ARVIND AGGARWAL,NEW DELHI V. ITO WARD 49(3), NEW DELHI

ITA 1040/DEL/2023

AI Insights

The case involves Arvind Aggarwal, the appellant, who appealed against the penalty imposed by the Income Tax Officer for not filing his income tax return for the assessment year 2011-12. The penalty of Rs. 5,000 was initially upheld by the Commissioner of Income Tax Appeals, which led to the appeal before the Income Tax Appellate Tribunal. The appellant argued that his income was below the taxable limit and he was under the bona fide belief that he was not required to file a return. The Tribunal, referencing a similar case, found in favor of the appellant, stating that the penalty under Section 271F was not warranted due to the absence of deliberate defiance of the law and the presence of a reasonable cause.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 30462 (ITAT-DELHI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Other Referred Cases: Mrs. Manju Kataruka Vs. ITO
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause; Bonafide belief
• Section: 147; 148; 139(1)

Judgement Text

"1 ITA no. 1040/Del/2023 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’ NEW DELHI BEFORE SHRISHAMIM YAHYA, ACCOUNTANT MEMBER AND SHRI SUDHIR PAREEK, JUDICIAL MEMBER ITA No. 1040/Del/2023 Assessment Year: 2011-12 Arvind Aggarwal, B-67, Jeevan Niketan, LIC Colony, Paschim Vihar, New Delhi-110087. PAN: ANAPA 3492 R Vs Income Tax Officer, Ward 49(3), New Delhi. APPELLANT RESPONDENT Assessee represented by Shri Dinesh Gupta, CA & Department represented by Shri Kanv Bali, Sr. DR & Sh. Satya Prakash Sharma, Sr. DR Date of hearing 11.10.2024 Date of pronouncement 09.01.2025 O R D E R PER SUDHIR PAREEK ,J.M: This appeal, preferred by the assessee, for assessment year 2011-12, is directed against the National Faceless Appeal Centre (NFAC), Delhi’s DIN & order no. ITBA/NFAC/S/250/2022-23/1049575728(1) dated 09.02.2023 in appeal no. CIT(A), Delhi-17/10126/2019-20. The assessee has raised following grounds of appeal: 2 ITA no. 1040/Del/2023 “1. That on facts and in law, the order passed by the learned Assessing Officer (AO) and the learned Commissioner of Income Tax Appeals [CIT(A)], are bad in law and void ab initio. 2. That on facts and in law, the CIT(A) has erred in 5,000 holding that the assessee was liable to file his ITR for the assessment year 2011-12 whereas the assessee's taxable income was below taxable limit and was therefore not liable to file his ITR u/s 139(1) of the Act. 3. That on facts and in law, the AO has erred in levying penalty u/s 271F of the Act. 4. That the impugned appellate order is arbitrary, illegal, bad in law and in violation of rudimentary principles of contemporary jurisprudence.” 5. The appellant craves leave to add/alter any/all grounds of appeal before or at the time of hearing of appeal.” 2. Facts, emerging from the record, in brief, are that during F.Y. 2010-11 relevant to A.Y. 2011-12 the assessee was doing online share transaction and incurred huge losses. However, the assessee did file his return of income as provided u/s 139(1) of the Income Tax Act. The case was reopened u/s 148 of the Act and in response to statutory notice u/s 148 of the Act, the assessee filed his return of income. Assessment was completed u/s 147 r.w.s.143(3) of the Act, on 17.12.2019 at an income of Rs.1,59,710/-. The Assessing Officer also initiated penalty proceedings for not filing the return as required u/s 139(1) of the Act and vide impugned penalty order dated 28.06.2019 imposed a penalty of Rs.5,000/-. Aggrieved against this the assessee preferred appeal before the learned CIT(A) 3 ITA no. 1040/Del/2023 who vide impugned order dated 09.02.2023 affirmed the penalty, inter alia, observing as under: “6.3 The appellant has made online share transactions to the tune of Rs.2,80,77,311 /- and assessment was completed at the income at Rs. 1,59,710/-. Thus the appellant is a person who was required to furnish return of Income u/s 139(1) of the Act. The AO had imposed the penalty u/s 271F on the ground that the appellant had without reasonable cause, failed to furnish return of income for A.Y. 2011-12 before the end of relevant assessment year and thus committed default within the meaning of Sec. 271 of the Act. Even during the course of appeal proceedings, the appellant has not filed any valid, reasonable and cogent reason for not filing his return of income, even though the provisions of Section 139(1) of the Income Tax Act explicitly required him to file his Return of Income within the stipulated time. The penalty levied by the AO u/s 271F, is therefore upheld and the appellant's appeal is accordingly dismissed.” 3. Aggrieved against the order of learned CIT(A) the assessee is in appeal before us. 4. Heard the rival submissions and carefully scanned material available on record. 5. Reiterating the grounds of appeal, the learned AR submitted that assessee / appellant was under bonafide belief that the he was not liable to file his ITR u/s. 139(1) of the Act owing to the fact that his income was below taxable income. 6. The Ld. AR further submitted that the assessee/ appellant has no tax payable as per the ITR filed in response to notice u/s. 148 and was accepted. As per him, regarding provision u/s. 139(1) of the Act, an individual is required to file his return of income exceeded the maximum amount which is not chargeable and his 4 ITA no. 1040/Del/2023 total income was Rs.1,59,710/- which is below exemption limit of income of Rs.1,60,000/- only so assessee / appellant was not supposed to file return of income u/s. 139(1) of the Act and also since the assessee/ appellant has no liability to file return of income, so penalty imposed is not sustainable as per law. 7. The Ld. AR also submitted that assessee/appellant was only making shares transactions online and not having any knowledge of day trading / squared up transactions in which caused heavy losses in shares transactions and under above circumstances, he was of the bonafide belief that since he has incurred losses no return of income to be filed by him. He also submitted that there was no any deliberate defiance of law and as such it is a reasonable caused for questioned failure. 8. Per contra, the learned DR relied upon the orders passed by both the lower authorities. 9. In course of law, the learned AR referred the judgment of Hon’ble ITAT Kolkata Bench in the case of Mrs. Manju Kataruka Vs. ITO in para 12 observed as under : - “16. Thus when a reasonable man of ordinary prudence acting under normal circumstances has in his mind a belief that he is not required to file return within required time because of the fact that there being no amount of tax payable by him after the adjustment of tax rebates admissible under the Act or of advance tax paid or tax deducted or collected at source and thus fails to file the return within required time, the case of this assessee would be treated as for a reasonable cause unless his belief is otherwise found 5 ITA no. 1040/Del/2023 false, fabricated and not bona fide. The particular cause operated upon the mind of the assessee of ordinary prudence and thus prevented him from filing the return within required time is to be examined or considered not arbitrarily but judicially in order to decide whether the cause shown can be said to be reasonable or not. The cause shown must be considered from the view point of a reasonable man of ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fides. There is no scope of any doubt that the assessee has to prove the existence of a reasonable cause by preponderance of probabilities as in a civil case and not necessarily by proof beyond reasonable doubt. An order of penalty under Section 271F cannot be passed without considering objectively the explanation of the assessee. When the assessee shows that the cause was reasonable, the burden will shift to the Department to prove that it was not a reasonable one so as to justify the assessee's failure to file return within required time. The matter is to be decided judicially on a consideration of all the relevant circumstances. If a question arises to the Department as to whether the cause shown by the assessee is reasonable or not while exercising its discretion to impose penalty under Section 271F and two alternative meanings are given to the cause shown, one should lean in favour of the subject as it is by now settled that if two possible and reasonable constructions can be put upon a penal provision, the Court must lean towards that construction which exempts the subject from penalty rather than the one which imposes penalty” 10. On the basis of the factual and legal position mentioned hereinbefore, we are of the considered opinion that in the present facts and circumstances of the case the penalty u/s. 271F of the Act is not warranted because assessee / appellant was in 6 ITA no. 1040/Del/2023 bonafide belief and he had no deliberate defiance of law so no case of penalty U/s. 271F of the Act is made out against assessee/ appellant, hence unsustainable in law and impugned penalty deserves to be deleted. 11. Consequently, this appeal of the assessee/ appellant is allowed as stated above and levied penalty u/s. 271F of the Act is hereby deleted. 12. In the result, the appeal of the assessee is allowed. Order pronounced in open court on _09_____.01.2025. SD/- SD/- (SHAMIM YAHYA) (SUDHIR PAREEK) ACCOUNTANT MEMBER JUDICIAL MEMBER *NEHA, Sr. PS * "