The Income Tax Appellate Tribunal (ITAT), Rajkot Bench, has recently, in an appeal filed before it, held that there is no penalty as checking, cross-checking and reconciliation of data was a very lengthy Process and a valid “reasonable cause” for non-filing of ITR.
The aforesaid observation was made by the Rajkot Bench when appeals were filed by the Assessee as against theseparate orders dated 24.11.2021, passed by the Commissioner of Income Tax (Appeals), Ahmedabad, confirming the levy ofpenalty of Rs. 5,000/- under section 271F of the Income Tax Act,1961, relating to the AssessmentYear (A.Y) 2010-11 to 2012-13 respectively.
The brief facts of the case were that the assessee, an individual andProprietor of M/s. Shreeji Trading Company, which was engaged inthe business of trading in gold, silver bullions and other preciousmetals, had filed his Returns of Income under section 139
of the Income Tax Act, for the Assessment Year 2010-11 on 15.10.2010; for theAssessment Year 2011-12 on 28.09.2011 and for the AssessmentYear 2012-13 on 29.03.2013.
Thereafter,a Search operation u/s. 132(1) of the Income Tax Act was carried out at the residence and business premises of theassessee on 20.05.2013, after which, the assessee was served withthe notice issued u/s. 153A of the Income Tax Act, dated 10.10.2013, requiringhim to file the Return of Income within 30 days from the receipt ofnotices. And, in response to the notices, the assessee hadfiled his Returns ofIncome on 08.08.2014, declaring the same income as filed in theoriginal Returns of Income.
Subsequently, the AO passed assessment orders u/s. 143(3) r.w.s. 153A ofthe Income Tax Act, dated 10.07.2017, wherein various additions/disallowanceswere made by the A.O. to the income returned for the respectiveassessment years.
Thereafter, the AO initiated the penalty proceedings u/s. 271Fof the Income Tax Act vide notice dated 27.02.2020, requiring the assessee toshow cause as to why penalty u/s. 271F of the Income Tax Act should not belevied for not filing the Returns of Income. And in response to the same, theassessee vide letter dated 14.03.2020 submitted that penalty u/s.271F of the Income Tax Act can be levied only in case of failure to furnishreturn of income u/s. 139(1) of the Income Tax Act and its provisos, and that theassessee having filed original Returns of Income before the end ofthe relevant assessment years, therefore u/s. 271F penalty is notapplicable in the present case.
The A.O., however, in total disregard to the facts of the caseand submissions made by the assessee, levied penalty of Rs.5,000/- each for all the three Assessment Years vide orders dated30.09.2020 u/s. 271F of the Income Tax Act.
Aggrieved by the penalty orders, the assessee filed appealsbefore the Commissioner of Income Tax (Appeals), Ahmedabad. But by the assessee havingfailed to appear before the CIT(A) inspite of 15opportunities given to the assessee, the ld. CIT(A) thereforeconfirmed the levy of penalty u/s. 271F of the Income Tax Act, therebyrelying upon fewITATdecisions.And, it is by being aggrieved by the same, that the assesseehas preferred the instant appeal before the Rajkot ITAT.
The ground of the assessee’s appeal being as to whether the Commissioner of Income-tax (Appeals), has erred on facts asalso in law, in confirming levy of penalty u/s 271F of the Act at Rs. 5,000/-, on the allegation of not filing return of income within time limit specified in thenotice issued u/s 153A of the Income-tax Act, 1961, it was submitted byMr. Mehul Ranpura, the counsel for the assessee, that the appellant hasreasonable cause for the delay in filing the return of income incompliance with notice issued u/s. 153A of the Income Tax Act, as the various books of account, diaries, papers, etc. found and seized, during the searchu/s. 132 of the Income Tax Act ,were voluminous and pertaining todifferent group concerns, and therefore that checking, cross checking and reconcilingdata etc. was a lengthy process.
The counsel for the assessee added that considering the complexities oftransactions and huge volume of data, the appellant decided to opt forsettlement of case by filing application with the Income-taxSettlement Commission, that the appellant has filed the settlement applicationbefore theIncome-tax Settlement Commission, AdditionalBench-II, Mumbai on 08.08.2014 and simultaneously filed the return ofincome with the AO, and therefore that, since there is reasonable cause for delay in filing return ofincome, no penalty could be levied.
Per contra, the Sr. D.R., Mr. B. D. Gupta appearing for the Revenue, supported the orders passed by the Lower Authorities and pleaded to confirm the levy of penalty.
Hearing the opposing contentions of either sides and perusing the materials available on record, the Rajkot ITAT commented:
“We have given our thoughtful consideration and perused thematerials available on record. The first argument of the assessee, namely that the penalty provisions of Section 271F are notapplicable in the case of a search and calling for the assessee to filethe Return under section 153A of the Act, which goes to the root ofthe case. However, the other submissions of the assessee namely“reasonable cause” for the delay in filing the Returns of income inresponse to the 153A notice on 08.08.2014.”
“We address this issuefirst namely the assessee’s explanation pursuant to the search
action u/s. 132 of the Act, various books of accounts, diaries,papers were seized by the Department which were voluminous andpertaining to different group concerns. Checking, cross checkingand reconciliation of datas was a very lengthy process. Furtherthere was considerable delay in furnishing seized documents wasalso a “reasonable cause” in filing the Returns of Income. Withoutthe above information, the assessee was not able to file the Returnsof income within the stipulated time limit of 30 days of the receiptof the notice”, the ITAT further noted.
Adding to the same, the Panel consisting of T.R. Senthil Kumar, the Judicial Member, along with Annapurna Gupta, the Accountant Member observed:
“Further the assessee also gone to the SettlementCommission, where his application for settlement of the case was admitted on 14.08.2014 is also a valid “reasonable cause”, whichprevented the assessee from filing the Returns of income, inresponse to the 153A notices.”
Thus, allowing the assessee’s appeal, the Rajkot ITAT held:
“On this count, the penalty levied u/s.271F r.w.s. 273B is legally not valid. Therefore, we hereby delete thepenalties levied u/s. 271F of the Act.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to TaxscanAdFree. Follow us on Telegram for quick updates.
