The Income Tax Appellate Tribunal, Lucknow, has clarified that genuine medical conditions - including acute depression and dehydration due to religious observance - can constitute "reasonable cause" under Section 273B of the Income Tax Act, thereby shielding taxpayers from penalties for non-compliance with statutory notices. This ruling reinforces the principle that penal provisions must yield to equitable considerations when non-compliance is involuntary and medically grounded.
Background & Facts
The Dispute
The appellant, Ajaz Alam, was assessed for the assessment year 2019-20 after failing to file his income tax return under Section 139(1) of the Income Tax Act, 1961. The Assessing Officer issued two notices under Section 142(1) on 10.05.2024 and 22.10.2024, seeking compliance. The appellant did not respond to either notice. Consequently, the Assessing Officer initiated penalty proceedings under Section 272A(1)(d) and imposed a penalty of Rs.20,000 on 18.07.2025. The Commissioner of Income Tax (Appeals) (NFAC) upheld the penalty on 19.12.2025. The appellant filed an appeal before the Tribunal, challenging both the penalty and the delay in filing the appeal.
Key Facts
- The appellant did not file his return for A.Y. 2019-20 despite receiving two notices under Section 142(1) on 10.05.2024 and 22.10.2024
- The penalty of Rs.20,000 was imposed under Section 272A(1)(d) for failure to comply with statutory notices
- The appellant claimed he suffered from acute depression during the relevant period, impairing his ability to respond
- He also cited dehydration due to observing "Roza Iftar" during Ramadan as a contributing factor to his inability to file the appeal on time
- The appellant submitted medical documentation and an affidavit supporting his claims
- The penalty order was passed on 18.07.2025; the appeal to CIT(A) was filed on 18.08.2025; the appeal to Tribunal was filed on 20.12.2025, three days after the statutory deadline
Procedural History
- 10.05.2024: First notice under Section 142(1) issued by Assessing Officer
- 22.10.2024: Second notice under Section 142(1) issued
- 18.07.2025: Penalty order under Section 272A(1)(d) passed by Assessing Officer
- 19.12.2025: CIT(A) NFAC order upholding penalty
- 20.12.2025: Appeal filed before ITAT Lucknow (delayed by 3 days)
- 27.05.2026: Tribunal pronounces order allowing appeal
Relief Sought
The appellant sought deletion of the penalty of Rs.20,000 imposed under Section 272A(1)(d), on the grounds that his non-compliance was due to reasonable cause under Section 273B, and also sought condonation of the 3-day delay in filing the appeal.
The Legal Issue
The central question was whether Section 273B of the Income Tax Act permits deletion of a penalty under Section 272A(1)(d) when the assessee establishes that non-compliance with statutory notices arose from genuine medical conditions, including depression and physical debilitation due to religious observance.
Arguments Presented
For the Appellant
The appellant’s counsel argued that the failure to comply with notices was neither wilful nor negligent but stemmed from acute depression and dehydration during Ramadan, both of which are bona fide medical conditions beyond the appellant’s control. Reliance was placed on Collector of Land Acquisition v. MST Katiji & Ors (167 ITR 471 SC), which permits liberal condonation of delay where the cause is genuine and not mala fide. It was submitted that Section 273B explicitly provides a shield against penalties if reasonable cause is proved, and medical incapacity qualifies as such. The appellant’s affidavit and medical records were submitted as evidence.
For the Respondent
The Departmental Representative contended that ignorance of law or failure to manage personal affairs cannot excuse statutory compliance. It was argued that notices were properly issued and served, and the appellant had ample opportunity to respond. The representative maintained that the penalty was mandatory under Section 272A(1)(d) unless a statutory exception applied, and that medical reasons, even if genuine, do not automatically constitute "reasonable cause" under Section 273B.
The Court's Analysis
The Tribunal acknowledged that non-compliance with notices under Section 142(1) was established. However, it emphasized that Section 273B operates as an overriding provision, expressly excluding penalty imposition if the assessee proves "reasonable cause" for the failure. The Tribunal noted that the term "reasonable cause" is not confined to legal or procedural justifications but encompasses any objective, credible, and non-fraudulent reason that explains the lapse.
"It is a settled proposition of law that where the assessee demonstrates a reasonable cause for failure to comply with statutory notices, no penalty u/s 272A(1)(d) of the Act can be sustained."
The Tribunal accepted the appellant’s submission that acute depression significantly impaired his cognitive and functional capacity during the relevant period. It further held that dehydration resulting from observing Roza Iftar - a religious practice protected under Article 25 of the Constitution - constituted a legitimate physical constraint. The Tribunal distinguished this from mere negligence or forgetfulness, noting that the appellant had not ignored the notices but was incapacitated from acting upon them.
The Tribunal also applied the precedent in Collector of Land Acquisition v. MST Katiji & Ors to condone the three-day delay in filing the appeal, observing that the delay was neither deliberate nor intentional, and that the appellant had acted promptly upon recovery. The Tribunal concluded that the penalty’s foundation was vitiated by the existence of reasonable cause, rendering its imposition unjust.
The Verdict
The appeal was allowed. The Tribunal deleted the penalty of Rs.20,000 imposed under Section 272A(1)(d) for non-compliance with notices under Section 142(1). The Assessing Officer was directed to delete the penalty from the appellant’s record. The delay in filing the appeal was condoned. No further directions were issued regarding interest or costs.
What This Means For Similar Cases
Medical Conditions Can Qualify as Reasonable Cause
- Practitioners may now invoke Section 273B to seek penalty deletion where clients suffer from documented mental health conditions such as depression, anxiety, or PTSD during assessment periods
- Medical certificates, prescriptions, or affidavits from treating physicians should be systematically attached to penalty appeals
- The burden shifts to the Revenue to disprove the genuineness of the medical condition, not to the assessee to prove perfect compliance
Religious Observances Are Legally Recognized as Exigencies
- Physical or mental strain arising from religious practices like fasting during Ramadan may be pleaded as reasonable cause
- This extends beyond income tax to other statutory compliance regimes where deadlines are rigid
- Tax authorities must now assess whether religious observance created a material impediment to compliance, not merely whether it occurred
Delay Condonation Is Liberal Where Cause Is Bona Fide
- A delay of even three days is not fatal if supported by credible evidence of medical or religious hardship
- Tribunals are increasingly willing to apply Katiji to procedural delays in tax appeals, provided the cause is non-malicious and substantiated
- Practitioners should always file a separate condonation petition alongside the appeal, even for minor delays
