Major Building Repairs, Accountant Fired, VALID Reasons for Failure to Respond: ITAT Deletes Penalty u/s 271A(1)(d)
The Income Tax Appellate Tribunal (ITAT) has set aside a penalty for non-compliance with income tax notices, as it was due to valid reasons like administrative changes and ongoing repairs.
The appellant, Shah And Nahar Industrial Premises A-1 Co-op Society Ltd., is a cooperative society that received notices for the assessment year 2020-21 under section 142(1) of the Income Tax Act. The first notice was issued on 25.11.2021, but the appellant claimed it was not received by either email or post. Two other notices were issued on 08.02.2022 and 16.02.2022, to which the appellant failed to respond.
The appellant stated that the non-compliance was because of the appointment of an Administrator in December 2019. The appellant also submitted that their previous chief accountant was terminated and a new Chartered accountant was appointed. Additionally, the building of the society was also going through major repairs.
However, these explanations were rejected by the AO, resulting in a penalty of Rs 40,000 on the appellant for the non-compliance with the notices issued under section 142(1). The decision was challenged before the CIT(A), which refused to accept the reasons for the non-compliance, calling it unjustified, unwarranted and unsustainable.
The Income Tax Appellate Tribunal (ITAT) observed that the explanation was specific, as there was the appointment of a new board, the termination of the previous accountant, and the building repairs. The ITAT said that these reasons were enough and justified the non-compliance. It also observed that the assessee did not gain anything by not responding to the notices. Accordingly, the penalty under section 271A(1)(d) of the Act was deleted.
Case Citation: Shah And Nahar Industrial Premises A-1 Co-op Society Ltd Vs ITO (ITAT Mumbai); ITA No. 5645/Mum/2025; 13/11/2025; 2020-21
