Non-Appearance Of Assessee In Response To Notice Issued Electronically Under Section 142(1) Of Income Tax Act A Bonafide Mistake: ITAT Mumbai

The Assessee Triumph International Finance India Limited had filed an appeal before the ITAT against the order of the Commissioner of Income Tax (Appeals) (CIT (A)) who had confirmed the levy of penalty on the Assessee under Section 272A(1)(d) of the Income Tax Act, 1961 for non-compliance to the notice issued under Section 142(1) of the Act in the relevant assessment year.

The counsel for the Assessee Triumph International had submitted before the ITAT that the Income Tax Department was gradually moving towards faceless assessment and e-assessment and hence had stopped physically serving notices to the assessees in the year 2019. The counsel had contented that 2019 being the first year of online interface, the employees of the Assessee company were not aware that notices were being issued electronically. The counsel had averred that it was only after the order levying penalty under Section 272A(1)(d) was served on the Assessee, the Assessee came to know about the ongoing assessment proceedings. It was contended by the counsel that the Assessee thereafter immediately filed its reply to the notice issued under Section 142(1) of the Act and furnished the required information and documents to the Assessing Officer. The counsel had submitted that non-compliance of the notice issued under Section 142(1) of the Act was for bonafide reasons, and since the Assessee Triumph International had participated in the assessment proceedings on coming to know about the ongoing assessment proceedings, no penalty under Section 272A(1)(d) of the Act should have been levied. The departmental representative had contended before the ITAT that the Assessee had deliberately failed to appear before the Assessing Officer. It was averred that the explanation furnished by the Assessee before the ITAT for non-appearance before the Assessing Officer was an afterthought and that no such explanation was furnished by the Assessee before the Assessing Officer.

Section 142(1) of the Income Tax Act gives the Assessing Officer the power to serve a notice on the assesse for the purpose of inquiry before undertaking assessment under the Act. Section 272A(1)(d) of the Act provides that where a person fails to comply with the notice issued under Section 142(1) of the Act he shall pay a sum of ten thousand rupees as penalty.

The ITAT observed that in the present case the Assessee Triumph International had been able to show reasonable cause for not responding to the initial notice issued under section 142(1) of the Act. The ITAT also observed that it was not a case of absolute non-appearance of the Assessee before the Assessing Officer since subsequently on learning about the ongoing assessment proceedings the Assessee had appeared before the Assessing Officer and had furnished the requisite details.

The ITAT ruled that in the present case the Assessee Triumph International had been able to show a reasonable cause for the failure to comply with the statutory notice issued under Section 142(1) of the Act. It observed that since the year 2019 was the initial year of shift towards digital and electronic mode, the mistake of the Assessee had appeared to be bonafide. The ITAT ruled that it was satisfied that the non-appearance of the Assessee in response to the initial notice under Section 142(1) of the Act was not deliberate.

The ITAT therefore allowed the Assessee's appeal and directed the Assessing Officer to delete the penalty.

Case Title : Triumph International Finance India Limited Versus DCIT, Mumbai

Counsel For The Appellant: Akash Kumar

Counsel For The Respondent: Dr. P. Daniel

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