Penalty for missing s.142(1) e-portal notices in ex parte s.144 assessment-lack of effective service held "reasonable cause", penalty deleted

Penalty under s. 272A(1)(d) for alleged non-compliance with four notices issued under s. 142(1) was examined where the notices were only uploaded on the e-filing portal and the assessment was completed ex parte under s. 144. The ITAT held that absence of actual knowledge due to lack of effective service/communication constitutes "reasonable cause" for non-compliance, and that mere portal uploading, without evidence of effective service, cannot sustain penalty, following binding HC precedent. The CIT(A)'s order was set aside and the penalty was deleted.

---

---

1. ISSUES PRESENTED AND CONSIDERED

1. Whether penalty under section 272A(1)(d) is sustainable where statutory notices under section 142(1) were only uploaded on the income-tax e-filing portal, and the assessee claimed lack of actual communication/effective service due to absence of direct email/SMS alerts and portal access being handled by a professional.

2. Whether the assessee's non-compliance with multiple section 142(1) notices, in the above circumstances, constituted "reasonable cause" so as to warrant deletion of the penalty.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Sustainability of penalty where notices were only uploaded on the portal without effective communication

Legal framework: The Tribunal examined levy of penalty under section 272A(1)(d) for failure to comply with notices issued under section 142(1), and evaluated sustainability of such penalty in the context of how notices were served/communicated through the e-filing portal.

Interpretation and reasoning: The Tribunal treated the "core issue" as whether penalty can stand when notices were merely uploaded on the portal. It accepted the principle (as applied by the Tribunal) that an assessee cannot be expected to continuously monitor the portal for departmental activity, and that mere uploading on the portal, without resulting in effective service/communication, may lead to violation of natural justice. On the facts, the Tribunal found no effective communication beyond portal upload and noted the assessee's claim that no secondary alerts via email/SMS were received directly, resulting in absence of actual knowledge.

Conclusion: The Tribunal held that penalty cannot be sustained merely because notices remained on the portal, in the absence of evidence of effective service or communication to the assessee. The penalty was therefore not sustainable on this basis.

Issue 2: Whether absence of actual knowledge constituted "reasonable cause" for non-compliance justifying deletion of penalty

Legal framework: The Tribunal considered whether the assessee's explanation amounted to "reasonable cause" for the failure to comply with the statutory notices, as relevant to sustaining or deleting penalty under section 272A(1)(d).

Interpretation and reasoning: The Tribunal found that the non-compliance arose due to absence of actual knowledge of the notices uploaded on the portal. It treated lack of actual communication/effective service as sufficient to explain non-representation, and therefore as constituting reasonable cause for non-compliance in the circumstances examined.

Conclusion: The Tribunal concluded that the assessee had reasonable cause for non-compliance because the notices were not effectively communicated. It set aside the appellate order affirming penalty and deleted the penalty amount.

---