Penalty under section 272A(1)(d) for non-compliance with notice quashed due to reasonable cause and absence of service

Penalty under 272A(1)(d) for non-compliance with notice was annulled where the taxpayer, a remote-residing farmer, failed to respond because he had engaged an advocate who received electronic communications and fees remained unpaid, preventing the advocate from informing the taxpayer; this reliance and lack of physical service amounted to reasonable cause under the statutory excusal doctrine, and therefore the penalty was deleted. The revenues concession that no physical notice was served reinforced the absence of culpability and resulted in withdrawal of the penalty.

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Issues: Whether the penalty of Rs.10,000/- imposed under section 272A(1)(d) of the Income-tax Act, 1961 for non-compliance with notice under section 142(1) should be deleted on the ground of reasonable cause under section 273B of the Income-tax Act, 1961.

Analysis: The Tribunal considered that the assessee, a farmer residing in a remote village, had engaged an advocate who provided an email address in the PAN application and purportedly received departmental communications. The assessee did not receive notices physically and did not monitor the advocate's email due to non-payment of fees and lack of access to internet facilities. The Tribunal noted that the quantum assessment was set aside by a Coordinate Bench and remanded for hearing, which corroborates that the assessee did not earlier receive opportunity to be heard. The Revenue admitted that no physical notice was served on the assessee during penalty proceedings until the Verification Unit physically served a final notice. Applying section 273B, the Tribunal treated the assessee's lack of knowledge and the failure of service/communication as constituting reasonable cause for non-compliance. The Tribunal therefore found the statutory preconditions for imposing the penalty as not satisfied in the factual matrix and exercised its power to relieve the assessee from penalty.

Conclusion: The penalty of Rs.10,000/- imposed under section 272A(1)(d) is deleted and the appeal is allowed in favour of the assessee.

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