Kartikay Nayyar vs. ACIT: Tribunal Overturns Penalty for Alleged Non-Compliance in AY 2012-13

Introduction

This article covers the tribunal proceedings in the case of Kartikay Nayyar vs. ACIT Central Circle-20, New Delhi for the assessment year 2012-13. The case involves a penalty of Rs. 10,000 imposed under section 271(1)(b) of the Income Tax Act, 1961, for alleged non-compliance with notices issued by the Assessing Officer (AO). The decision, pronounced on March 8, 2021, by the Delhi Bench ‘SMC-2’ of the Income Tax Appellate Tribunal (ITAT), provides insight into the judicial review of penalties for non-compliance.

Background

The appellant, Kartikay Nayyar, was subjected to a notice under section 153A of the Income Tax Act on September 22, 2017. Subsequent notices under sections 142(1) and 143(2) were issued, along with a questionnaire, for various dates in 2018. However, the appellant failed to respond adequately to these notices, leading to the issuance of a penalty notice under section 274 and the imposition of a penalty of Rs. 10,000 under section 271(1)(b) for the assessment year 2012-13.

Appellant’s Arguments

The appellant, represented by CA Anil Jain, argued that the penalty was unjustified as there had been a misunderstanding regarding the receipt of the notice dated October 5, 2018. The appellant contended that a response had been submitted on November 19, 2018, explaining that the notice fixing the hearing for October 25, 2018, had not been received. This explanation was noted by the Assessing Officer, but the penalty was imposed nonetheless, allegedly without considering the appellant’s submission.

Respondent’s Arguments

The Departmental Representative (DR) argued that the penalty was rightly imposed due to a series of non-compliances by the appellant. The DR maintained that the appellant’s failure to appear and respond to the notices warranted the penalty under section 271(1)(b).

Tribunal’s Findings

The ITAT, after reviewing the facts, found that the appellant had indeed responded to the notice on November 19, 2018, explaining the non-receipt of the earlier notice. The tribunal observed that the Assessing Officer had made a note on the appellant’s letter regarding the non-receipt of the notice, which contradicted the AO’s conclusion that there had been no compliance.

The tribunal emphasized that penalties under section 271(1)(b) are not automatically applicable and must be considered in light of the circumstances surrounding each case. In this instance, the tribunal found that the imposition of the penalty was not justified as the appellant had provided a reasonable explanation for the alleged non-compliance.

Conclusion

The tribunal concluded that the penalty imposed under section 271(1)(b) should be deleted, and the appeal was allowed in favor of Kartikay Nayyar. This case underscores the importance of considering the facts and explanations provided by taxpayers when evaluating penalties for non-compliance. The decision also highlights the tribunal’s role in ensuring that penalties are imposed fairly and only when genuinely warranted.

The outcome of this case serves as a reminder to both taxpayers and tax authorities to maintain clear communication and thoroughly document all interactions during assessment proceedings. It also demonstrates that the appellate process can provide relief to taxpayers who believe they have been unjustly penalized.

Kartikay Nayyar vs. ACIT: Tribunal Overturns Penalty for Alleged Non-Compliance in AY 2012-13