Neetu Nayyar vs ACIT – Penalty U/S 271(1)(b) for Non-Compliance (Assessment Year 2012-13) – ITA No. 6190/DEL/2019

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

Case Number: ITA 6190/DEL/2019

Appellant: Neetu Nayyar, New Delhi

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

Assessment Year: 2012-13

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, addresses the appeal filed by Neetu Nayyar against the penalty imposed under Section 271(1)(b) of the Income Tax Act, 1961, for alleged non-compliance with several notices issued during the assessment proceedings for the assessment year 2012-13. The appellant contested the penalty, asserting that any delay or non-compliance was due to genuine reasons and not due to willful negligence.

Background of the Case

Neetu Nayyar, a resident of New Delhi, was under scrutiny as part of assessment proceedings initiated under Section 153A of the Income Tax Act following a search operation. The Assessing Officer (AO) issued multiple notices under Sections 142(1) and 153A, requiring the appellant to provide various documents and information necessary for completing the assessment. The AO alleged that the appellant failed to comply with certain notices, which resulted in the imposition of a penalty under Section 271(1)(b). This section penalizes an assessee for non-compliance with any notice issued under the Act.

Following the penalty order, Neetu Nayyar appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], arguing that the non-compliance was not intentional. She maintained that some notices were not received on time, and when they were received, she complied with them to the best of her ability. However, the CIT(A) upheld the penalty order, leading the appellant to escalate the matter to the Income Tax Appellate Tribunal (ITAT).

Key Issues Raised in the Appeal

The appeal raised several critical issues:

• Was the penalty under Section 271(1)(b) justified given the circumstances surrounding the appellant’s non-compliance?
• Did the appellant have reasonable cause for the alleged non-compliance, which would warrant relief under Section 273B, which provides for the waiver of penalties if reasonable cause is established?
• Were the appellant’s explanations regarding the delayed or non-receipt of notices adequate and credible?

Tribunal Proceedings

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. Due to the ongoing COVID-19 pandemic, the hearing was conducted through video conferencing.

Appellant’s Arguments

Representing the appellant, Sh. Anil Jain, CA, argued that the non-compliance was neither deliberate nor willful. He contended that there were genuine reasons for the delays, including instances where notices were not received in time or were lost in transit. He emphasized that the appellant had made every effort to comply with the notices once they were received and that the delays should be considered in light of these mitigating factors.

Respondent’s Arguments

On behalf of the Revenue, the Senior Departmental Representative (DR), Sh. Prakash Dube, argued that the appellant had shown a pattern of non-compliance. He stated that the appellant’s repeated failures to respond to the AO’s notices justified the penalty under Section 271(1)(b). The DR maintained that the reasons provided by the appellant for the non-compliance were insufficient to warrant the cancellation of the penalty.

Tribunal’s Findings and Analysis

After hearing the arguments and reviewing the material on record, the Tribunal examined the sequence of events leading to the penalty. The Tribunal noted that the AO had issued several notices under Sections 142(1) and 153A, and despite the appellant’s explanations, the AO proceeded to impose the penalty based on the perceived non-compliance with these notices.

The Tribunal focused on the notice dated 16th October 2018, which was one of the key reasons for imposing the penalty. The Tribunal observed that the appellant had responded to a show-cause notice on 19th November 2018, explaining that she had not received the earlier notice fixing the hearing for 25th October 2018. The Tribunal noted that the AO had acknowledged the appellant’s response but proceeded to impose the penalty regardless, without adequately considering the appellant’s explanation.

The Tribunal emphasized that penalties under Section 271(1)(b) should not be imposed automatically or in a routine manner. It highlighted that each case should be assessed on its own merits, and if the appellant provides a reasonable explanation for the delay or non-compliance, this should be taken into account. The Tribunal observed that in this case, the appellant had provided a plausible reason for the non-compliance, and there was no evidence to suggest that the non-compliance was willful or intentional.

Tribunal’s Decision

In its ruling, the ITAT held that the penalty imposed under Section 271(1)(b) was not justified in this case. The Tribunal found 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 taken the appellant’s explanations into consideration before imposing the penalty.

As a result, the Tribunal allowed the appeal filed by Neetu Nayyar and quashed the penalty order under Section 271(1)(b). The Tribunal’s decision highlighted the importance of evaluating each case on its individual facts and cautioned against the routine imposition of penalties without considering the specific circumstances of the case.

Conclusion

The ITAT’s ruling in favor of Neetu Nayyar serves as a critical reminder that tax authorities must exercise discretion and fairness when imposing penalties for non-compliance. The decision underscores that penalties should not be imposed mechanically and that genuine reasons provided by the assessee must be taken into account. This case reaffirms the principle that penalties under Section 271(1)(b) should only be imposed in cases of clear and willful non-compliance, ensuring that assessees are treated justly in the assessment process.

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 – Penalty U/S 271(1)(b) for Non-Compliance (Assessment Year 2012-13) – ITA No. 6190/DEL/2019