Shiv Kumar Nayyar vs ACIT Central Circle-20, New Delhi – Appeal Against Penalty Under Section 271(1)(b) (Assessment Year 2012-13) – ITA No. 6204/DEL/2019

Case Summary: Shiv Kumar Nayyar vs ACIT Central Circle-20, New Delhi

Case Number: ITA 6204/DEL/2019

Appellant: Shiv Kumar Nayyar, New Delhi

Respondent: ACIT Central Circle-20, New Delhi

Assessment Year: 2012-13

Date of Filing: 22nd July 2019

Order Type: Final Tribunal Order

Date of Order: 31st March 2021

Date of Pronouncement: 31st March 2021

Background of the Case

The case involves Shiv Kumar Nayyar, a taxpayer from New Delhi, who filed an appeal against the penalty imposed by the Assessing Officer (AO) under Section 271(1)(b) of the Income Tax Act, 1961. The penalty was levied due to alleged non-compliance with statutory notices during the assessment proceedings for the assessment year 2012-13.

The appellant, Shiv Kumar Nayyar, was issued notices under Section 153A of the Income Tax Act on 22nd September 2017 for the assessment years 2011-12 to 2016-17. Additional notices under Section 143(2) were issued for the assessment year 2017-18. Despite these notices, the AO found that the appellant did not fully comply with the requests for information, leading to the imposition of a penalty under Section 271(1)(b).

The appellant argued that the non-compliance was not intentional and that there was insufficient time to compile the required information. Moreover, the appellant claimed that due compliance was eventually made, and the assessment was completed under Section 143(3) of the Income Tax Act. The appellant’s primary contention was that the penalty should not have been imposed, especially since the final assessment order was passed under Section 143(3) and not under Section 144, which would have indicated a failure to comply.

Grounds of Appeal

The appellant raised several grounds of appeal against the penalty order:

1. The penalty was imposed despite the appellant eventually complying with the statutory notices, leading to the completion of the assessment under Section 143(3) of the Act.
2. The notices issued by the AO did not provide sufficient time to compile and submit the required details.
3. The AO cited different dates for the non-compliance in the penalty notice and the show cause notice, leading to confusion and a lack of clarity.
4. Similar penalties imposed in related cases involving the same group of assessees had been quashed by the Income Tax Appellate Tribunal (ITAT) under identical circumstances.

Tribunal Proceedings

The case was heard by the Income Tax Appellate Tribunal (ITAT) Delhi Bench “SMC-2” via video conferencing. The bench was presided over by Shri R.K. Panda, Accountant Member. The appellant was represented by Shri Anil Jain, Chartered Accountant, while the Revenue was represented by Shri Frat Khan, Additional CIT (DR).

Appellant’s Arguments

The appellant’s counsel argued that the penalty imposed under Section 271(1)(b) was unjustified given that the assessment was ultimately completed under Section 143(3) of the Income Tax Act. The counsel cited several judicial precedents where penalties under similar circumstances were quashed by the ITAT. Specifically, the counsel referred to cases involving Smt. Neetu Nayyar and Smt. Meena Nayyar, where the ITAT had deleted the penalties under Section 271(1)(b) on the grounds that the assessment was completed under Section 143(3) and due compliance was eventually made.

The appellant’s counsel also highlighted the discrepancies in the dates mentioned in the penalty notice and the show cause notice, arguing that these inconsistencies further weakened the case for imposing a penalty.

Revenue’s Arguments

The Revenue’s representative argued that the penalty was justified as the appellant had failed to comply with the notices issued by the AO in a timely manner. The representative contended that the AO had provided sufficient opportunities for compliance, but the appellant delayed the submission of the required information, thereby hampering the assessment proceedings.

The Revenue further argued that the ITAT should uphold the penalty imposed by the AO to ensure that taxpayers comply with statutory notices promptly and do not delay the assessment process.

Tribunal’s Decision

After considering the arguments of both parties and reviewing the material on record, the ITAT ruled in favor of the appellant, Shiv Kumar Nayyar. The tribunal noted that while the appellant had indeed delayed compliance with the statutory notices, the final assessment was completed under Section 143(3) of the Income Tax Act. This indicated that the appellant had eventually complied with the AO’s requests, and the assessment was not conducted under Section 144, which would have suggested non-compliance.

The tribunal cited its own precedents, particularly the cases involving Smt. Neetu Nayyar and Smt. Meena Nayyar, where penalties under Section 271(1)(b) were deleted under similar circumstances. The ITAT emphasized that penalties should not be imposed merely on technical grounds, especially when the taxpayer has eventually complied and the assessment has been completed under Section 143(3).

The ITAT also addressed the issue of the discrepancies in the dates mentioned in the penalty notice and the show cause notice, acknowledging that these inconsistencies could have contributed to the appellant’s confusion and delay in compliance.

In light of these considerations, the ITAT set aside the order of the Commissioner of Income Tax (Appeals) [CIT(A)] and directed the AO to cancel the penalty imposed under Section 271(1)(b) for the assessment years 2011-12 and 2012-13.

Conclusion

The ITAT’s ruling in the case of Shiv Kumar Nayyar vs ACIT Central Circle-20, New Delhi underscores the importance of considering the overall circumstances of a case before imposing penalties under Section 271(1)(b) of the Income Tax Act. The tribunal’s decision highlights that penalties should not be imposed on technical grounds alone, especially when the taxpayer has made subsequent compliance and the assessment has been completed under Section 143(3).

This case reaffirms the principle that penalties under Section 271(1)(b) should only be imposed in cases of deliberate and continued non-compliance, and not in situations where the taxpayer has ultimately cooperated with the assessment process.

Order Pronounced: The appeal of the assessee, Shiv Kumar Nayyar, is allowed, and the penalty under Section 271(1)(b) is canceled.

Shiv Kumar Nayyar vs ACIT Central Circle-20, New Delhi – Appeal Against Penalty Under Section 271(1)(b) (Assessment Year 2012-13) – ITA No. 6204/DEL/2019