FANCY DIAMONDS INDIA PVT LTD., MUMBAI V. N F ASS C / DCIT-5(1)(1) (CURRENT JURIDICTION), MUMBAI

ITA 728/MUM/2023

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The case involves Fancy Diamonds India Pvt. Ltd., which appealed against a penalty imposed by the Assessing Officer (AO) for non-compliance with a notice under section 142(1) of the Income Tax Act, 1961, during the assessment year 2017-18. The AO had levied a penalty of Rs.10,000 after the assessee submitted the required information post the deadline due to technical difficulties in the first year of electronic filing. The Commissioner of Income-tax (Appeals) upheld the penalty, leading to the appeal before the Income Tax Appellate Tribunal. The Tribunal, referencing similar cases and the circumstances of the assessee's compliance, decided in favor of the assessee, highlighting the reasonable cause for the delay and the non-deliberate nature of the non-compliance.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 299213 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-05-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 22-05-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 09-03-2023
• Other Referred Cases: Swati Jignesh Jain vs ITO, Triumph International Finance India Ltd. vs DCIT, Ganesh B Pokhriyal vs ACIT-3, Kalyan, Sai Prerana Co.Op. Credit Society vs ITO, Khyalilal Mohanlal Tater vs DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reasonable cause
• Section: 143(3); 142(1); 143(1); 250; 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “F” BENCH MUMBAI. BEFORE SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER & MS. PADMAVATHY S, ACCOUNTANT MEMBER ITA No.728/Mum/2023 (Assessment Year: 2017-18) Fancy Diamonds India Pvt.Ltd., 52, Sidhpura Industrial Estate, 2 nd Floor, Gaik Wadi, S V Road, Goregaon, Mumbai-400062. बनाम/ Vs. NFASSC/DCIT-5(1)(1), Aayakar Bhavan, M.K.Road, Mumbai-400020. ̾थायी लेखा सं./जीआइआर सं./PAN/GIR No. : AAACF3325J (अपीलाथŎ /Appellant) (ŮȑथŎ / Respondent) अपीलाथŎ ओर से / Appellant by : Shri Himanshu Gandhi.AR ŮȑथŎ की ओर से/Respondent by : Smt.Vranda U Matkarni.DR सुनवाई की तारीख / Date of Hearing 23/05/2023 घोषणा की तारीख /Date of Pronouncement 25/05/2023 आदेश / ORDER PER PAVAN KUMAR GADALE - JM: The assessee has filed an appeal against the order of Commissioner of Income-tax (Appeals)-National Faceless Appeal Centre, Delhi [“Ld. CIT(A)”] passed under section 250 of the Income Tax Act, 1961 (“the Act”) for the Assessment Year (“AY”) 2017-18. The assessee has raised the following grounds of appeal:- 1. "On the facts and circumstances of the case and law, the Ld.CIT erred in confirming levy of penalty of Rs.10,000/- under section 272A(1)(d) of Income Tax Act, 1961. 2 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. 2. Appellant craves leave to add further grounds or to amend or alter the existing ground of appeal on or before the date of hearing.” 2. The brief facts of the case are that the assessee company is engaged in the business of diamond studded gold jewellery. The assessee has filed the return of income for AY 2017-18 on 03.11.2017 disclosing a total income of Rs.2,07,93,156/- and the return of income was processed u/s 143(1) of the Act. Subsequently, the case was selected for scrutiny under the CASS and notice u/s 143(2) and U/sec 142(1) of the Act was issued. In compliance to the notices, the assessee has filed details. The Assessing Officer (“AO”) on perusal of the financial statements, found that the assessee has disclosed trade payables of Rs.11,12,57,689/- and the A.O has issued notice u/s 142(1) of the Act dated 20.09.2019 to furnish the party-wise break-up of the trade payables and the assessee has filed the submissions on 25.11.2019. Further, the AO has issued notice u/s 142(1) dated 05.12.2019 to substantiate with the details of trade payables outstanding and ledger extracts of the trade creditors and documentary evidence on continuation of the trade activities and invoking provisions U/sec41(1) of the Act. And in compliance, the assessee has filed the submissions on 11-12-2019. Further the A.O has issued notices U/sec133(6) of the Act on the trade creditors, and there was no response. Finally the A.O. has issued show cause notice and the assessee has filed additional details 3 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. substantiating the balances of trade creditors. whereas the AO was not satisfied with the submissions in respect of four trade creditors and the genuineness could not be established and made addition u/s 41(1) of the Act of Rs.4,58,25,064/- and assessed the total income of Rs.6,66,18,224/- and passed the order u/s 143(3) of the Act dated 18.12.2019. 3. Subsequently, the AO has initiated penalty proceedings u/s 272A(1)(d) of the Act as the assessee has failed to comply with the notice issued u/s 142(1) of the Act within the time period. Whereas in the penalty proceedings the assessee has filed the submissions vide letter dated 18.04.2021 explaining the reasonable cause for not filing the information within the time granted as per notice u/s 142(1) of the Act. The AO was not satisfied with the explanations and levied penalty of Rs.10,000/- and passed order u/s 271A(1)(d) of the Act dated 16.06.2021. 4. Aggrieved by the penalty order, the assessee has filed an appeal with CIT(A). Whereas the CIT(A) considered the grounds of appeal, submissions of the assessee and the findings of the AO but has confirmed the action of the AO in levying the penalty and dismissed the appeal of the assessee. Aggrieved by the order of Ld.CIT(A), the assessee has filed an appeal before Hon’ble Tribunal. 5.At the time of hearing, Ld.AR for the assessee submitted that Ld.CIT(A) has erred in confirming the levy of penalty irrespective of the facts that the assessee has submitted the details with the AO within reasonable time due to technicalities but before completion 4 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. of the assessment and the AO has passed assesseement order u/s 143(3) of the Act. The Ld.AR substantiated the submissions with the factual Paper Book and judicial decisions and prayed for allowing the appeal. 6.Contra, the Ld.DR submitted that the assessee has not filed the details called for in the assesseement proceedings within time limit and the assessee has not explained the reasonable cause before the lower authorities on the delay and the Ld.DR supported the order of CIT(A). 7. We have heard the rival submissions and perused the material on record. The sole matrix of the disputed issue envisaged by the Ld.AR of the assessee that Ld.CIT(A) has erred in confirming the levy of penalty overlooking the factual aspects and information filed. Further, the assessee incompliance to the notice u/s 142(1) of the Act has filed the information much before the completion of assesseement . The Ld.AR demonstrated the notice u/s 142(1) of the Act dated 20.09.2019 calling for to submit the information on or before 26.09.2019 at page 1 to 4 of paper book in respect of queries raised in the Annexure at S.No.1 to 14 and the Ld.AR has also referred to the response filed in compliance to notice at page 5 & 6 of the Paper Book with evidence of online filling on 26.11.2019 and other dates. The contentions of Ld.AR that there is no wanton Act of the assessee to delay in filing the information but due to technicalities and collection of details, the information could not be submitted by the assessee in time. The Ld.AR of the assessee relied on the following judicial decisions:- 5 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. [i]. Swati Jignesh Jain vs ITO (ITA No.1971/Mum/2021); [ii]. Triumph International Finance India Ltd. vs DCIT (ITA No.1870/Mum/2020); [iii]. Ganesh B Pokhriyal vs ACIT-3, Kalyan (ITA No.5291/Mum/2018); [iv]. Sai Prerana Co.Op. Credit Society vs ITO (ITA No.219 & 193//Mum/2023); and [v]. Khyalilal Mohanlal Tater vs DCIT (ITA No.1381 to 1386/Mum/2022) 8. We have considered the facts, circumstances and submissions of the case, and find that the assessee has complied with the notice u/s 142(1) of the Act though the time limit was granted in respect of notice issued on 20.09.2019 to be filed before 26.09.2019 but the facts remains that the assessee has filed the details on 26.11.2019 and subsequently, the AO having considered the facts and information has passed assesseement order u/s 143(3) of the Act dated 18.12.2019. The assessee has filed the details which can be disputed by the Revenue, though nothing was brought on record by the revenue to say that the information was not filed. In respect of the reasonable cause, the Ld.AR has explained that this is the first year of the operations of electronic filing of submissions and the assessee has faced certain difficulties and there is a due compliance to notice U/sec142(1) of the Act . We find the Honble Tribunal in the case of Triumph International Finance India Ltd. vs DCIT in ITA No.1870/Mum/2020 [Assessment Year 2017-18] order 6 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. dated 10.03.2022 on the identical issue has dealt on the facts and provisions of law and granted the relief and observed at Page 3 Para 4 to 6 of the order read as under: 4. “We have heard the submissions made by rival sides. The Assessing Officer vide order dated 21/12/2019 has levied penalty of Rs.10,000/- under section 272A(1)(d) of the Act for non-compliance of the notice issued under section. 142(1) of the Act. Undisputedly, no explanation was furnished by the assessee before the Assessing Officer for non-compliance of the notice under section 142(1) of the Act. As per the contentions of ld. Authorized Representative of the assessee, the notice under section 142(1) of the Act was served on the assessee electronically. The 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 7 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. assessee appeared before the Assessing Officer and furnished the requisite details. The 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. 5. The first 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 nonappearance 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 8 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. unsustainable. The Assessing Officer is directed to delete the penalty. 6. In the result, impugned order is set-aside and appeal by the assessee is allowed.” 9. We find the facts in the present case, are similar and identical as discussed in the above judicial decision and the the assessee has explained the reasonable cause that due to technicalities, the assessee could not file details on time and were filed before completion of assessment u/s 143(3) of the Act. Accordingly we fallow the judicial precedence and set-aside the order of the CIT(A) and direct the Assessing officer to delete the penalty and we allow the grounds of appeal in favour of the assessee. 10. In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court on 25.05.2023. Sd/-D Sd/- Sd/- Sd/- (PADMAVATHY S) (PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai, Dated 25/05/2023 *Amit Kumar, Sr. PS* आदेश की Ůितिलिप अŤेिषत/Copy of the Order forwarded to : 1. अपीलाथŎ / The Appellant 2. ŮȑथŎ / The Respondent. 9 ITA No. 728/Mum/2023 Fancy Diamonds India Pvt.Ltd. 3. संबंिधत आयकर आयुƅ / The CIT(A) 4. आयकर आयुƅ(अपील) / Concerned CIT 5. िवभागीय Ůितिनिध, आयकर अपीलीय अिधकरण, मु᭥बई / DR, ITAT, Mumbai 6. गाडŊ फाईल / Guard file. आदेशानुसार/ BY ORDER, सȑािपत Ůित //True Copy// 1. उप/सहायक पंजीकार ( Asst. Registrar) आयकर अपीलीय अिधकरण, मु᭥बई / ITAT, Mumbai