Penalty u/s 272A(1)(d) deleted as counsel misled by filing inaccurate return and not informed of assessment and penalty notices
ABCAUS Case Law Citation:
ABCAUS 3750 (2023) (05) ITAT
Important Case Laws relied upon:
Triumph International Finance India Ltd vs DCIT
In the instant case, the assessee had challenged the order passed by the National Faceless Appeal Centre (NFAC) in confirming the levy of income tax penalty u/s 272A(1)(d) of the Income Tax Act, 1961 (the Act) by the Assessing Officer.
The assessee was an individual engaged in business. The assessee filed his return of income under presumptive taxation u/s 44AD of the Act.
Subsequently, the said return was declared invalid by CPC Bangalore. The case of the assessee was selected for limited scrutiny to verify the cash deposits made by the assessee during the year in his bank account during demonetization period.
The AO observed that as per the information, the assessee had deposited large amount of cash. Several notices were issued to the assessee seeking various information by the AO. However, the notices stood completely uncompiled with.
Hence the AO completed the assessment u/s 144 of the Act by making an addition being 8% of total cash deposits made during the year.
Later, the AO levied penalty u/s 272A(1)(d) of the Act for non-compliance to the notice issued to the assessee computed at Rs 10000 per each offence committed by the assessee.
Before the CIT(A) NFAC, the assessee submitted that the assessee was not in receipt of any notice for assessment proceedings and this was the first year of shift towards proceedings initiated in digital and electronic mode.
It was submitted that the email of the assessee was not given in the return. It was submitted that the email of the advocate representing the assessee was given in the return and that the said advocate had not intimated the assessee regarding the various statutory notices issued by the AO.
It was also pointed out that even the assessment order was not received by the assessee. Only after the levy of penalty u/s 272A(1)(d) of the Act in the sum of Rs 50,000/- for which demand notice was issued, the assessee came to know of the assessment proceedings already completed in electronic mode.
It was submitted that having come to know of the penalty levied, the assessee contacted the authorized representative who had shown his incompetence and also concealed that he had done something wrong in filing the return of assessee which had made the return invalid.
It was submitted that later the assessee contacted a senior chartered accountant who procured the assessment order and filed appeals with delay condonation applications in the case of quantum as well as for two penalties imposed upon the assessee.
It was pointed out that the assessee was completely unaware of the quantum assessment order framed u/s 144 of the Act ; penalty order passed u/s 270A of the Act for misreporting of income and penalty order passed u/s 272A(1)(d) of the Act.
It was submitted that the assessee had totally depended on the advocate who had promised to take care of his income tax affairs and the said person had not advised the assessee properly due to his careless behavior by ignoring the statutory notices. Since the email ID of advocate was mentioned in the return, the statutory notices had been sent only to the advocate and not to the assessee. Hence it was submitted out that it was not a case of willful default by the assessee.
However, CIT(A) confirmed the levy of penalty u/s 272A(1)(d) of the Act.
The Tribunal observed that it was not in dispute that the assessee had not attended to any of the proceedings before the AO both during quantum and penalty proceedings. Also, the assessee had categorically denied the receipt of any statutory notices in electronic mode and that the email ID of the advocate was mentioned in the return of income and his email ID was not mentioned thereon. Hence the notices including the assessment orders were not received by him. The Tribunal found that the assessee had also stated that he was completely dependent on the advocate who has been authorized to look after his income tax affairs and that the said advocate had completely misled him by filing an inaccurate return which had eventually made the return filed by the assessee invalid by CPC Bangalore. Moreover, the advocate had never informed the assessee that notices were issued by the AO in assessment and penalty proceedings.
The Tribunal observed that the various averments made by the assessee regarding his inability to respond to the statutory notices were not found to be false by the revenue.
The Tribunal opined that it was the first year of shifting of issuance of notice and framing of assessments in electronic mode by the department, considering the totality of facts and circumstances of the case, the reasons adduced by the assessee expressing his inability to attend to the notices, constitute reasonable cause within the meaning of section 273B of the Act.
The Tribunal stated that the assessee had also been consistent with the stand taken before the CIT(A) and the tribunal in adducing the reasons for not responding to the statutory notices.
The Tribunal opined that the reasons for non-compliance to the notices was not deliberate on the part of the assessee as this view is fortified by the decision of the co-ordinate bench.
In view of the above, the ITAT opined that the assessee was prevented from sufficient cause and hence would be entitled for immunity provided u/s 273B of the Act in the peculiar facts and circumstances of the case.
Accordingly, the ITAT directed the AO to delete the penalty levied u/s 272A(1)(d) of the Act and the appeal of the assessee was allowed.
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