy of penalty under Section 272A(1)(d) of the Income-tax Act, 1961:

Due to the non-compliance with the statutory notices, the AO initiated penalty proceedings under Section 272A(1)(d). Despite issuing show cause notices, the assessee failed to provide a satisfactory explanation. The AO imposed a penalty of Rs. 60,000/- for non-compliance with notices under Sections 143(2) and 142(1). The first appeal against the penalty was dismissed by the Commissioner of Income-tax (Appeals) [CIT(A)], who upheld the penalty, noting that the assessee did not provide any reasonable explanation for non-compliance.

3. Consideration of reasonable cause for non-compliance under Section 273B of the Income-tax Act, 1961:

The assessee contended that he is a retired professor, aged 74, and not well-versed with computers, which caused difficulties in complying with the electronic notices. The assessee also claimed that he was busy with professional engagements and travels, which kept him away from his hometown. The Tribunal observed that while the switch to electronic and faceless assessments is commendable, it also presents challenges, especially for older individuals. The Tribunal emphasized that Section 273B provides for no penalty if the taxpayer demonstrates reasonable cause for failure to comply. The Tribunal set aside the appellate order and remanded the matter back to the CIT(A) for fresh adjudication, considering all relevant facts and circumstances, and determining whether it is a fit case for levy of penalty under Section 272A(1)(d). The CIT(A) was directed to provide a proper and adequate opportunity of being heard to the assessee and to admit the evidences submitted by the assessee in its defense.

Conclusion:

The appeal filed by the assessee was allowed for statistical purposes, and the matter was remanded back to the CIT(A) for fresh adjudication, considering the reasonable cause for non-compliance under Section 273B. The Tribunal did not comment on the merits of the issue and emphasized the need for a thorough investigation of the facts to determine the applicability of the penalty.