Facts of the Case

The assessee, Chudaji Thakor, an individual farmer residing in a remote village in Gandhinagar district, had not filed his return of income for Assessment Year 2018-19. During the relevant year, the assessee sold an immovable property for ₹75 lakh and deposited cash of ₹49 lakh in his bank account. Consequently, a notice under Section 148 dated 28.03.2023 was issued. The assessee did not respond to the notice under Section 148 and subsequent notices under Section 142(1), leading to completion of ex parte assessment proceedings.

The Assessing Officer thereafter levied a penalty of ₹10,000 under Section 272A(1)(d) for failure to comply with notices issued under Section 142(1). The penalty was confirmed by the CIT(A), NFAC vide order dated 29.07.2025. Aggrieved, the assessee filed an appeal before the Tribunal with a delay of 30 days, which was condoned.

Issues Involved

Whether penalty under Section 272A(1)(d) was leviable for non-compliance with notices under Section 142(1) when the assessee had a reasonable cause under Section 273B, and whether the ex parte penalty order could survive in the facts of the case.

Petitioner’s Arguments

The assessee submitted that he is a farmer residing in a remote village with no access to internet facilities and had limited knowledge of income-tax laws. He had approached a local advocate for obtaining PAN and advice, and the advocate’s email ID was used for official communications. Since the assessee did not pay professional fees, the advocate failed to forward departmental communications. Consequently, the assessee remained unaware of the notices issued under Section 142(1) and the subsequent penalty proceedings. It was contended that these facts constituted a reasonable cause under Section 273B warranting deletion of penalty.

Respondent’s Arguments

The Revenue relied on the order of the CIT(A) and contended that notices were issued through the email ID registered in PAN records and also through physical service by the Verification Unit. It was argued that failure to comply even after physical service showed disregard for statutory proceedings and did not constitute reasonable cause.

Court Order / Findings

The ITAT Ahmedabad observed that it was undisputed that the assessee was a farmer residing in a remote village and lacked awareness of electronic communications. The Tribunal noted that the assessee relied upon an advocate for income-tax matters and that communications sent to the advocate’s email were not conveyed to the assessee. The Tribunal further noted that the quantum assessment itself had already been set aside by a coordinate bench with directions to decide the matter afresh after granting opportunity to the assessee.

Considering the totality of facts, the Tribunal held that the assessee had demonstrated reasonable cause as contemplated under Section 273B for non-compliance with notices under Section 142(1). Accordingly, the Tribunal held that levy of penalty under Section 272A(1)(d) was not justified and deserved to be deleted.

Important Clarification

The Tribunal clarified that penalty under Section 272A(1)(d) is not automatic and must be tested against the existence of reasonable cause under Section 273B. Where an assessee demonstrates bona fide reasons such as lack of awareness, remote location, and dependence on third parties for compliance, penalty cannot be sustained merely on technical non-compliance.

Final Outcome

The appeal filed by the assessee was allowed. The penalty of ₹10,000 levied under Section 272A(1)(d) of the Income-tax Act was deleted in full.

Link to download order https://www.mytaxexpert.co.in/uploads/1769063594_CHUDAJITHAKORVASAJADAVS.INCOMETAXOFFICERWARD1GANDHINAGAR.pdf

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