ITAT Indore Reduces Section 271(1)(b) Penalty to ₹10,000 Through Consensus Approach — Ashish Daulatrm Sariya vs NFAC

Case Overview

The Income Tax Appellate Tribunal (ITAT), Indore Bench, delivered a noteworthy ruling in the matter of Ashish Daulatrm Sariya Vs NFAC, addressing a penalty dispute arising under Section 271(1)(b) of the Income Tax Act, 1961. The case pertained to Assessment Year 2012–13 and involved a penalty of ₹20,000 that had been levied upon the assessee for repeated non-compliance with statutory notices during reassessment proceedings. The Tribunal, recognising a mutual agreement reached between both sides, decided to reduce the penalty to ₹10,000, bringing finality to what had become a protracted dispute over a relatively modest amount.

Background and Factual Matrix

Origin of Reassessment Proceedings

The genesis of this matter lay in reassessment proceedings initiated under Sections 147 and 144 of the Income Tax Act, 1961. The Revenue received information through the Annual Information Return (AIR) indicating that the assessee had made substantial cash deposits in his savings bank account during the relevant previous year (01.04.2011 to 31.03.2012). Specifically, cash deposits of ₹10,67,884/- were identified along with an additional cash transaction of ₹50,000/-, aggregating to ₹11,17,844/-, which the Assessing Officer (AO) concluded had escaped assessment.

On the basis of this information, reassessment proceedings were set in motion and the assessee's total income was eventually assessed and computed at ₹11,17,884/- through an assessment order passed under Section 147 read with Section 144 of the Act.

Repeated Non-Compliance by the Assessee

Before proceeding to frame the ex parte assessment, the AO extended multiple opportunities to the assessee to appear, submit explanations, and furnish relevant documents. The following timeline captures the sequence of events:

  1. 29.03.2019 — First opportunity extended to the assessee; no response received.
  2. 19.07.2019 — Second opportunity granted; assessee again remained silent.
  3. 21.10.2019 — Third opportunity provided; still no compliance.
  4. 18.07.2019 — Notice issued under Section 142(1) of the Act with a compliance deadline of 26.07.2019; assessee failed to respond.
  5. 21.10.2019 — Another Section 142(1) notice issued; no response received.
  6. 17.11.2019 — Final notice issued, requiring compliance by 22.11.2019, along with a warning that assessment would be completed ex parte under Section 144 if compliance was not forthcoming.

Despite this entire series of notices and reminders, the assessee did not furnish any response or documents whatsoever. The AO accordingly completed the assessment ex parte on 12.12.2019 under Section 147 read with Section 144. Additionally, it was noted in the assessment order that the assessee had not filed any Income Tax Return under Section 139(1) of the Act, leading the AO to also contemplate separate penalty proceedings under Section 271F.

Penalty Proceedings Under Section 271(1)(b)

Imposition of Penalty