Mr. Rakesh Shukla vs The ITO

PER RAMIT KOCHAR, AM:

This appeal in ITA No. 1481/Del/2026 for Assessment Year: 2015-16 has arisen form the learned CIT(A)’s appellate order u/s 250 of the Income-tax Act, 1961(in Short “1961Act”) dated 30.12.2025 in DIN & Order No: ITBA/NFAC/S/250/2025-26/1084226429(1), which appeal in turn has arisen from the penalty order dated 22.11.2023 passed by the AO u/s 271(1)(b) of the 1961 Act (DIN & Order No. ITBA/PNL/F/271(1)(b)/2023-24/1058136873(1) ).

The brief facts of the case are that the assessee did not filed his return of income u/s 139 of the 1961 Act, for the impugned assessment year. The case of the assessee was reopened by Revenue by invoking provisions of Section 147 of the 1961 Act for the reasons that as per information uploaded on insight portal under the category of high risk, the assessee has debit and credit entries to the tune of Rs. 8,82,18,426/- in his bank accounts with Axis Bank( bank account nos. 914020011146052 and 914020013742683), and similarly there were debit and credit entries to the tune of Rs. 6,49,94,738/- in his bank account maintained with ICICI Bank ( bank account number 629505501021). As per AO, since the assessee has not filed return of income u/s 139, these amounts remained unexplained. Proceedings u/s 147/148 were initiated against the assessee by the AO, details of which are recorded in assessment order. However, the assessee did not file return of income even during reassessment proceedings in pursuant to notice issued by the AO nor filed any response thereto to the statutory notices issued by the AO u/s 142(1) of the 1961 Act as well to SCN issued by the AO to the assessee, which led AO to frame best judgment reassessment against the assessee u/s 144 of the 1961 Act , wherein deposits to the tune of Rs. 14,98,33,014/- by the assessee in his bank accounts maintained with the Axis Bank and ICICI Bank Limited were added to the income of the assessee by the AO as being unexplained as the assessee could not explain sources of said bank deposits , by invoking provisions of Section 69A of the 1961 Act read with Section 115BBE of the 1961 Act, vide assessment order dated 25.05.2023 passed u/s 147 read with Section 144 of the 1961 Act. Thereafter , penalty proceedings u/s 271(1)(b) of the 1961 Act were initiated against the assessee by the AO for failure to comply with the notices u/s 142(1) dated 24.04.2023, 03.05.2023 and 09.05.2023 issued by the AO during reassessment proceedings. The assessee did not participated in penalty proceedings despite issuance of notices for penalty u/s 271(1)(b) and SCN’s issued by the AO, details are recorded in penalty order. The inspector was also deputed during penalty proceedings, and the inspector submitted that no such person existed on the address supplied by the assessee. The AO levied penalty of Rs. 30,000/- for default in complying with notices issued by the AO u/s 142(1), dated 24.04.2023, 02.05.2023 and 09.05.2023 @Rs. 10,000/- for each non-compliance, vide penalty order dated 22.11.2023 passed by the AO u/s 271(1)(b) of the 1961 Act.

Aggrieved, the assessee filed first appeal with the ld. CIT(A) against penalty levied by the AO as well as quantum assessment. The said appeal against quantum assessment was filed belatedly by the assessee with ld. CIT(A) beyond the time stipulated u/s 249(2) of the 1961 Act, by 240 days, and the ld. CIT(A) dismissed the said appeal by refusing to condone the delay as sufficient cause was not demonstrated by the assessee. Vide separate order dated 03.09.2025 in ITA No.1480/Del/2026 for impugned assessment year 2015-16 wrt quantum assessment, the ITAT has now condoned the aforesaid delay and restored the matter to the file of AO for denovo assessment. Against impugned penalty order dated 22.11.2023, the assessee filed first appeal with ld. CIT(A). The assessee submitted before ld. CIT(A) that the reassessment framed by the AO was best judgment reassessment framed ex-parte u/s 144 r.w.s. 147 of the 1961 Act . It was submitted that the assessee was not having any knowledge of the reassessment proceedings, and the assessee became aware of the reassessment order only when penalty and recovery messages were received by the assessee , and its only then the assessee realized that the assessment has been completed. It was submitted that there was no valid service of notices by the AO during reassessment proceedings , as the same were merely uploaded on the IT portal . . The ld. CIT(A) dismissed the appeal of the assessee by holding that as per ITBA Portal, the notices were issued by AO u/s 142(1) of the 1961 Act , which were served to the email id provided by the assessee. There was no valid reasons provided by the assessee for non compliance, and there was no reasonable cause for non-compliance to the notices issued by the AO u/s 142(1) of the 1961 Act, and hence the ld. CIT(A) upheld the penalty order passed by the AO levying penalty of Rs. 30,000/- u/s 271(1)(b) of the 1961 Act.

Aggrieved, the assessee has filed second appeal with ITAT. The ld. Counsel for the assessee submitted that the assessee was not aware of the reassessment proceedings and did not received the assessment order. The notices issued by the AO u/s 142(1) of the 1961 Act during the course of reassessment proceedings were not received. The reassessment order was not received by the assessee. It was submitted reassessment order was an ex-parte best judgment order passed by the AO u/s 144 read with Section 147. It was submitted that only when recovery and penalty messages started coming, the assessee became aware of the assessment order being passed, and filed an appeal with ld. CIT(A). Only one show cause notice was received which was handed over to the ITP, but the said ITP did not took any action. The assessee has filed an affidavit dated 30.06.2026 before the Tribunal (placed on record in file), averring above facts, which is reproduced hereunder:-

We have considered rival contentions and perused the material on record. The facts in brief are narrated in preceding para’s of this order , and are not repeated. The assessee did not participated in reassessment proceedings conducted by the AO u/s 147/148 of the 1961 Act, which led to framing of ex-parte assessment order u/s 144 read with Section 147 of the 1961 Act. The AO initiated penalty proceedings u/s 271(1)(b) of the 1961 Act against the assessee for non compliance of the notices issued by the AO u/s 142(1) dated 24.04.2023, 02.05.2023 and 09.05.2023. The assessee did not participated in penalty proceedings. The AO levied penalty of Rs. 30,000/- for non compliances of the notices dated 24.04.2023 , 02.05.2023 and 09.05.2023 issued by the AO u/s 142(1) of the 1961 Act during reassessment proceedings @ Rs. 10,000/- for each default. The assessee filed first appeal before ld. CIT(A) and submitted that notices issued during reassessment proceedings were never served on the assessee. But, ld. CIT(A) rejected the contentions of the assessee as the said notices were sent by email provided by the assessee through ITBA portal. Similar plea has been taken by the assessee before the Tribunal. Affidavit to that effect is also filed , which is reproduced in the preceding para’s of this order. The assessee is contending that none of the aforesaid notices u/s 142(1) , dated 24.04.2023, 02.05.2023 and 09.05.2023 were served on him, and only one SCN was received. The said SCN was handed to ITP, but he did not comply. Section 271(1)(b) as was applicable during relevant period, reads as under:

Thus, Section 271(1)(b) of the 1961 Act , inter-alia, stipulates that if any persons fails to comply with notice issued by the AO u/s 142(1) of the 1961 Act, the AO may direct such persons to pay by way of penalty in addition to tax, if any payable by him, a sum of Rs. 10000/- for each failure. As per AO, the assessee has failed to comply with notices issued by the AO u/s 142(1) , dated 24.04.2023, 02.05.2023 and 09.05.2023 during reassessment proceedings, and hence consequently penalty of Rs. 30000/- was levied by the AO @Rs. 10,000/- for each default. The assessee is contending that all three aforesaid notices were not received. The Revenue is contemplating that the said notices were served through ITBA portal via email provided by the assessee. The assessee is denying to have received aforesaid notices.The affidavit to that effect is filed by the assessee, which is reproduced above and placed on record in file. The Revenue has not furnished electronic proof of service of email . Section 282 of the 1961 Act read with Rule 127 of the Income-tax Rules, 1962 governs the manner and mode of serving of notices. Moreover, Section 271(1)(b) of the 1961 Act is subject to Section 273B of the 1961 Act. In our considered view , reasonable cause is shown by the assessee as is contemplated u/s 273B of the 1961 Act, for non compliances with the notices issued by the AO u/s 142(1) dated 24.04.2023, 02.05.2023 and 09.05.2023. Thus, in view of above, penalty levied by the AO and as confirmed by ld. CIT(A) is not sustainable, and we order for deletion of the said penalty. The appeal of the assessee is allowed. We order accordingly.

In the result, the appeal filed by the assessee is allowed..