Honey Nayyar vs ACIT Central Circle-20: Challenging Penalty Levied u/s 271(1)(b) for Non-Compliance During Assessment Year 2014-15

Case Overview: Honey Nayyar vs ACIT Central Circle-20

Case Number: ITA 6212/DEL/2019

Appellant: Honey Nayyar, New Delhi

Respondent: ACIT, Central Circle-20, New Delhi

Assessment Year: 2014-15

Case Filed On: 2019-07-22

Order Type: Final Tribunal Order

Date of Order: 2021-03-31

Pronounced On: 2021-03-31

Introduction

The dispute between Honey Nayyar and the ACIT, Central Circle-20 revolves around a penalty imposed under Section 271(1)(b) of the Income Tax Act, 1961, due to alleged non-compliance with statutory notices during the assessment year 2014-15. The appellant, Honey Nayyar, sought to challenge this penalty, arguing that the non-compliance was not intentional and that the penalty was unjustified.

Background

This case is part of a series of appeals arising from a search and seizure operation conducted on the ‘Nayyar’ group on November 18, 2016. As a result, the appellant’s case was centralized to Central Circle-19, New Delhi. Notices under Section 153A were issued for the assessment years 2011-12 to 2016-17, with additional notices under Section 143(2) for the assessment year 2017-18. The appellant was required to furnish specific documents and explanations, which led to the issuance of penalties for alleged non-compliance.

For the assessment year 2014-15, the Assessing Officer (AO) levied a penalty of Rs. 10,000 under Section 271(1)(b) due to the appellant’s failure to respond to the notice issued on October 5, 2018. The penalty was based on the assertion that the appellant did not submit the required details or explanations by the specified deadline.

Sequence of Events Leading to the Penalty

The series of events that led to the imposition of the penalty include:

• September 22, 2017: Notices under Section 153A were issued for AY 2011-12 to 2016-17.
• August 13, 2018: Notice issued under Section 142(1), accompanied by a questionnaire, scheduling the case for hearing on August 23, 2018.
• September 7, 2018: A show-cause notice of penalty under Section 271(1)(b) was issued, with a hearing scheduled for September 14, 2018.
• October 5, 2018: Another notice under Section 142(1) was issued, requiring the appellant to provide the requested details by October 25, 2018.
• December 6, 2018: The penalty was imposed by the AO due to non-compliance with the October 5, 2018 notice.

The AO justified the penalty on the grounds that despite multiple opportunities, the appellant failed to comply with the statutory requirements.

Appellant’s Defense

During the tribunal hearing, the appellant, represented by Shri Anil Jain, CA, argued that the penalty was unjust and that the non-compliance was not deliberate. The appellant contended that the notice fixing the hearing on October 25, 2018, was received late, leaving insufficient time to gather and submit the necessary information.

Furthermore, the appellant argued that even if the notice had been received on time, the time allowed was insufficient to compile the exhaustive details requested. The appellant also cited relevant case laws, arguing that penalties should not be imposed in cases where the assessment was ultimately completed under Section 143(3), indicating substantial compliance with the statutory requirements.

Respondent’s Arguments

The respondent, represented by Shri Frat Khan, Addl. CIT(DR), countered that the appellant had ample opportunities to comply with the notices but failed to do so, justifying the penalty. The CIT(A) upheld the penalty, emphasizing that the appellant’s non-compliance hindered the assessment process and warranted the penalty under Section 271(1)(b).

Tribunal’s Analysis and Judgment

After reviewing the facts and arguments, the tribunal observed that while there was a delay in complying with the notice dated October 5, 2018, the assessment was ultimately completed under Section 143(3) of the Income Tax Act. The tribunal noted that in several similar cases, where assessments were completed under Section 143(3), penalties under Section 271(1)(b) were not imposed, especially when the compliance was eventually made.

The tribunal referred to the decisions in the cases of Smt. Neetu Nayyar and Smt. Meena Nayyar, where penalties under identical circumstances were deleted. The tribunal recognized that the appellant had ultimately complied with the statutory requirements, leading to the completion of the assessment. Given this, the tribunal concluded that imposing the penalty under Section 271(1)(b) was unnecessary and unjustified.

Conclusion

The Income Tax Appellate Tribunal, Delhi Bench, found that the penalty imposed under Section 271(1)(b) for the assessment year 2014-15 was unwarranted. The tribunal allowed the appeal filed by Honey Nayyar and directed the cancellation of the penalty order dated December 6, 2018.

This judgment highlights the tribunal’s consideration of the overall compliance by the appellant during the assessment process. It emphasizes that penalties should not be imposed when there is eventual compliance, particularly when the assessment is completed under Section 143(3).

Final Tribunal Order

The final order, pronounced on March 31, 2021, by Accountant Member Shri R.K. Panda, allowed the appeal and quashed the penalty levied under Section 271(1)(b) for the assessment year 2014-15.

Order Pronounced in the Open Court on 31/03/2021.

Accountant Member: R.K. Panda

Honey Nayyar vs ACIT Central Circle-20: Challenging Penalty Levied u/s 271(1)(b) for Non-Compliance During Assessment Year 2014-15