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March 26, 2022

ITAT deletes section 272A(1)(c) penalty for default due to Ignorance of law

by CA Shivam Jaiswal in Income Tax

ITAT deletes section 272A(1)(c) penalty for default due to Ignorance of law

Fact and Issue of the case

These are two appeals filed by the assessee directed against the respective orders of the learned Commissioner of Income Tax (Appeals)-2, Jaipur (hereinafter called as ‘CIT(A)’) dated 05.06.2018 penalty of Rs.10,000/-& Rs. 42,000/-levied u/s. 272A (1)(c) of the Income Tax Act, 1961 (in short ‘’the Act”) for the Assessment year 2013-14.

The assessee is an individual and having business of Building construction and dealing real estate at Jaipur and after construction completed sold the flats as per market price and maintaining Regular books of accounts which are duly supported by vouchers and Requisite records are duly audited by Auditor.”

The Assessing Officer also initiated penalty proceedings 272A (1)(c) of the Income Tax Act, 1961 (in short ‘’the Act”) for the Assessment year 2013- 14. However, he was failed to comply with the summons. Consequently a penalty show cause u/s 272A(1)(c) dated 02.01.2014 was issued providing an opportunity for explaining reason of non- compliance with summons u/s 131(1A) of the I.T. Act dated 04.10.2013.

In the present proceedings, the appellant was provided hearing opportunities on 22.11.2016, 05.01.2017, 05.01.2018, 12.03.2018 and 23.03.2018 but there has been no compliance nor any request for adjournment. Aggrieved by the CIT(A) order, the assessee is in appeal before us. The Ld AR for assessee submitted that he was a small business contractor and he was not aware of the notices sent to him. Once he received the notices, he was not aware of the procedure to levy tax and reply to the notice. He further submitted that there was delay in compliances with the summons.

The Ld. DR, on the other hand opened the arguments with the summons issued U/s 131(C) and 133(6) and strongly supporting the order of the CIT(A) submitted that there is no merit in arguments taken by the Ld. AR of the assessee and the AO has rightly taken has a fit case for imposition of penalty U/S 272A(1)c.The DR submitted that there must be a reasonable ground   U/s Sec 273(B).

Observation of the Court

The court has heard both the parties, perused materials available on record and gone through orders of the authorities. The learned Commissioner of Income-tax (Appeals) erred upholding the order by the AO, Where the assessee admitted his delay in reply for the notice and delay in complying the summons. Further the learned Commissioner of Income-tax (Appeals) failed to observe the submissions made by the Assessee in the CIT (A).

The court is of the view that there is no finding of the AO based on some contradictory evidence to disapprove that explanation offered by the assessee was false or the assessee was not able to substantiate the explanation furnished or fails to prove that such explanation is not bona fide and that all the facts relating to the same and material to the computation of his total income has not been disclosed by him. We further arrive at a conclusion that ignorance of law is certainly no excuse for a default committed but, at the same time, there is no presumption in law that everybody knows the law. The application of this rule would differ from case to case and person to person. In a given case, there may be a person who is quite illiterate, living in remote village, rarely coming in touch with law enforcing machinery and not required to discharge any statutory obligations under a particular law. Ignorance of law may be a good excuse in his case. As submitted by the Ld AR for assessee that there is no willful failure to comply the with summons u/s 131(IA) of the IT Act dated 04.10.2013.

Therefore the order on the CIT (A) is accordingly set aside and thus penalty u/s 272A(1)(c) levied by the AO is not in accordance with law therefore same is cancelled. In the result appeal of assessee is allowed.

 The Assessing Officer also initiated penalty proceedings 272A (1)(c) of the Income Tax Act, 1961 (in short ‘’the Act”) for the Assessment year 2013- 14. After careful consideration of all the facts and circumstances of the case, court is satisfied that Assessee has willfully failed comply with notice u/s 133(6) dated 19.02.2013 and show cause penalty notice dated 02.01.2014 thus is liable to be penalized for non- compliance u/s 272A(2)(c) and penalty is hereby levied @ Rs. 100/- per day for the period 25.02.2013 to 01.05.2014 amounting to Rs. 42,000/.

Before the CIT(A) the assessee submitted its explanation but the Commissioner of Income-tax(A) was not convinced and confirmed the levy of penalty. The Ld CIT (A) observed that I have perused the facts of the case and the penalty order. The appeal is against penalty levied under section 272A(2)(c) of the I.T. Act of an amount of Rs. 42,000/- by the JDIT (I&CI) for default in complying to provide information as requisitioned under section 133(6) of the I.T. Act, 1961.

The JDIT (I&CI) noted that the required information requisitioned under the above section was neither provided nor any attendance made in regard to the same even in the penalty proceedings there was no compliance before the Assessing Officer. In the present proceedings also as recorded above there has been no compliance nor any submission made. The penalty levied is confirmed. Ground of appeal is dismissed.

Therefore the order on the CIT (A) is accordingly set aside and thus penalty u/s 272A(1)(c) levied by the AO is not in accordance with law therefore same is cancelled. In the result appeal of assessee is allowed.

Conclusion

In the result, both the appeals of the assessee are allowed.

ITAT-deletes-section-272A1c-penalty-for-default-due-to-Ignorance-of-law

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