BHOGIBHAI VITHALBHAI PATEL,MEHSANA V. THE ACIT, CIRCLE-GANDHINAGAR, GANDHINAGAR

ITA 1824/AHD/2024

AI Insights

The case involves Bhogibhai Vithalbhai Patel, a senior citizen, who appealed against a penalty imposed by the Assistant Commissioner of Income Tax for non-compliance with notices related to his income tax assessment for the year 2017-18. The penalty was initially upheld by the Commissioner of Income Tax (Appeals), but the Tribunal found that the assessee's representative failed to communicate the notices, leading to the assessee's unintentional non-compliance. The Tribunal noted that the assessee had complied with the initial notice and only failed to respond to subsequent notices due to a communication gap, which was not a deliberate act of non-compliance.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29562 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2017-2018
• Other Referred Cases: Glass Lines Equipments Co. Ltd. v. CIT (253 ITR 454) (Gujarat HC), CIT v. Manjunath Cotton & Ginning Factory (359 ITR 565) (Karnataka HC)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NITIN KULKARNI
• Assessee Lawyers: ANIL KSHATRIYA
• Keywords: Set aside; Reasonable cause; Principle of natural justice
• Section: 144; 142(1); 143(2); 68; 274; 142(2A); 273B

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदा बा द \u0012ा यपीठ ‘SMC’, अहमदा बा द । IN THE INCOME TAX APPELLATE TRIBUNAL “ SMC ” BENCH, AHMEDABAD सु\u0017ी सुिच\u0019ा का \u001aले, \u0012ा ियक सद एवं \u0017ी मकरंद वसंत महा देवकर, लेखा सद क े सम\"। ] ] BEFORE MS. SUCHITRA KAMBLE, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1824/Ahd/2024 िनधा \u0010रण वष\u0010 /Assessment Year : 2017-18 Bhogibhai Vithalbhai Patel A-22, Tirupati Township Mehsana Char Rasta Dharol Colony Road Visnagar Mehsana 384 315 बनाम/ v/s. The Asst.Commissioner of Income Tax Circle-Gandhinagar Gandhinagar \u0014थायी लेखा सं./PAN: ABUPP 4018 N अपीलाथ%/ (Appellant) &' यथ%/ (Respondent) Assessee by : Shri Anil Kshatriya and Shri Alay Anil Kshatriya, ARs Revenue by : Shri Nitin Kulkarni, Sr.DR सुनवाई की तारीख/Date of Hearing : 12/12/2024 घोषणा की तारीख /Date of Pronouncement: 08/01/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the assessee is directed against the order passed by the Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi (hereinafter referred to as “CIT(A)”), dated 30.08.2024, confirming the penalty of Rs.20,000/- levied by the Assessing Officer (hereinafter referred to as “AO”) under Section 272A(1)(d) of the Income Tax ITA No.1824/Ahd/2024 Bhogibhai Vithalbhai Patel vs. ACIT Asst. Year : 2017-18 2 Act, 1961 (hereinafter referred to as \"the Act\") vide assessment order dated 12/12/2019 for the Assessment Year (AY) 2017-18. Facts of the Case: 2. The assessee is a senior citizen deriving income from pension and bank interest. The return of income for A.Y.2017-18 was filed on 19.07.2017 declaring total income of Rs.8,29,990/-. The case was selected for limited scrutiny under CASS, and a notice u/s 143(2) of the Act was issued on 24.09.2018. Subsequent notices u/s 142(1) of the Act dated 05.04.2019 and 23.08.2019 were issued to the assessee for furnishing additional information. As the assessee allegedly failed to comply with the notices, the AO proceeded to make a best judgment assessment u/s. 144 of the Act on 12.12.2019, making an addition of Rs.19,00,000/- under Section 68 of the Act for unexplained cash deposits. Thereafter, the AO imposed a penalty of Rs.20,000/- under Section 272A(1)(d) of the Act for non-compliance. 3. The Assessee preferred an appeal before the CIT(A) and submitted before the CIT(A) that the notices and penalty orders were communicated to the email ID of the authorized representative, Shri M.B. Thakor, who failed to inform the assessee. The assessee also filed affidavits explaining the communication failure and asserted that he was unaware of the proceedings. However, the Ld.CIT(A) rejected the affidavits, considering them to be afterthoughts and unsupported by credible evidence. The CIT(A) observed that the assessee failed to comply despite being granted sufficient opportunities. The CIT(A) concluded that the assessee failed to demonstrate ITA No.1824/Ahd/2024 Bhogibhai Vithalbhai Patel vs. ACIT Asst. Year : 2017-18 3 reasonable cause under Section 273B of the Act and upheld the penalty of Rs.20,000/- imposed by the AO. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us with the following grounds of appeal: 1. On facts and circumstances of the case and in law, the order passed by the Ld. CIT(A) is bad in law, illegal besides being in violation of principle of natural justice & equity, as passed without considering the material already placed on record, as such it is liable to be quashed and set aside. 2. On facts and circumstances of the case and in law, the Ld. CIT(A) has grossly erred in sustaining the impugned penalty of Rs.20,000/-u/s.272A of the Act so levied by the A.O. when there is no justification in doing so. The impugned order may kindly be set aside and penalty u/s.272A of the Act may kindly be directed to be deleted. LEAVE CRAVED The appellant craves leave to add, alter, amend and/or withdraw any of the grounds or ground of appeal either before or at the time of appeal hearing. RELIEF CLAIMED The appellant respectfully urges that by allowing ground no.1 so being raised by the appellant, the impugned order may kindly be quashed and set aside, and by allowing ground no.2, the penalty of Rs.20,000/- may kindly be deleted. 5. During the course of hearing before us, the Authorized Representative (AR) of the assessee submitted that the assessee is a 72-years old senior citizen deriving income from pension and bank interest, with limited familiarity with the complexities of tax proceedings. The return of income for A.Y. 2017- 18 was filed through his authorized representative's office on 19.07.2017 and all communications from the Income Tax Department, including notices issued under Section 143(2) and Section 142(1) of the Act, were sent to the email ID of the authorized representative (Shri M.B. Thakor). The AR further ITA No.1824/Ahd/2024 Bhogibhai Vithalbhai Patel vs. ACIT Asst. Year : 2017-18 4 stated that the authorized representative failed to inform the assessee about the notices, resulting in non-compliance. The assessee contended that this was an inadvertent lapse without any mala fide intent or wilful default. The AR emphasized that the assessee had submitted an affidavit dated 12.02.2020, along with an affidavit by the authorized representative, explaining the communication gap and confirming the bonafide nature of the lapse. The AR further pointed out that these affidavits were supported by the fact that the representative's office was handling multiple clients matters and inadvertently failed to convey the notices to the assessee and the penalty notice u/s 272A(1)(d) of the Act and recovery demand notice were only discovered when the assessee received a physical recovery notice from the AO on 30.01.2020. The AR stated that upon discovery, the assessee took immediate steps to comply and filed an appeal against the assessment order and penalty. However, despite this detailed explanation, as stated by the AR, the CIT(A) summarily dismissed the affidavits as afterthoughts and failed to conduct an inquiry or provide an opportunity for rebuttal, violating the principle of natural justice. The AR relied on judicial precedents, including Glass Lines Equipments Co. Ltd. v. CIT (253 ITR 454) (Gujarat HC), wherein it was held that an affidavit must be read as a whole, and any rejection must be based on valid reasons. It was further argued that the show- cause notice was vague and did not specify the exact notices that were allegedly non-complied with. 5.1. The AR further argued that the penalty notice issued u/s 274 r.w.s. 272A(1)(d) of the Act was vague and failed to specify which notices the assessee had failed to comply with. The AO referred to multiple sections [143(2), 142(1), 142(2A)] but did not clarify the specific non-compliance ITA No.1824/Ahd/2024 Bhogibhai Vithalbhai Patel vs. ACIT Asst. Year : 2017-18 5 related to notices dated 05.04.2019 and 23.08.2019. This ambiguity deprived the assessee of an opportunity to defend effectively and indicates non- application of mind by the AO, rendering the penalty order invalid. The AR placed reliance on the judgment in the case of CIT v. Manjunath Cotton & Ginning Factory (359 ITR 565) (Karnataka HC), where it was held that the failure to specify the exact reason for penalty in the notice renders the entire penalty proceedings unsustainable. 5.2. The AR pointed out that the reference to Section 142(2A) of the Act (for special audit) in the show-cause notice was erroneous and irrelevant, as the assessee was not required to maintain any books of accounts being a senior citizen deriving income from pension and interest and the inclusion of Section 142(2A) of the Act indicated a mechanical and baseless inclusion, further invalidating the penalty order. 6. The Ld. Departmental Representative (DR) supported the orders of the AO and the CIT(A), contending that multiple opportunities were provided to the assessee for compliance, which the assessee failed to utilize. 7. After considering the rival submissions and perusing the material on record, we find that the assessee submitted affidavits explaining the reasons for non-compliance, asserting that the communication failure was due to his representative’s inaction. However, the CIT(A) summarily dismissed the affidavits as afterthoughts without providing an opportunity for cross- examination or conducting an independent inquiry. This action amounts to a violation of the principles of natural justice. The Hon’ble Jurisdictional High Court in the case of Glass Lines Equipments Co. Ltd. v. CIT (253 ITR 454) ITA No.1824/Ahd/2024 Bhogibhai Vithalbhai Patel vs. ACIT Asst. Year : 2017-18 6 has held that affidavits must be read in their entirety, and selective acceptance or rejection without valid reasoning is impermissible. 7.1. The facts clearly indicate that the non-compliance was not due to any willful default or mala fide intent on the part of the assessee. The lapse occurred due to the negligence of the authorized representative, which was beyond the control of the assessee. There are many judicial precedents where it is held that an assessee should not be penalized for the omissions or errors of their legal representative when the assessee has placed bona fide reliance on them. In the present case, the failure of the representative to communicate notices cannot be attributed to any fault of the assessee, who is a senior citizen relying on professional guidance for compliance. 7.2. The show-cause notice issued by the AO under Section 274 r.w.s. 272A(1)(d) of the Act failed to specify the exact section or details of non- compliance. Instead, it vaguely referred to multiple provisions [Sections 143(2), 142(1), 142(2A)] without clearly identifying the specific default. This amounts to non-application of mind by the AO. The inclusion of Section 142(2A) of the Act (related to a special audit) in the show-cause notice was erroneous and irrelevant, as the assessee was not required to maintain any books of accounts, being a senior citizen deriving income from pension and bank interest. The invocation of an inapplicable provision demonstrates a mechanical and baseless approach by the AO, further rendering the penalty proceedings unsustainable. 7.3. Section 273B of the Act provides relief from penalties under Section 272A(1)(d) of the Act, if the assessee can demonstrate a reasonable cause for ITA No.1824/Ahd/2024 Bhogibhai Vithalbhai Patel vs. ACIT Asst. Year : 2017-18 7 non-compliance. In this case, the affidavits filed by the assessee and the authorized representative explain the genuine reasons behind the non- compliance. There was no evidence to suggest any mala fide intent or willful defiance by the assessee. Therefore, the penalty imposed does not stand in light of the reasonable cause demonstrated by the assessee. The assessee complied with the initial notice u/s 143(2) of the Act on 01.10.2018 and only failed to comply with subsequent notices due to a communication gap. This shows that the assessee had the intention to comply with the proceedings and that the subsequent default was inadvertent and not deliberate. Hence, the penalty imposed cannot be justified under such circumstances. 7.4. In light of the above findings and judicial precedents relied on, we hold that the penalty of Rs.20,000/- imposed under Section 272A(1)(d) of the Act, was unjustified and deserves to be set aside. 8. In the result, the appeal of the assessee is allowed, and the impugned penalty order is quashed. Order pronounced in the Open Court on 8th January, 2025 at Ahmedabad. Sd/- Sd/- (SUCHITRA KAMBLE) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 08/01/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS ITA No.1824/Ahd/2024 Bhogibhai Vithalbhai Patel vs. ACIT Asst. Year : 2017-18 8 आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The CIT(A)-(NFAC), Delhi 5. िवभागीय #ितिनिध , आयकर अपीलीय अिधकरण , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u0010 फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (word processed by Hon’ble AM in his laptop) : 7.1.2025 2. Date on which the typed draft is placed before the Dictating Member. : 7.1.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 8.1.25 7. Date on which the file goes to the Bench Clerk. : 8.1.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : "