Bonafide Mistakes during Initial Year of Income Tax E-Assessment can be Ignored: ITAT deletes Income Tax Penalty [Read Order]

The Income Tax Appellate Tribunal (ITAT), Mumbai bench, while quashing a penalty order under section 272A(1)(d) of the Income Tax Act, 1961 held that the year, 2019 being the initial year of shift towards digital and electronic mode, the mistake appears to be bonafide.

Earlier, the first appellate authority has rejected the explanation furnished by the assessee for non-compliance of the notice issued under section 142(1) of the Act merely for the reason that during penalty proceedings under section 272A(1)(d) of the Act, the assessee has not stated the reasonable cause.

Before the Tribunal, the assessee pleaded that this was in the year 2019. This being the first year of online interface, the employees of the assessee company were not aware that notices were being issued electronically. It was only after the order levying penalty under section 272A(1)(d) along with the notice of demand of Rs.10,000/- was served on the assessee, the assessee came to know about the ongoing assessment proceedings.

A bench comprising ITAT President Shri G.S.Pannu and Judicial Member Shri Vikas Awasthy held that “We are not in agreement with the findings of CIT(A). The assessee has explained that about ongoing assessment proceedings the assessee came to know only on receipt of order u/s 272A(1)(d) of the Act and demand notice. The explanation furnished by the assessee before the CIT(A) and before the Tribunal is consistent. We are satisfied that nonappearance of the assessee in response to the initial notice under section 142(1) of the Act was not deliberate.”

Quashing the penalty order, the Tribunal concluded that “The year 2019 being the initial year of shift towards digital and electronic mode, the mistake appears to be bonafide. The assessee has been able to show reasonable cause for the failure to comply with statutory notice u/s. 142(1) of the Act. Thus, in our view penalty levied u/s. 272A(1)(d) of the Act is unsustainable. The Assessing Officer is directed to delete the penalty.”

To Read the full text of the Order CLICK HERE

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