NIHAL INDUSTRIES PRIVATE LIMITED,AHMEDABAD V. INCOME TAX OFFICER, WARD 3(1)(1), AHMEDABAD

ITA 1488/AHD/2024

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Nihal Industries Pvt. Ltd. appealed against the penalty of Rs.30,000 imposed by the Assessing Officer for non-compliance with statutory notices under Section 142(1) of the Income Tax Act, 1961, during the assessment year 2014-15. The company argued that it did not receive any communication regarding the assessment and penalty proceedings. The Commissioner of Income Tax (Appeals) upheld the penalty, noting that notices were served electronically. The Tribunal, while agreeing that the company did not comply with the notices, reduced the penalty, citing that multiple penalties for the same default were excessive and not aligned with the legislative intent.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 29685 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2025
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Assessment Year: misc
• Other Referred Cases: Smt. Rekha Rani (ITA No. 6131/Del/2013)
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: KETAKI DESAI
• Assessee Lawyers: ARJAV D. VIDANI
• Keywords: Reasonable cause
• Section: 147; 148; 144; 142(1)

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “डी“,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, AHMEDABAD \u0016ी िस\u0018ाथ\u001a नौिटयाल, \u0011ाियक सद\u001e एवं \u0016ी मकरंद वसंत महादेवकर, लेखा सद\u001e क े सम%। ] ] BEFORE SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER AND SHRI MAKARAND V. MAHADEOKAR, ACCOUNTANT MEMBER आयकर अपील सं /ITA No.1488/Ahd/2024 िनधा \u000fरण वष\u000f /Assessment Year : 2014-15 Nihal Industries Private Limited 1961, Above Royal Cycle Inside Panchkuwa Panchkuwa Ahmedabad – 380 001 बनाम/ v/s. The Income Tax Officer Ward-3(1)(1) Ahmedabad \u0013थायी लेखा सं./PAN: AADCN 7129 D (अपीलाथ&/ Appellant) ('( यथ&/ Respondent) Assessee by : Shri Arjav D. Vidani, AR Revenue by : Ms. Ketaki Desai, Sr.DR सुनवाई की तारीख/Date of Hearing : 11 /03/2025 घोषणा की तारीख /Date of Pronouncement: 12 /03/2025 आदेश/O R D E R PER MAKARAND V. MAHADEOKAR, AM: This appeal by the assessee is directed against the order of the Learned Commissioner of Income Tax (Appeals)-NFAC, Delhi [hereinafter referred to as “CIT(A)”], dated 21.06.2024, confirming the penalty of Rs.30,000/- levied by the Assessing Officer [hereinafter referred to as “AO”] under Section 271(1)(b) of the Income Tax Act, 1961 [hereinafter referred to as “the Act”] for Assessment Year (AY) 2014-15. ITA No.1488/Ahd/2024 Nihal Industries Pvt.Ltd. vs. ITO Asst. Year : 2014-15 2 Facts of the case: 2. The assessee filed its return of income for AY 2014-15 on 17.11.2014, declaring a loss of Rs.7,47,000/-. The case was reopened under Section 147 of the Act, and a notice under Section 148 of the Act was issued on 28.08.2022. The AO issued notices under Section 142(1) of the Act on 03.04.2023, 19.04.2023, and 25.04.2023. The assessee failed to comply with these notices, and consequently, the AO completed the assessment under Section 144 r.w.s. 147 of the Act on 04.05.2023, making an addition of Rs.2,44,53,602/-. Subsequently, penalty proceedings under Section 271(1)(b) of the Act were initiated, and the AO imposed a penalty of Rs.30,000/- for non-compliance with the statutory notices. 3. The assessee challenged the penalty before the CIT(A), contending that the notices were not received at the registered address of the company and the assessment proceedings were conducted ex-parte, without the assessee having knowledge of the same. The CIT(A) dismissed the appeal, holding that notices were served electronically through the e-filing portal, and therefore, the assessee's plea of non-receipt was not acceptable. The CIT(A) further held that the assessee failed to provide any reasonable cause for non- compliance. 4. Aggrieved by the order of the CIT(A), the assessee is in appeal before us with following grounds of appeal: 1. The Learned CIT has erred in law and fact by confirming the penalty of Rs.30,000/- imposed by the assessing officer under section 271(1)(b) of the act. 2. With your Honours pre permission, the appellant reserves the right to add, alter or amend or withdraw any ground/s of appeal. ITA No.1488/Ahd/2024 Nihal Industries Pvt.Ltd. vs. ITO Asst. Year : 2014-15 3 5. During the course of hearing before us, the Authorized Representative (AR) reiterated that the assessee never received any physical or email communication regarding the assessment and penalty proceedings. The Director of the assessee company filed an affidavit stating that they have not received any notice and they were not aware about the assessment proceedings. 6. The Departmental Representative (DR), on the other hand, stated that as per the scheme of faceless assessment the notices are issued online by mail and therefore there is no question of non-receipt of notices. 7. We have carefully considered the submissions made by the assessee as well as the findings of the CIT(A). The primary issue for adjudication is whether the penalty under Section 271(1)(b) of the Act is justified in the present case. 7.1. The assessee is a Private Limited Company engaged in business and is expected to be aware of the faceless e-assessment process. Notices were issued through the faceless e-proceedings portal, which is a legally recognized mode of service under the Income Tax Act. Given that a corporate entity is required to have adequate systems in place to track e-proceedings on the Income Tax portal, the claim of the assessee regarding non-receipt of notices is not entirely convincing. Therefore, we find that the assessee has not demonstrated reasonable cause for non-compliance with the statutory notices issued under Section 142(1) of the Act. ITA No.1488/Ahd/2024 Nihal Industries Pvt.Ltd. vs. ITO Asst. Year : 2014-15 4 7.2. However, while the failure to respond to statutory notices warrants the levy of penalty, the imposition of separate penalties for each instance of default is not justified. The Co-ordinate Bench in the case of Smt. Rekha Rani (ITA No. 6131/Del/2013) has held that penalty under Section 271(1)(b) of the Act cannot be imposed repeatedly for multiple notices if the default arises from the same cause. It was further observed that in such cases, the appropriate remedy for non-compliance is the completion of best judgment assessment under Section 144 of the Act, rather than imposing multiple penalties. 7.3. Following the rationale laid down in the case of Rekha Rani (supra), we reiterate that penalty under Section 271(1)(b) of the Act is intended as a deterrent measure and not as a revenue-generating provision. Allowing penalties to be imposed for multiple defaults of the same nature would lead to an excessive and unintended burden on the assessee, which does not align with the legislative intent behind the provision. 7.4. Considering the facts and circumstances of the case, we restrict the penalty to Rs.10,000/- for a single default, instead of Rs.30,000/- as confirmed by CIT(A). 8. Accordingly, the appeal of the assessee is partly allowed. Order pronounced in the Open Court on 12th March, 2025 at Ahmedabad. Sd/- Sd/- (SIDDHARTHA NAUTIYAL) JUDICIAL MEMBER (MAKARAND V. MAHADEOKAR) ACCOUNTANT MEMBER अहमदाबाद/Ahmedabad, िदनांक/Dated 12/03/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS ITA No.1488/Ahd/2024 Nihal Industries Pvt.Ltd. vs. ITO Asst. Year : 2014-15 5 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 , अिधकरण अपीलीय आयकर , राजोकट/DR,ITAT, Ahmedabad, 6. गाड\u000f 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) : 11.03.2025 2. Date on which the typed draft is placed before the Dictating Member. : 11.03.2025 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. : 12.3.25 7. Date on which the file goes to the Bench Clerk. : 12.3.25 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 : "