ARGUMENT ADVANCED

A. PLAINTIFF IS LIABLE TO BE PENALIZED

The plaintiffs in this case are liable to be penalized under Section 271(1)(b), 271(1)(c) and
272B of the Income Tax Act as they defaulted under the the Section 142(1), 142(2) and
139(A) of the act and there was no reasonable cause to justify their acts.
1.

THE PLAINTIFF FAILED TO COMPLY TO THE NOTICE UNDER SECTION 142(1)

Section 142(1) of the Income Tax Act 1961 states that if an assesse has not furnished his or
her Income Tax Return within the due given date, the Assessing Officer may serve a notice
require the assesse to furnish the return of his income in the prescribed form and manner. 1 In
the present case when a notice was issued to the plaintiff under section 142(1) because she
had failed to file her Income Tax Return within the due given date, after receiving the notice,
the plaintiff did not file the Income Tax return in the prescribed form and manner, wherein
she asked her employee to file the Income Tax Return on her behalf and the return was filed
along with a wrong PAN card number. The Income Tax Act allows a person to file Income
Tax Returns on
someone elses behalf,2 only if this person is duly authorized by the person on whose behalf
the ITR is being filed and such person should hold a valid power of attorney and this power
of attorney should be attached along with the return.3 In the present case no such prescribed
format was adhered upon and hence was in contravention of the section 142(1) of the Income
Tax Act and therefore this action rightfully attracted penalty under section 271(1)(b) of the
Act.

1 Section 142(1), Income Tax Act 1961.

2 Section 140, Income Tax Act 1961.
3 Taxmans Direct Taxes, 49th Edition, p. 914, Para 360

2.

THE PLAINTIFF FAILED TO COMPLY TO THE NOTICE UNDER SECTION 142(2)

Section 142(2) of the Income Tax Act 1961 states that for the purpose of making enquiries
and obtaining full information about the income or loss of any person, the Assessing officer
shall give a notice to the assesse to meet him and clear all the discrepancies in person. 4 In the
present case when such notice was issued to the plaintiff, she was required to report to the
office of the assessing officer and clear her position on the various claims and discrepancies
in the return filed, but she did not adhere to the requirement of the notice and did not appear
on the scheduled day, even in the reply sent by her to the Assessing Officer, she did not
address grave issue under her ITR such as using of a wrong PAN card number while filing
returns. Hence it can be said that she defaulted under Section 142(2) of the Income Tax Act
wherein she did not adhere to the guidelines of the notice properly and did not respond
appropriately to the inquires made by the Assessing Officer and thus attracting penalties
under section 271(1)(b).
3.

THE PLAINTIFF FAILED TO COMPLY WITH THE PROVISION OF SECTION 139A

Section 139A of the Income Tax Act 1961 states that every person who has been allotted a
PAN number is required to quote his correct PAN number in all his Income Tax Return Filed.5
When a tax payer fails to do so, he/she attracts a penalty under section 272B of the Income
Tax Act 1961, which states that when a person quotes or intimates a number which is false,
and which he knows or believes to be false, a penalty of Rs 10,000 can be levied on him. 6 In
the present case both Mr. Tanda and Ms. Ritika were aware of the fact that the PAN number
mentioned is false and incorrect, and still they filed the wrong PAN number along with the

4 Section 142(2), Income Tax Act 1961

5 Section 139A(5)(a), Income Tax Act 1961
6 Section 272B, Income Tax Act 1961

return, hence they would be liable for default under section 139A of the Income Tax Act and
would attract penalty under section 272B of the Act.
4.

THE PLAINTIFF WOULD BE LIABLE TO BEST JUDGMENT ASSESSMENT UNDER SECTION

144

Section 144 of the Income Tax Act 1961 states that when an assesse fails to make a return
under the specified period of time and fails to comply with a notice issued under Section
142(1) and Section 142(2) of the Act, the assessing officer, after taking into account all the
material gathered by him and after giving the assesse and opportunity to be heard shall make
the assessment of the total income and loss to the best of his judgment and decide upon the
sum of return payable by the assesse and also the penalties accordingly. In the present case
the plaintiff defaulted on both the grounds which leads to the best judgment assessment,
wherein she was not able to file the returns in the time prescribed and she also failed to
comply with the terms of notice issued under section 142(1), and also because she was issued
a notice under Section 142(1), It was not required to give her opportunity of being heard. 7
Hence it can be stated that the assessing officer rightfully made best judgment assessment
under Section 144 and the penalties applied on the findings of such assessment would be
justified.
5.

THERE WAS NO REASONABLE CAUSE BEHIND THE DEFAULTS

By virtue of Section 273B of the Income Tax Act 1961, penalty is not livable under section
271(1)(b), 271(1)(c) and 272B, if the assesse proves that there was reasonable cause for
failure.8 In the present case there was no reasonable cause behind all the defaults that the
plaintiff made. Under section 139A, the plaintiff even though having filed a wrong PAN
number in the first instance, had the opportunity to clear her stance when she mailed her reply

7 Section 144, Income Tax Act 1961

8 Kalakrithi v. ITO [2002] 125 Taxman 97 (Mad.)

to the Assessing Officer. Under Section 142(1) and 142(2) the plaintiff was given enough
time to come and meet the assessing officer which she did not adhere to. The best judgment
assessment was made after two separate notice and an opportunity to be heard was given to
the plaintiff and. It has been established that a Best Judgment Assessment cannot be
considered an ex parte proceeding,9 and the question of Mens rea would not arise as it is not
an essential ingredient for attracting civil liabilities like penalties.10 Hence there is no defense
that can be taken by the plaintiff for their acts and therefore they are liable to be penalized.

9 CIT v. Segu Buchiah Shetty[1970] 77 ITR 539 (SC)

10 Mahak Singh v ITO[2010] 127 ITD 1 (Delhi),