Honey Nayyar vs ACIT Central Circle-20: Challenging Penalty Levied u/s 271(1)(b) for Non-Compliance During Assessment Year 2012-13

Case Overview: Honey Nayyar vs ACIT Central Circle-20

Case Number: ITA 6210/DEL/2019

Appellant: Honey Nayyar, New Delhi

Respondent: ACIT, Central Circle-20, New Delhi

Assessment Year: 2012-13

Case Filed On: 2019-07-22

Order Type: Final Tribunal Order

Date of Order: 2021-03-31

Pronounced On: 2021-03-31

Introduction

The case of Honey Nayyar vs ACIT Central Circle-20 was brought before the Income Tax Appellate Tribunal (ITAT), Delhi Bench, concerning the imposition of a penalty under Section 271(1)(b) of the Income Tax Act, 1961, for alleged non-compliance during the assessment year 2012-13. The appellant, Honey Nayyar, contested the penalty, asserting that the non-compliance was due to valid reasons and that the penalty was unwarranted.

Background

This case, along with several others, stemmed from a search and seizure operation carried out on the ‘Nayyar’ group on November 18, 2016. Following this, the case was centralized with Central Circle-19, New Delhi. Notices under Section 153A of the Income Tax Act were issued for assessment years 2011-12 to 2016-17, along with notices under Section 143(2) for the assessment year 2017-18. The appellant was required to respond to these notices by submitting relevant documents and explanations.

However, the appellant allegedly failed to comply with the notices issued, leading to the Assessing Officer (AO) levying a penalty of Rs. 10,000 under Section 271(1)(b) for each assessment year, including 2012-13. The penalty was imposed on the grounds that the appellant did not provide the required information or respond to the notices within the stipulated time.

Details of Non-Compliance and Penalty

The sequence of events leading to the penalty is as follows:

• September 22, 2017: Notices issued under Section 153A for AY 2011-12 to 2016-17.
• August 13, 2018: Notice issued under Section 142(1) along with a questionnaire, fixing the case for hearing on August 23, 2018.
• September 7, 2018: Show cause notice of penalty under Section 271(1)(b) issued for AY 2011-12 to 2017-18, fixing the hearing on September 14, 2018.
• October 5, 2018: Another notice under Section 142(1) issued, fixing the case for hearing on October 25, 2018.
• December 6, 2018: Penalty imposed under Section 271(1)(b) due to non-compliance.

The AO argued that despite several opportunities, the appellant failed to comply with the notices, justifying the penalty.

Appellant’s Arguments

During the tribunal hearing, the appellant’s representative argued that the penalty was unjustified as there was a valid reason for the non-compliance. The appellant asserted that the notice fixing the hearing on October 25, 2018, was not received in time, which prevented them from preparing and submitting the required details.

The appellant further argued that even if the notice had been received, the time provided was insufficient to compile the necessary information. Additionally, the appellant cited case laws where penalties were not imposed when assessments were ultimately completed under Section 143(3) of the Income Tax Act.

Respondent’s Arguments

The respondent’s representative contended that the appellant had consistently failed to comply with the notices issued by the AO, justifying the penalty. The CIT(A) had upheld the penalty, noting that the appellant’s non-compliance had hampered the assessment proceedings and justified the imposition of the penalty under Section 271(1)(b).

Tribunal’s Observations and Judgment

Upon reviewing the case, the tribunal noted that while there was non-compliance with the notices issued on October 5, 2018, the assessment was ultimately completed under Section 143(3). The tribunal observed that in similar cases, where assessments were completed under Section 143(3) after the appellant eventually complied, penalties under Section 271(1)(b) were not imposed.

The tribunal referred to the decision in the cases of Smt. Neetu Nayyar and Smt. Meena Nayyar, where under identical circumstances, the penalties were deleted by the tribunal. The tribunal found that the appellant had ultimately complied with the requirements, and the assessment was completed successfully. Therefore, the tribunal concluded that the penalty under Section 271(1)(b) was not warranted in this case.

Conclusion

The Income Tax Appellate Tribunal, Delhi Bench, concluded that the penalty imposed under Section 271(1)(b) for the assessment year 2012-13 was unjustified. The tribunal allowed the appellant’s appeal, setting aside the penalty order dated December 6, 2018.

This judgment underscores the importance of considering the overall compliance of the appellant during the assessment proceedings, particularly when the assessment is completed under Section 143(3), before imposing penalties for earlier non-compliance.

Final Tribunal Order

The final order, pronounced on March 31, 2021, by Accountant Member Shri R.K. Panda, allowed the appeal filed by Honey Nayyar and quashed the penalty levied under Section 271(1)(b) for the assessment year 2012-13.

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 2012-13