Validity of penalty for Non-compliance of notice issued under section 142(1)/143(2) if Notices sent to old address of assessee-company

Short Overview : Where prior to completion of assessment, assessee had already reported its new address to revenue, but AO sent the notices to assessee at the old address, then assessee could not be held in default for not complying with notices under section 142(1)/(143(2).

Assessee was subjected to penalty under section 271(1)(b) for failure to comply with notices under section 142(1)/143(2). Case of assessee was that the notices were sent to assessee at its old address.

it is held that Prior to completion of assessment for assessment year under appeal, assessee had already reported new address to Revenue Department. However, AO for the reasons best known to him had sent the notices to assessee at the old address. No attempt was made to serve assessee at the new address. Therefore, there could not be any reason to believe that assessee had defaulted in making compliance to the notices, so as to impose penalty under section 271(1)(b).

Decision: In assessee’s favour.

Referred: Pr. CIT v. Atlanta Capital (P.) Ltd. [ITA No. 665/2014 dt. 21-9-2015] : 2015 TaxPub(DT) 3772 (Del-HC).

IN THE ITAT, DELHI BENCH

BHAVNESH SAINI, J.M.

Ethnic Overseas (P) Ltd. v. ITO

ITA No. 7453/Del./2018

1 August, 2019

Assessee by: Somil Aggarwal, Advocate

Revenue by: S.L. Anuragi, Senior Departmental Representative

This appeal by assessee has been directed against the order of learned Commissioner(Appeals)-13, New Delhi dt. 1-6-2018 for assessment year 2005-06, challenging the levy of penalty under section 271(1)(b) of the Act.

2. The assessing officer noted in the penalty order that assessee company was required to furnish details/information/explanation by issue and service of notices/letters mentioned in the penalty order pertaining to notice dt. 18-8-2006, 26-4-2007, 4-5-2007, 28-5-2007, 17-8-2007, 5-9-2007, 20-9-2007, 28-9-2007 and 5-10-2007. The assessing officer noted that there was no compliance to the notices which was considered as default under section 271(1)(b) of the Act. The assessing officer issued show-cause notice for levy of penalty and in absence of any explanation, the assessing officer levied the penalty of Rs. 10,000 for failure to comply with notices under section 142(1)/143(2) of the Act. The assessee contended before learned Commissioner(Appeals) that there was a change in address as reported in ITR for subsequent assessment year 2006-07.

Therefore, no notice has been served upon the assessee at the new address. The learned Commissioner(Appeals) did not accept the contention of the assessee and noted that the record shows assessee has four addresses and on 5-9-2007, Counsel for assessee appeared, therefore, change of address should have been intimated to the assessing officer. The appeal was accordingly dismissed.

3. Learned counsel for assessee submitted that the assessing officer has mentioned old address even in the penalty order despite in the Income tax return for assessment year 2006-07 filed on 31-12-2006 assessee has reported new address at “E-6/9, Vasant Vihar, New Delhi”. No notice has been served upon the assessee at new address, therefore, penalty cannot be levied against the assessee. He has further submitted that even in the penalty order assessing officer was not specific as to for which notice penalty has been levied against the assessee. He has submitted that order of the Commissioner(Appeals) on quantum has been set aside by ITAT vide order dt. 20-12-2017 and appeal is pending before learned Commissioner(Appeals) and, as such, matter is still pending on quantum. He has relied upon the judgment of Hon’ble Delhi High Court in the case of Pr. CIT v. Atlanta Capital (P.) Ltd., ITA No. 665/2014 dt. 21-9-2015] : 2015 TaxPub(DT) 3772 (Del-HC) in which it was noted that assessing officer was aware of change of address of the assessee and yet the notice under section 148 of the Act was issued at old address.

Therefore, issue was decided against the revenue.

4. On the other hand, learned Departmental Representative relied upon the orders of the authorities below and submitted that as per PAN, assessing officer issued notice which has not been complied by the assessee.

Therefore, penalty was rightly levied against the assessee.

5. I have considered the rival submissions. In the present case the assessing officer passed the assessment order under section 144 of the Act dt. 11-12-2007 (PB-6) in which assessing officer has mentioned address of the assessee at 1378/21, 3rd Floor, Naiwala, Karol Bagh, New Delhi. Same address is mentioned in the penalty order.

The assessee, however, filed return of income for subsequent assessment year 2006-07 on 31-12-2006 in which assessee has mentioned new address at E-6/9, Vasant Vihar, New Delhi. It is, therefore, clear that prior to completion of the assessment for assessment year under appeal, assessee had already reported new address to the revenue department. However, the assessing officer for the reasons best known to him have sent the notices to the assessee at the old address. No attempt has been made to serve assessee at the new address. Therefore, there could not be any reason to believe that assessee had defaulted in making compliance to the notices. learned Commissioner(Appeals) noted that on 5-9-2007 counsel for assessee appeared before assessing officer but no new address has been intimated. However, in the Income tax return filed for subsequent assessment year 2006-07, assessee had already reported new address to the department. There is thus, no default on the part of the assessee to comply with the notices under section 142(1)/143(2) of the Act. Further, assessing officer has recorded several dates on which notices have been issued to the assessee, but it is not mentioned in the penalty order as to for which default of notice penalty has been levied. In the absence of any specific charge against the assessee, it is difficult to accept that assessee would default to make any reply before the authorities below. The quantum matter is pending before the Commissioner(Appeals) as per directions of the Tribunal.

Considering all these facts and circumstances, I am of the view that assessee had a reasonable cause for failure to comply with the notices. Therefore, penalty is not leviable in the matter. I, accordingly, set aside the orders of the authorities below and cancel the penalty.

6. In the result, appeal of assessee is allowed.

Order pronounced in the open court.