Facts of the Case

The assessee is a partnership firm engaged in the business of trading in plywood, adhesive, locks, kitchen appliances, hardware and cement.

A survey under Section 133A of the Income Tax Act was conducted on 08.02.2018. The case was selected for compulsory scrutiny and notice under Section 143(2) was issued on 20.09.2019.

The assessment was completed under Section 144 on 23.04.2021 determining income at Rs.19,86,138/- as against returned income of Rs.1,64,420/-.

Penalty proceedings were initiated for non-compliance of notices issued under Section 142(1). Notices dated 18.01.2021 and 01.02.2021 were issued, but no compliance was made. Subsequently, notice under Section 274 read with Section 272A(1)(d) was issued.

The assessee submitted that adjournment applications had been filed in response to the notices under Section 142(1). However, as per the penalty order passed under Section 272A(1)(d), the alleged adjournment applications were not available on record.

Thereafter, further notices under Section 274 read with Section 272A(1)(d) were issued through e-mail and Speed Post, but no compliance was made.

Accordingly, penalty of Rs.20,000/- was levied under Section 272A(1)(d) for non-compliance of the two notices under Section 142(1).

The assessee filed an appeal before the learned CIT(A), which was dismissed vide order dated 18.09.2024 confirming the penalty.

Issues Involved

  1. Whether penalty of Rs.20,000/- under Section 272A(1)(d) for non-compliance of notices under Section 142(1) was justified.
  2. Whether the CIT(A) passed a speaking order in compliance with Section 250(6).
  3. Whether the assessee was provided adequate opportunity during penalty proceedings.

 Petitioner’s Arguments

During hearing before the Tribunal, none appeared on behalf of the assessee.

However, it was the case of the assessee before the lower authorities that:

  • Adjournment applications were filed in response to notices under Section 142(1).
  • Non-compliance was not deliberate.
  • The period coincided with the COVID-19 pandemic.

 Respondent’s Arguments

The learned Senior Departmental Representative supported the orders of the lower authorities.

The CIT(A), while confirming the penalty, observed that:

  • Compliance dates (29.01.2021 and 08.02.2021) fell in January and February 2021.
  • The second wave of COVID-19 started later (March–May 2021).
  • No evidence was furnished to substantiate the claim of adjournment applications.
  • Therefore, penalty of Rs.20,000/- deserved confirmation.

 Court Order / Findings

The Tribunal observed that:

  • The assessment was completed ex-parte.
  • The CIT(A) confirmed the penalty.
  • However, the CIT(A) failed to pass a speaking order on the grounds raised by the assessee.

The Tribunal held that under Section 250(6) of the Act, the CIT(A) is duty-bound to pass a reasoned and speaking order addressing the grounds of appeal on merits.

Although the CIT(A) had afforded opportunities to the assessee, the Tribunal was of the view that one more opportunity should be granted.

Accordingly:

  • The impugned order of the CIT(A) was set aside.
  • The issue relating to levy of penalty under Section 272A(1)(d) was restored to the file of the CIT(A).
  • The CIT(A) was directed to pass a fresh order in accordance with law after providing reasonable opportunity to the assessee.

The appeal was allowed for statistical purposes.

Important Clarification

The Tribunal did not adjudicate on the merits of the penalty under Section 272A(1)(d). The matter was remanded solely for fresh adjudication by the CIT(A).

The order reiterates:

  • The mandatory requirement of passing speaking orders under Section 250(6).
  • The necessity of affording reasonable opportunity in penalty proceedings.
  • That appellate authorities must deal with grounds of appeal in detail rather than confirming penalty in a summary manner.

Link to download the order -  https://www.mytaxexpert.co.in/uploads/1770884783_NAVNIRMANALLAHABADVS.DEPUTYCOMMISSIONEROFINCOMETAXCENTRALCIRCLEALLAHABAD2.pdf 

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