Neeraj Kumar’s Penalty Appeal in ITA 6577/DEL/2019 for AY 2012-13

Neeraj Kumar’s Penalty Appeal in ITA 6577/DEL/2019 for AY 2012-13

In the case of ITA No. 6577/DEL/2019, the appellant, Neeraj Kumar, Muzaffarnagar, contested the penalty levied under Section 271(1)(b) of the Income Tax Act, 1961, by the Assessing Officer (AO) for the assessment year 2012-13. The appeal was heard and resolved by the Income Tax Appellate Tribunal (ITAT), Delhi Bench “E” on 3rd October 2022.

Background of the Case

Neeraj Kumar, an individual taxpayer, did not file a return of income for the assessment year 2012-13 as his income was below the taxable threshold. However, the case was reopened based on AIR (Annual Information Return) data, indicating that Neeraj Kumar had engaged in trading on the Multi Commodity Exchange (MCX) and suffered substantial losses. The Assessing Officer (AO) issued a notice under Section 148 of the Income Tax Act on 14th March 2014 to reopen the assessment, followed by several notices under Section 142(1).

At the relevant time, Neeraj Kumar resided at WZ-481, Naraina Village, New Delhi, with his family. Due to financial difficulties stemming from his losses in the commodity market, he moved back to his hometown at 275, Village-Satheri, Tehsil and Post Khathuli, District Muzaffarnagar, Uttar Pradesh, in January 2011. Despite this change, the AO continued to send notices to his previous address in Naraina Village.

Penalty Proceedings

Because of Neeraj Kumar’s non-compliance with the notices, the AO completed the assessment ex-parte under Section 144 on 5th March 2015 and imposed a penalty of Rs. 70,000 under Section 271(1)(b) for non-compliance with seven notices. This penalty also included a default for non-compliance with the notice under Section 148.

Neeraj Kumar only became aware of the assessment and penalty when he was contacted by the Tax Recovery Officer (TRO) in the first week of October 2018. Upon learning of the situation, he promptly obtained certified copies of all orders and filed appeals against the penalty on 25th October 2018.

Appellant’s Defense

Neeraj Kumar’s counsel argued that the appellant had not received any of the notices issued under Sections 148 and 142(1) because they were sent to his old address in Naraina Village, New Delhi. The appellant had relocated to Muzaffarnagar in January 2011 due to financial stress, and his new address was only updated in the PAN data on 3rd May 2019, well after the notices were issued.

The counsel further contended that the penalty imposed for non-compliance with the notice under Section 148 was unjustified, as Section 271(1)(b) does not stipulate penalties for non-compliance with such notices. An affidavit affirming these facts was submitted to the CIT(A), but the CIT(A) did not take these submissions into account and upheld the penalty.

ITAT’s Findings and Decision

The ITAT carefully reviewed the submissions from both sides and scrutinized the orders of the AO and CIT(A). The Tribunal noted that the AO had issued multiple notices under Section 142(1), but there was no evidence that any of these notices were served on the appellant. The Tribunal also observed that the AO had levied a penalty under Section 271(1)(b) for non-compliance with the notice under Section 148, which is not covered by the provisions of Section 271(1)(b).

The ITAT acknowledged that Neeraj Kumar had relocated to Muzaffarnagar in January 2011 and that the notices were sent to his previous address in Naraina Village, New Delhi. The Tribunal concluded that there was a reasonable cause for the appellant’s non-compliance, as the notices were never served on him at his new address. The Revenue did not provide any evidence to dispute these claims.

Furthermore, the ITAT noted that the CIT(A) failed to consider the appellant’s affidavit and the circumstances under which the notices were not received. The Tribunal also emphasized that the penalty under Section 271(1)(b) for non-compliance with the notice under Section 148 was not legally justified.

In light of these findings, the ITAT determined that the penalty imposed under Section 271(1)(b) was unwarranted and should be deleted. The Tribunal directed the AO to remove the penalty levied under Section 271(1)(b) for the assessment year 2012-13.

Conclusion

The ITAT allowed Neeraj Kumar’s appeal, setting aside the penalty imposed under Section 271(1)(b). This decision highlights the importance of properly serving notices and the necessity for tax authorities to consider the factual circumstances before imposing penalties.

Order pronounced in the open court on 3rd October 2022.

Sd/-
(ANIL CHATURVEDI)
ACCOUNTANT MEMBER

Sd/-
(C.N. PRASAD)
JUDICIAL MEMBER

Dated: 03/10/2022

Neeraj Kumar’s Penalty Appeal in ITA 6577/DEL/2019 for AY 2012-13