Neetu Nayyar vs ACIT – Challenge Against Penalty U/S 271(1)(b) for Non-Compliance – ITA No. 6189/DEL/2019

Case Overview: Neetu Nayyar vs ACIT, Circle-20(2), New Delhi

Case Number: ITA 6189/DEL/2019

Appellant: Neetu Nayyar, New Delhi

Respondent: ACIT, Circle-20(2), New Delhi

Assessment Year: 2011-12

Date of Filing: 22nd July 2019

Order Type: Final Tribunal Order

Date of Order: 22nd December 2020

Date of Pronouncement: 22nd December 2020

The case of Neetu Nayyar vs. ACIT, Circle-20(2), New Delhi, revolves around the challenge against the penalty imposed under Section 271(1)(b) of the Income Tax Act, 1961. The penalty was levied for alleged non-compliance with various notices issued by the Assessing Officer (AO) during the assessment proceedings for the assessment year 2011-12. The appellant, Neetu Nayyar, contested the penalty, arguing that the non-compliance was neither intentional nor deliberate and that the circumstances justified her actions.

Background of the Case

Neetu Nayyar, a taxpayer based in New Delhi, was subjected to assessment proceedings under Section 153A of the Income Tax Act following a search operation. As part of these proceedings, the AO issued several notices under Sections 142(1) and 153A, requiring the appellant to furnish information and documents necessary for completing the assessment. The AO claimed that the appellant failed to comply with some of these notices, leading to the imposition of a penalty under Section 271(1)(b), which penalizes assessees for non-compliance with any notice issued under the provisions of the Act.

The appellant appealed against the penalty order before the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that there was no willful non-compliance and that any delay in response was due to genuine reasons, such as non-receipt of notices or delays in their delivery. The CIT(A), however, upheld the penalty, which prompted the appellant to file a further appeal before the Income Tax Appellate Tribunal (ITAT).

Key Issues Raised in the Appeal

The main issues in this appeal were:

• Whether the penalty imposed under Section 271(1)(b) was justified given the facts and circumstances of the case.
• Whether the appellant had reasonable cause for the alleged non-compliance, thereby warranting relief under Section 273B of the Income Tax Act, which provides that no penalty shall be imposed if the assessee can prove that there was reasonable cause for the failure to comply with the notice.
• The adequacy of the appellant’s explanations regarding the non-receipt or delayed receipt of notices.

Proceedings Before the Tribunal

The appeal was heard by the ITAT Delhi Bench ‘SMC-2’, with Sh. Bhavnesh Saini serving as the Judicial Member and Dr. B. R. R. Kumar as the Accountant Member. The hearing was conducted through video conferencing due to the restrictions imposed by the COVID-19 pandemic.

Arguments by the Appellant

During the proceedings, the appellant, represented by Sh. Anil Jain, CA, argued that there was no intentional non-compliance with the notices issued by the AO. He submitted that the appellant had responded to the notices when they were received, but there were instances where the notices were either not received or received late due to postal delays. He emphasized that the appellant made every effort to comply with the requirements of the AO and that any delay was due to factors beyond her control.

Arguments by the Respondent

The Senior Departmental Representative (DR), Sh. Prakash Dube, countered the appellant’s arguments by asserting that there was a pattern of non-compliance by the appellant. He pointed out that the appellant failed to respond to several notices, and therefore, the AO was justified in imposing the penalty under Section 271(1)(b). He argued that the appellant’s reasons for non-compliance were not sufficient to justify the cancellation of the penalty.

Tribunal’s Findings and Analysis

The Tribunal reviewed the submissions of both parties and examined the material on record. The Tribunal observed that the AO had issued multiple notices to the appellant under Sections 142(1) and 153A, including show-cause notices. The AO imposed the penalty under Section 271(1)(b) based on the appellant’s failure to comply with the notice dated 16th October 2018, among others.

However, the Tribunal found that the appellant had, in fact, responded to a show-cause notice on 19th November 2018, explaining that the notice fixing the hearing for 25th October 2018 was not received. The Tribunal noted that the AO acknowledged this explanation but nonetheless imposed the penalty, seemingly disregarding the appellant’s justification. The Tribunal emphasized that penalties under Section 271(1)(b) should not be imposed mechanically and that each case must be evaluated on its merits.

The Tribunal also took into account the appellant’s consistent efforts to comply with the assessment proceedings once the notices were received and the reasons provided for any delays. The Tribunal observed that the appellant had provided a plausible explanation for the non-compliance, and there was no evidence of willful or intentional disregard for the notices issued by the AO.

Tribunal’s Decision

In its decision, the ITAT held that the penalty imposed under Section 271(1)(b) was not warranted in this case. The Tribunal ruled that the appellant had demonstrated reasonable cause for the non-compliance, particularly regarding the non-receipt of the notice dated 16th October 2018. The Tribunal further stated that the AO should have considered the appellant’s explanations before proceeding to impose the penalty.

Consequently, the Tribunal allowed the appeal filed by Neetu Nayyar and set aside the penalty order under Section 271(1)(b). The Tribunal’s decision underscored the importance of carefully considering the facts and circumstances of each case before imposing penalties and highlighted that penalties should not be imposed in a routine manner.

Conclusion

The ITAT’s ruling in this case serves as a reminder that tax authorities must exercise discretion and consider the specific facts and explanations provided by the assessee before imposing penalties for non-compliance. The decision also reinforces the principle that penalties should be reserved for cases where there is clear evidence of willful or deliberate non-compliance, rather than being imposed as a matter of course.

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

Neetu Nayyar vs ACIT – Challenge Against Penalty U/S 271(1)(b) for Non-Compliance – ITA No. 6189/DEL/2019