TaxTMI 
TaxTMI 
2026 (8) TMI 262
X X X X Extracts X X X X
X X X X Extracts X X X X
....ssion made before him explaining the facts and circumstances causing non-compliance of notices before the Assessment Unit. 3. BECAUSE without prejudice to the aforesaid grounds and in any case the Id. CIT(A) was not justified in confirming penalty to the tune of Rs. 10,000 (out of Rs. 40,000/- levied by A.O.) for alleged non-compliance of notice u/s. 143(2) on this ground itself that neither any satisfaction for the same was recorded in the Assessment Order nor was the same reflected in the penalty show cause notice. 4. BECAUSE the order appealed against is contrary to facts, law and principles of natural justice. 5. BECAUSE each ground taken in appeal is mutually exclusive and without prejudice to each other. 6. The "appellant" craves leave to add, delete or modify any of the grounds before or at the time of hearing of appeal." 2. The facts giving rise to the present appeal are that in this case the assessee has filed return of income u/s. 139(1) of the Income Tax Act, 1961 ("Act", for short) on 19.10.2022, declaring total income at Rs. 17,75,430/ -. The case was taken up for scrutiny proceedings. During the course of assessment proceedings, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing to application of section 273B of the Act." 4.1 By way of ground no. 1, 2 & 3 the assessee has challenged the levy of penalty u/s. 272A(1)(d) imposed by the Assessment Unit (NFAC) on account of non- compliance of notice dated 01.06.2023 issued u/s. 143(2) of the Act and notices dated 26.07.2023, 31.08.2023 & 17.01.2024 issued u/s. 142(1) of the Act. 4.2 Facts of the case are that the return of income of the assessee was selected for scrutiny assessment vide notice dated 01.06.2023 issued u/s. 143(2) of the Act by Assessment Unit. A copy of the notice u/s. 143(2) is enclosed as Annexure - III. 4.3 During the course of assessment proceedings, the Assessing Officer issued notices u/s. 142(1) from time to time i.e. on 26.07.2023 and 31.08.2023 along with questionnaire calling upon the assessee to furnish various information and documents. A copy of the notices u/s. 142(1) dated 26.07.2023 and 31.08.2023 are enclosed as Annexure - IV. 4.4 However, the said notices u/s. 142(1) and the notice u/s. 143(2) did not come to knowledge of the assessee for the reason that none of the notices were served at the address of the assessee firm through post or n....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ixing the date of compliance on or before 24.01.2024. A copy of the notice u/s. 142(1) dated 17.01.2024 is enclosed as Annexure - VII. 4.9 The said notice dated 17.01.2024 did not come to knowledge of assessee for the reason that the said notice was served on the email ID "[email protected]" and the only staff, who was looking after the taxation related matters of the firm and was operating the said e-mail account, had left the service after 10th October, 2023 and he did not inform the assessee about the said notice. An affidavit in this regard of the concerned ex-staff of the assessee firm is enclosed as Annexure - VIII. Also, relevant screenshot of the income tax portal showing communication of the said notice dated 17.01.2024 on e-mail account is enclosed as Annexure - IX. 4.10 Also, the said e-mail account was not accessible by any other staff members of the assessee firm and assessee had also not received the notice through post or notice server. In view of aforesaid, assessee did not have any knowledge of the notice issued so as to make compliance of the same. 4.11 On a perusal of reason for non-compliance of various notices, as have b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....issaria Bros. (supra) will be applicable in this case also. Consequently, it is also held that the order ought to have been passed on or before 31st Sept., 2001, failing which the levy will become barred by limitation. 2.4 Coming to the issue of recording of satisfaction, it may be mentioned that mere initiation of penalty does not amount to satisfaction as held by Hon'ble Delhi High Court in the case of CIT v. Ram Commercial Enterprises Ltd. [2001] 167 CTR (Del) 321 : [2000] 246 ITR 568 (Del). In absence of recording of the satisfaction in the assessment order, mere initiation of penalty will not confer jurisdiction on the AO to levy the penalty. 2.5 We also find that finally the order was passed under s. 143(3) and not under s. 144 of the Act. This means that subsequent compliance in the assessment proceedings was considered as good compliance and the defaults committed earlier were ignored by the AO. Therefore, in such circumstances, there could have been no reason to come to the conclusion that the default was willful. 2.6 In view of the aforesaid discussion, it is held that the learned CIT(A) was not right in upholding the levy of penalty. Thus, ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....1053446996(1)." A copy of the show cause notice dated 16.03.2024 is enclosed as Annexure - x. 5.5 In this regard, it is submitted that as per settled position of law, for initiating the penalty proceedings the requisite satisfaction has to be recorded by the Assessing Officer (Assessment Unit in this case) during the course of assessment proceedings. In other words, such a satisfaction is to be discernable from the assessment order. Reliance in this regard is placed on the ratio of decision of the Hon'ble Supreme Court of India in the case of Commissioner of Income-tax vs. Jai Laxmi Rice Mills Ambala City reported in [2015] 64 taxmann.com 75 (SC), wherein it was held as under :- "5. As pointed out above, insofar as, fresh assessment order is concerned, there was no satisfaction recorded regarding penalty proceeding under Section 271E of the Act, though in that order the Assessing Officer wanted penalty proceeding to be initiated under Section 271(1)(c) of the Act. Thus, insofar as penalty under Section 271E is concerned, it was without any satisfaction and, therefore, no such penalty could be levied. These appeals are, accordingly, dismissed." ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eal filed against the assessment order dated 16.03.2024 giving rise to the impugned penalty as well as for filing reply on merits, assessee had requested for a month's time. A copy of the reply dated 22.04.2024 is enclosed as Annexure - XIII. 6.5 Thereafter, another reply dated 22.05.2024 was filed, wherein the assessee had furnished detailed explanation to show cause as to why penalty should not be imposed u/s. 272A(1)(d) of the Act. Relevant text of the reply dated 22.05.2024 is reproduced herein below :- 3. The assessee begs to object to levy of proposed penalty on the strength of the submission made herein after: 4.1 Notice u/s. 143(2) was issued without specifying the reason for selection of the case for scrutiny assessment and as such the entire assessment proceedings are void ab initio rendering the assessment order as illegal. 4.2 The notices, the non-compliance of which has formed the basis for initiation of penalty proceedings u/s. 272A(1)(d), did not come to the knowledge of the assessee for the reason that the notices were sent /served on the e-mail address which was not accessible to the assessee. The notices vide reason for non-....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... 142(1) did not come to knowledge of the assessee for the reason that none of the notices were served at the address of the assessee firm through post or notice server email ID "[email protected]" and the only staff, who was looking after the taxation related matters of the firm and was operating the said e-mail account, had left the service after 10th October, 2023 and he did not inform the assessee about the said notice. Also, the said e-mail account was not accessible by any other staff members of the assessee firm and assessee had also not received the notice through post or notice server. In view of aforesaid, assessee did not have any knowledge of the notice issued so as to make compliance of the same. DIN:ITBA/AST/F/142(1)/2023- 26.07.2023 10.08.2023 5. On a perusal of reason for non-compliance of various notices, as have been explained above, it would be seen that there was sufficient cause for non-compliance. The assessee has not gained by non-compliance to the notices in any manner what-so- ever. Since, there was reasonable cause for failure to comply with the notices, the assessee deserves immunity from levy of penalty in view of savings provided ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s well as the notices u/s. 142(1). Further, on a perusal of the reply dated 22.05.2024, it - could very well be seen that there was sufficient and reasonable cause for not complying to the said notices u/s. 142(1) and the notice u/s. 143(2) and therefore, the penalty u/s. 272A(1)(d) was not leviable on the assessee. 6.8 Taking into account the submission made above, such an action on the part of the Assessment Unit of levying the penalty of Rs. 40,000/- vide the impugned penalty order dated 07.08.2024 without properly considering the aforesaid submissions made by the assessee, is wholly against the principles of natural justice and prejudicial to interest of the assessee. 6.9 Therefore, the penalty order dated 07.08.2024 deserves to be quashed and consequently, the penalty imposed of Rs. 40,000/- may kindly be cancelled. PRAYER 7. In view of the submission made hereinfore, your honour be pleased to - (i) cancel the penalty of Rs. 40,000/- imposed by the Assessment Unit; (ii) quash the impugned penalty order; and (iii) allow such other relief as is found to be admissible in law and equity. Respectfully submitted....