2025 (8) TMI 1422 - AT - Income Tax

Penalty under section 271(1)(b) limited to one default where repeated 142(1) notices sought same information

ITAT CHANDIGARH held that though the assessee failed to comply with the first three of five AO notices u/s 142(1) and complied with the latter two, the ... Levy of penalty u/s 271(1)(b) - non-compliance with many notices issued u/s 142(1) - AO had issued notices u/s 142(1) on five different occasions - HELD THAT:- Admittedly, during the course of set-aside proceedings, the AO had issued notices u/s 142(1) on five different occasions and out of the same, the assessee admittedly didn’t comply with the initial three notices, however, the latter two notices have been complied with as evident from the assessment order and therefore, the default is in terms of the non-compliance of the initial three notices. The explanation of the assessee in terms of non-compliance to these notices in terms of not conversant with the e-filing portal doesn’t sound convincing, as rightly pointed out by the ld DR that where the assessee can file appeal before the Tribunal and has the necessary assistance from his Counsel, he cannot claim ignorance of the directions so given by the Tribunal by seeking further shelter/ignorance to access to the e-fling portal where the notices have been reflected and in any case, nothing has been brought on record in terms of non-receipt of the notices on the email id so provided by the assessee. Having said that, we find merit in the contention of the ld AR that where the notices have been issued by the AO, one after the another, on three different occasions seeking the same information, it will not multiply the default and it would constitute a single default and decisions cited by the ld AR support the case of the assessee. Thus, restrict the penalty levied under section 271(1)(b) of the Act to one default as against five defaults treated by the AO. Accordingly, the penalty under section 271(1)(b) of the IT. Act is confirmed to the extent of Rs. 10,000/- and remaining penalty is hereby directed to be deleted. ISSUES PRESENTED AND CONSIDERED 1. Whether the appeal delay should be condoned for reasonable cause and the appeal admitted. 2. Whether imposition of penalty under section 271(1)(b) for non-compliance with multiple notices issued under section 142(1) can be sustained as separate defaults for each notice, when the notices sought the same information. 3. Whether ignorance or unfamiliarity with the e-filing portal (as an agriculturist) constitutes reasonable cause to avoid or negate liability under section 271(1)(b) for non-compliance with statutory notices. 4. Whether deletion of additions in the quantum proceedings by the appellate authority absolves the assessee from penalty liability for earlier non-compliance with notices issued during assessment proceedings. ISSUE-WISE DETAILED ANALYSIS Issue 1 - Condonation of delay in filing the appeal Legal framework: Principles permitting condonation of delay where reasonable cause is shown and exercise of discretion to admit appeals despite procedural delay. Interpretation and reasoning: The Tribunal examined the affidavit and submissions showing reasonable cause for delay and exercised discretion to condone the delay and admit the appeal. Ratio vs. Obiter: Ratio - where reasonable cause is established by affidavit and submissions, delay may be condoned and appeal admitted; not an obiter remark. Conclusion: Delay in filing the appeal was condoned and appeal admitted for adjudication. Issue 2 - Whether repeated notices under section 142(1) seeking the same information constitute multiple defaults attractable to separate penalties under section 271(1)(b) Legal framework: Section 142(1) empowers the AO to call for information and direct attendance; section 271(1)(b) penalises failure to comply with such notices; section 144 provides for best judgment assessment where non-compliance occurs. Penalty is penal/deterrent in nature and requires distinct defaults to justify repeated penalties. Precedent treatment: Coordinate bench decisions restricting multiple penalties for repeated notices seeking the same information were relied upon and followed. Those authorities held that repeated issuance of notices seeking identical information does not multiply defaults and penalty should be confined to the first default. Interpretation and reasoning: The Tribunal accepted that where the AO issued successive notices seeking the same information, such repetition does not create distinct independent defaults. The Tribunal reasoned that permitting multiple penalties for the same underlying default would be inconsistent with the deterrent, not revenue-raising, objective of section 271(1)(b) and that the AO's remedy for non-compliance includes invoking best judgment assessment under section 144 rather than repeatedly multiplying penalties. Ratio vs. Obiter: Ratio - where repeated notices call for the same information, the defaults constitute a single default for purposes of section 271(1)(b), and penalty should be limited accordingly. This is the central binding conclusion in the judgment. Conclusion: Penalty imposed for five defaults was excessive; it was restricted to one default and reduced to the statutory minimum applicable in the facts (Rs. 10,000), with the balance deleted. Issue 3 - Whether ignorance of e-filing portal / appellant's claimed inability to access notices constitutes reasonable cause to avoid penalty Legal framework: Reasonable cause is a statutory consideration when adjudicating penalty under section 271(1)(b); bona fide inability or absence of notice may vitiate imposition if established on evidence. Interpretation and reasoning: The Tribunal scrutinised the claim that the assessee, an agriculturist, was not conversant with the e-filing portal and therefore unaware of early notices. The Tribunal found such explanation unconvincing because the assessee had actively litigated (appeal before the Tribunal) and had professional assistance. No evidence was produced to show non-receipt of notices on the e-mail furnished to the department. Accordingly, ignorance of e-filing did not qualify as reasonable cause in the instant facts. Ratio vs. Obiter: Ratio - mere assertion of unfamiliarity with e-filing does not, without supporting evidence, constitute reasonable cause to escape penalty for non-compliance with notices. Observations about expectations from taxpayers assisted by counsel are contextual reasoning rather than broad dicta. Conclusion: The e-filing ignorance plea did not discharge the assessee's burden to show reasonable cause; the defence failed on facts and did not negate liability for the single default held to exist. Issue 4 - Whether subsequent deletion of assessment additions by the appellate authority removes liability for penalty imposed for earlier non-compliance Legal framework: Penalty under section 271(1)(b) is for failure to comply with statutory notices and is conceptually independent of the correctness of the assessment result; deletion of additions in quantum does not automatically erase the initial failure to comply with notices unless such deletion demonstrates that notices were misconceived or not issued. Interpretation and reasoning: The Tribunal accepted the Revenue's contention that deletion of additions at appellate stage does not, by itself, excuse non-compliance with notices issued during assessment proceedings. The Tribunal nonetheless considered other factors (single vs multiple defaults and reasonable cause) in adjudicating penalty quantum. Ratio vs. Obiter: Ratio - deletion of additions does not per se absolve an assessee from penalty for failure to comply with statutory notices; this is an applied ratio in the decision. Any suggestion that deletion could in some circumstances bear on penalty is contextual and obiter unless tied to proof that notices were improper or not received. Conclusion: Deletion of additions did not eliminate the liability for the one default found; the penalty was therefore not annulled entirely but restricted to the single default amount. Overall Conclusion of the Court/Tribunal The Tribunal condoned the delay in filing the appeal. On merits, it held that multiple notices seeking the same information constitute a single default for the purposes of section 271(1)(b); the plea of ignorance of the e-filing portal was not established as reasonable cause; deletion of additions in quantum did not automatically negate penalty liability. Applying these conclusions, the Tribunal restricted the penalty to one default and confirmed penalty to the extent of Rs. 10,000, deleting the remaining confirmed amounts; the appeal was partly allowed.