2025 (4) TMI 591 - AT - Income Tax

Taxpayers Win: Section 271B Penalties Limited to Single Default Instance Under Income Tax Act

The SC/Tribunal addressed penalties under Section 271B of Income Tax Act for non-compliance with AO notices. The key ruling limited penalties to a single ... Penalty u/s. 271B - non-compliance in respect of two notices issued - HELD THAT:- The factum of service of notice on the assessee electronically on her email ID couldn’t be rebutted by the ld AR. At the same time, it is a settled legal proposition that for the same default, the penalty cannot be levied twice and reference can be drawn to the decision of Rekha Rani[2015 (5) TMI 1100 - ITAT DELHI]. In light of aforesaid, we deem it appropriate to restrict the levy of penalty to Rs 10,000/- and the balance penalty is hereby deleted. Appeal of the assessee is partly allowed. ISSUES PRESENTED and CONSIDEREDThe core legal questions considered in this judgment are:Whether the penalty under Section 271B of the Income-Tax Act, 1961, was correctly levied on the assessee for non-compliance with notices issued by the Assessing Officer (AO).Whether the penalty could be levied multiple times for the same default of non-compliance with notices under Section 143(2) of the Act.Whether a reasonable cause existed for the assessee's non-compliance with the notices due to the change in communication address.ISSUE-WISE DETAILED ANALYSISPenalty under Section 271B for Non-Compliance with AO NoticesRelevant legal framework and precedents: Section 271B of the Income-Tax Act, 1961, pertains to the imposition of penalties for failure to comply with certain procedural requirements. The case of Smt. Rekha Rani V. DCIT was cited as a precedent, which dealt with similar issues of non-compliance with notices.Court's interpretation and reasoning: The Tribunal recognized that the penalty for non-compliance with notices could not be levied multiple times for the same default. The Tribunal referenced the decision in the Rekha Rani case, which emphasized that the penalty provision is deterrent in nature and not intended for revenue generation. It was noted that imposing penalties for each instance of non-compliance would contravene the legislative intent.Key evidence and findings: The Tribunal found that the assessee had not rebutted the fact that notices were sent electronically to her registered email, which was a valid mode of service. However, there was acknowledgment that the same default should not attract multiple penalties.Application of law to facts: The Tribunal applied the legal principle from the Rekha Rani case to the facts at hand, determining that the penalty should be restricted to one instance of non-compliance rather than multiple penalties for the same issue.Treatment of competing arguments: The assessee argued that the notices were not served at the correct address, which was countered by the Revenue's assertion that electronic communication was valid. The Tribunal sided with the Revenue on the validity of electronic service but agreed with the assessee on limiting the penalty to a single instance.Conclusions: The Tribunal concluded that the penalty should be restricted to Rs. 10,000 for the initial default, and any additional penalties for subsequent non-compliance were deleted.Reasonable Cause for Non-Compliance Due to Change of AddressRelevant legal framework and precedents: The concept of 'reasonable cause' is a recognized defense against penalties under the Income-Tax Act. The Tribunal considered whether the assessee's change of address constituted a reasonable cause for non-compliance.Court's interpretation and reasoning: The Tribunal acknowledged the assessee's claim of having updated her communication address but emphasized that electronic service was not disputed. Thus, the change of address did not constitute a reasonable cause for non-compliance.Key evidence and findings: The Tribunal noted the evidence of electronic service and the lack of dispute over this mode of communication by the assessee.Application of law to facts: The Tribunal applied the principle that reasonable cause must be substantiated by evidence, which was not sufficiently provided by the assessee in this case.Treatment of competing arguments: The assessee's argument of non-receipt due to address change was not accepted due to the validity of electronic service.Conclusions: The Tribunal did not find a reasonable cause for the non-compliance based on the change of address, as electronic service was deemed valid.SIGNIFICANT HOLDINGSPreserve verbatim quotes of crucial legal reasoning: 'The provision of Section 271(1)(b) is of deterrent nature and not for earning revenue. Any other view taken shall lead to the imposition of penalty for any number of times (without limits) for the same default of not appearing in response to the notice issued under Section 143(2) of the Act.'Core principles established: The Tribunal reinforced the principle that penalties under Section 271B should not be imposed multiple times for the same default, aligning with the deterrent purpose of the provision rather than a revenue-generating mechanism.Final determinations on each issue: The Tribunal restricted the penalty to Rs. 10,000 for the initial default and deleted any additional penalties for subsequent non-compliance. The appeal was partly allowed, reflecting the Tribunal's adherence to the principle of proportionality in penalty imposition.