Penalty u/s 272A(1)(d) Deleted Where Statutory Notices Were Sent to Wrong Email ID

Overview of the Decision

The Rajkot Bench of the Income Tax Appellate Tribunal, in the case of Dharmendry Bhatta Vs ITO, examined whether penalty under Section 272A(1)(d) could be sustained when statutory notices issued under Section 142(1) were not served on the assessee’s registered email address, but instead on the email ID of her husband.

For Assessment Year 2017-18, the Tribunal ultimately set aside the penalty of Rs. 50,000 imposed by the Assessing Officer (AO) and affirmed by the CIT(A), holding that there was sufficient cause for non-compliance because the notices were not served in the legally mandated manner.

Background of the Case

Trigger for Reassessment Proceedings

  1. The assessee did not file a return of income for AY 2017-18.
  2. Based on departmental information, it was noticed that the assessee had purchased an immovable property.
  3. A survey u/s 133A was carried out on 02/04/2019 in the case of M/s Six Twenty Realty Pvt. Ltd. in connection with its “Dream City” project at Rajkot.
  4. During the survey, the authorities recovered a folder from the email account of Shri Yagnesh Jogi, accountant of M/s Six Twenty Realty Pvt. Ltd. The folder contained various excel sheets reflecting booking details and receipts against sale of flats in the Dream City project. These were impounded as Annexure A/5, pages 43 to 55.
  5. The seized records indicated that M/s Six Twenty Realty Pvt. Ltd. received “on money” in cash over and above the registered value of the flats in multiple years.
  6. The assessee was identified as a purchaser of a flat from M/s Six Twenty Realty Pvt. Ltd., having allegedly paid Rs. 25,11,000/- in total.

In view of this information and the absence of a filed return, the AO reopened the assessment by issuing notice under Section 148 on 31/03/2021.

Assessment Proceedings and Additions

  • In response to the notice u/s 148, the assessee filed a return declaring total income of Rs. 2,89,190/-.
  • The assessment was ultimately completed under Section 147 r.w.s 144B on 27/03/2022.
  • The AO made an addition of Rs. 6,11,000/- as unaccounted investment relating to the immovable property purchase for AY 2017-18.

Parallelly, the AO took the view that the assessee had not complied with multiple notices issued under Section 142(1) during the e-assessment proceedings, and therefore initiated penalty proceedings under Section 272A(1)(d).

Penalty Proceedings u/s 272A(1)(d)

Alleged Non-Compliance with Section 142(1) Notices

According to the AO:

  • Several notices u/s Section 142(1) were issued during the e-proceedings and were claimed to have been served through registered email/RPAD.

  • The AO listed default in relation to notices dated:

    • 19/11/2021
    • 30/12/2021
    • 27/01/2022
    • 17/02/2022
    • 15/03/2022

  • The AO stated that:

    • Only partial compliance was made to some earlier notices.
    • There was no response to subsequent notices and to penalty show cause notices issued later.
    • Show cause for penalty was first issued on 27/03/2022, to which the assessee did not reply.
    • A further penalty show cause notice dated 27/08/2022 required explanation by 03/09/2022, but again, no reply was filed or uploaded.

On this basis, the AO concluded that: