Kartikay Nayyar vs. ACIT: Penalty Under Section 271(1)(b) Dismissed for AY 2016-17

Case Overview: Kartikay Nayyar vs. ACIT, Assessment Year 2016-17

The case of Kartikay Nayyar vs. ACIT Central Circle-20, New Delhi, pertaining to the assessment year 2016-17, revolves around the imposition of a penalty under section 271(1)(b) of the Income Tax Act, 1961. This penalty was imposed due to the alleged non-compliance by the appellant with several notices issued during the reassessment proceedings. The Income Tax Appellate Tribunal (ITAT), Delhi Bench, addressed the case and delivered its final judgment on March 8, 2021.

Background of the Case

The reassessment process for Kartikay Nayyar was initiated following a notice under section 153A of the Income Tax Act on September 22, 2017. Subsequently, several other notices were issued under sections 142(1) and 143(2), requiring the appellant to furnish various documents and explanations.

Despite multiple notices, the appellant allegedly failed to respond adequately, leading the Assessing Officer (AO) to issue a penalty notice under section 274 on November 9, 2018. As a result, on December 6, 2018, a penalty of Rs. 10,000 was imposed under section 271(1)(b) for the perceived non-compliance.

Appellant’s Arguments

Represented by CA Anil Jain, the appellant contested the penalty on the grounds that it was unjustified. The appellant argued that one of the critical notices, dated October 5, 2018, which scheduled a hearing for October 25, 2018, was not received. This issue was communicated to the Assessing Officer on November 19, 2018, explaining the delay in compliance.

The appellant further asserted that there was no willful neglect or intention to disregard the notices, and that efforts were made to comply with the notices once they were received. Thus, the penalty imposed was argued to be without merit, as there was no deliberate non-compliance.

Respondent’s Arguments

The Departmental Representative (DR) contended that the penalty was correctly imposed, arguing that there was a pattern of non-compliance by the appellant throughout the reassessment process. The DR maintained that the penalty was warranted due to the appellant’s failure to respond to multiple notices adequately and in a timely manner.

Tribunal’s Analysis and Findings

The ITAT carefully reviewed the case details, including the appellant’s explanations and the rationale provided by the Assessing Officer for imposing the penalty. The tribunal noted that the appellant had indeed responded on November 19, 2018, explaining the non-receipt of the earlier notice. This explanation was acknowledged by the Assessing Officer, contradicting the claim of non-compliance.

The tribunal emphasized that penalties under section 271(1)(b) should not be imposed automatically and must consider the specific circumstances and facts of each case. The tribunal found that the Assessing Officer failed to adequately consider the appellant’s reasonable explanation regarding the non-receipt of the notice and the subsequent efforts to comply.

Moreover, the ITAT highlighted that the imposition of penalties requires evidence of willful or deliberate non-compliance, which was not present in this case. The tribunal recognized that the appellant had made genuine efforts to comply with the notices once they were received and had communicated valid reasons for any delays.

Final Decision

Based on its findings, the ITAT concluded that the penalty imposed under section 271(1)(b) was unjustified and should be deleted. The appeal was therefore allowed in favor of Kartikay Nayyar, and the penalty order was overturned.

This decision underscores the importance of a fair and judicious approach when imposing penalties. It reinforces that penalties should not be imposed mechanically but should be based on a careful evaluation of the circumstances surrounding each case.

Conclusion

The outcome of Kartikay Nayyar vs. ACIT serves as a crucial reminder to both taxpayers and tax authorities. For taxpayers, it highlights the importance of maintaining clear communication and documentation throughout the assessment and reassessment proceedings. For tax authorities, it emphasizes the necessity of exercising discretion and fairness when imposing penalties, ensuring that such measures are only applied in instances of clear and willful default.

This case also reflects the significance of the appellate process in protecting taxpayers’ rights and ensuring that penalties are imposed justly and appropriately. As demonstrated in this case, reasonable explanations provided by taxpayers should be given due consideration before any punitive action is taken.

Kartikay Nayyar vs. ACIT: Penalty Under Section 271(1)(b) Dismissed for AY 2016-17