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Recently, the income tax appellate tribunal (ITAT) Delhi, provided relief to Mr Mahesh, a resident of the United Kingdom (UK), by canceling an income tax penalty of Rs 10,000 imposed on him for not responding to a tax notice.
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This penalty of Rs 10,000 was levied by the Assessing Officer (AO) under Section 272A(1)(d) due to failure to comply with a notice under Section 142(1) issued on January 6, 2023.
Mr Mahesh explained to the tax department that he is a non-resident and living in the UK and has no income sources in India, which is why he didn’t file an income tax return (ITR). He also mentioned that he was unaware of any assessment proceedings against him for AY 2018-19 since he never received any notice. After the CIT (A) dismissed his appeal, he took the case to ITAT Delhi.
The representatives from the Income Tax Department’s strongly defended the impugned order and requested ITAT Delhi for upholding penalty levied by the assessing officer (AO) under Section 272A(1)(d). They argued that Mr Mahesh was uncooperative as he not only failed to respond to the notice under Section 142(1) but also did not participate in the assessment process.
Summary of the judgement
Chartered Accountant Suresh Surana, said to ET Wealth Online that in the given case, the assessee preferred an appeal before the Income Tax Appellate Tribunal (ITAT/Tribunal), Delhi, challenging the order passed by the ld. Commissioner of Income Tax (Appeals) [CIT(A)] for the AY 2018–19.
Surana says: “The appeal challenges the confirmation of a penalty of Rs 10,000 levied by the Assessing Officer (AO) under section 272A(1)(d) of the Income-tax Act, 1961 , for alleged non-compliance with a notice issued under section 142(1).”
According to Surana, the Tribunal observed that it is an un-denying fact that the assessee is a resident of the United Kingdom and is a Non-Resident Indian. The assessment has been framed in the name of the assessee in the status of Non-Resident, and the address mentioned in the order is that of the United Kingdom.
Surana says: “It is not emanating from the records as to whether the said notice was ever served on the assessee. The section mandates service of notice and not issuance of notice alone.”
Surana says that in the absence of service of notice, it is not possible for the assessee to know about any proceedings being initiated against him. The fact that the assessment has been framed in ex-parte proceedings further strengthens the claim of the assessee that he was unaware of any Income-tax proceedings against him for the impugned assessment year.
Surana says: “Considering the entire facts of the case and the reason furnished by the assessee for non-compliance of the notice under section 142(1), the penalty levied under section 272A(1)(d) of the Act is directed to be deleted.”
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ITAT Delhi analyses the case
ITAT Delhi (case no. ITA No. 2125/Del/2025) in its judgement dated October 28, 2025 said that they listened to the tax department’s arguments and reviewed the decisions made by the lower authorities.
It is clear that the assessee is a resident of the United Kingdom and is a Non-Resident Indian. The assessment was framed under his name as a NRI. The address listed in the order is in the UK.
The Assessing Officer imposed a penalty under Section 272A(1)(d) for not complying with the notice under Section 142(1) of the Act dated January 6, 2023.
ITAT Delhi said it is not emanating from records as to whether the said notice was ever served on the assessee?
ITAT Delhi said that the Section mandates service of notice and not issuance of notice alone. In the absence of service of notice, it is not possible for the assessee to know about any proceedings being initiated against him.
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ITAT Delhi said: “The fact that the assessment has been framed in an ex-parte proceedings, further strengthens the claim of assessee that he was unaware of any Income Tax proceedings against him for the impugned assessment year.”
ITAT Delhi judgement:
- Considering entire facts of the case and the reason furnished by the assessee for non-compliance of the notice u/s.142(1)of the Act, the penalty levied u/s. 272A(1)(d) of the Act is directed to be deleted.
- In the result, impugned order is set aside and appeal of the assessee is allowed. Order pronounced in the open court on Tuesday the 28th day of October, 2025.
Priyal Goel Jain, Partner and NRI Tax Expert, Dinesh Aarjav & Associates, said to ET Wealth Online: “This ruling is a strong reaffirmation of the foundational principle that tax administration must be rooted in due process and fairness, irrespective of the taxpayer’s residential status.”
Jain says that the ITAT Delhi has rightly emphasised that issuance of a notice is meaningless unless it is effectively served.
Jain says: “For NRIs, who often face ex-parte assessments and penalties due to communication gaps, this judgment sends a clear message that procedural lapses by the department cannot be cured by imposing penalties. It significantly strengthens the legal position of overseas taxpayers and underscores that compliance obligations can only arise when the taxpayer is first made aware of proceedings in a lawful manner.”
What is notice under Section 142(1)?
According to Surana, for the purpose of making an assessment , the AO is required to serve a notice on a person who has filed a return of Income or where the time allowed under section 139(1) for furnishing the return has expired.
Surana says that such notice may require the person to furnish a return of income where no return has been filed within the prescribed time, to produce or cause to be produced such accounts or documents as may be required, or to furnish in writing, duly verified, such information as the Assessing Officer may call for, including details of assets and liabilities.
Surana says: “However, the AO must obtain prior approval of the Joint Commissioner before calling for a statement of assets and liabilities not reflected in the accounts and cannot require the production of accounts relating to a period exceeding 3 years prior to the previous year.”
Surana says that it is pertinent to note that the Act does not expressly prescribe a specific time limit for the issuance of a notice under section 142(1). However, section 153(1) of the Act provides that the time limit for completing a scrutiny assessment under section 143(2) is 12 months from the end of the relevant assessment year.
Surana says that from this, it may be inferred that notices under section 142(1) should also be issued within the statutory period available for completion of the scrutiny assessment. Further, the assessee is required to furnish the return or information required under section 142(1) within the time specified in the notice.
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