AVINASH NARAYAN SUTAR,NAVI MUMBAI vs. COMMISSIONER OF INCOME-TAX (APPEALS) (NFAC), DELHI

First we will deal with the appeal of the assessee for AY. 2010- 11.

Brief facts are that the assessee had filed his original return of income for AY. 2010-11 at Rs.1,58,670/-. Later, the case of the assessee was reopened and the assessment was completed u/s 143(3) r.w.s 147 of the Income Tax Act, 1961 (hereinafter “the Act”) dated 27.03.2015 at a total income of Rs.89,24,450/- on two grounds ie, (i) the AO taking note that there was cash deposit to the tune of A.Y. 2010-11 to 2012-13 Avinash Narayan Sutar Rs.1,64,78,801/- in five (5) bank accounts of the assessee, and after considering the reply of the assessee, AO disallowed Rs.57,67,580/- i.e. 35% of the total cash deposits; and (ii) the AO from perusal the details on record observed that the assessee had received a sum of Rs.30 Lakhs as non-refundable deposits on account of entering into a Joint Venture Agreement dated 29.01.2010, which according to AO, assessee failed to offer it to taxation; and when confronted on this issue, the assessee offered the said amount for taxation and the AO added the same (Rs 30 Lakhs); and initiated in the assessment order dated 27.03.2015, the penalty u/s 271(1)(c) of the Act for “concealment of income”.

In the statutory appeal filed before the Ld. CIT(A) regarding the quantum addition as noted (supra), the assessee only challenged the decision of the AO disallowing/adding Rs.57,67,580/- on account of unexplained cash deposit in the bank account. And the Ld. CIT(A) partly allowed the appeal of the assessee by restricting it to 10% of the cash deposit i.e. Rs.16,47,880/- instead of 35%. Still not satisfied, the assessee challenged the action of the Ld. CIT(A) before this Tribunal and the Tribunal vide order dated 12.12.2022 in to 1031/Mum/2020 (common order for AY. 2010-11 to AY. 2012-13) was pleased to delete the addition sustained to the tune of Rs.16,47,880/- on account of cash deposit.

Meanwhile, the AO had initiated the penalty u/s 271(1)(c) of the Act for “concealment of income” on account of addition made of Rs.30 Lakhs i.e. non-refundable deposit for entering into Joint Venture (JV) as well as regarding the addition made to the tune of A.Y. 2010-11 to 2012-13 Avinash Narayan Sutar Rs.57,67,580/- on account unaccounted cash deposit. As noted in the quantum assessment order dated 27.03.2015, the AO had initiated penalty u/s 271(1)(c) of the Act for “concealment of income” for both the additions (supra), but passed the penalty order dated 27.08.2021 u/s 271(1)(c) of the Act for “furnishing of inaccurate particulars of income”.wherein he noted the fact that Ld. CIT(A) vide his order dated 13.12.2019 has restricted the addition on account of cash deposits to Rs.16,47,880/- instead of Rs.57,67,580/- as added by him. And consequently [by giving effect to the Ld. CIT(A) order quantum assessment got reduced to Rs.46,47,880/- (i.e. Rs.30 Lakhs + Rs.16,47,880/-] he was of the opinion that penalty should be imposed 100% tax sought to be evaded to the tune of Rs.13,85,787/- for “furnishing of inaccurate particulars of income”.

Aggrieved by the penalty order of passed by the AO, the assessee preferred an appeal before the Ld. CIT(A) who was pleased to dismiss the appeal of the assessee. Aggrieved, the assessee is before this Tribunal.

We have perused the written submission filed by the Ld. AR of the assessee and note that the penalty has been confirmed on two accounts (1) addition sustained by Ld. CIT(A) in the quantum assessment to the tune of Rs.16,47,880/- u/s 69A of the Act being cash deposit in the bank account. (2) addition of Rs.30 Lakhs being non- refundable deposit receipt by the assessee which assessee has not challenged in the quantum appeals before the Ld. CIT(A) as well as Tribunal. A.Y. 2010-11 to 2012-13 Avinash Narayan Sutar 8. Regarding the addition of Rs.16,47,880/- restricted by Ld. CIT(A) on account of cash deposit in the bank, it is noted that on assessee’s further appeal, this Tribunal was pleased to delete the addition of Rs.16,47,880/- vide order dated 12.12.2022 (supra). Therefore, since the foundation of penalty levied for addition of Rs.16,47,880/- has been removed by the Tribunal, the penalty levied to that extent has to be deleted. For that we rely on the legal Maxim “Sublato Fundamento credit opus” meaning in case foundation is removed, the super-structure falls. In the case of Badarinath Vs. Tamilnadu AIR 2000 (Supreme Court) 3243 the Hon’ble Supreme Court has held that once the basis of proceeding is gone, all consequential order and acts would fall on the ground automatically which is applicable to judicial and quasi-judicial proceedings. We also refer to the decision of the Hon’ble Supreme Court in the case of K. C. Builders Vs. ACIT reported at (2004) 135 Taxman 461 (SC).

Coming to the balance penalty sustained on account of addition of Rs.30 Lakhs being non-refundable deposit received by assessee for entering into JV, we note that the AO in the assessment order dated 27.03.2015 had acknowledged the fact that he came to know about the transaction (regarding assessee receiving non-refundable deposit of Rs 30 Lakhs on account of entering into Joint Venture Agreement dated 29.01.2010) from perusal of the records submitted by assessee. This admission of the AO in the assessment order itself that he came to know about this transaction from perusal of the details submitted by the assessee goes on to show that assessee had disclosed this material fact that assessee had received Rs.30 Lakhs as non-refundable deposit. A.Y. 2010-11 to 2012-13 Avinash Narayan Sutar Further, it has been brought to our notice that this fact had been duly disclosed by assessee in the balance-sheet which was filed along with return of income. And during assessment proceedings when AO pointed out about assessee not offering the same for taxation, assessee realizing his mistake had duly offered Rs.30 Lakhs for taxation which fact has been acknowledged by the AO in the assessment order. Despite this being the position, the AO recorded in the assessment order dated 27.03.2015 that he had initiated the penalty proceedings on this issue also for “concealment of income”. As noted, on this issue (ie. Addition of Rs.30 Lakhs), the assessee did not file any appeal before the Ld. CIT(A)/Tribunal. The AO in the penalty order dated 27.08.2021 hasd imposed the penalty for furnishing inaccurate particulars of income. And the Ld. CIT(A) has confirmed the action of the AO.

It is noted that the assessee had shown the receipt of Rs.30 Lakhs as non-refundable deposit in his balance-sheet, and the AO noted that assessee had not offered for taxation the same, confronted the assessee and the assessee realizing his mistake offered for taxation the same and the AO while making the addition of Rs.30 Lakhs has recorded in the assessment order dated 27.03.2015 that the Penalty proceedings u/s 271(1)(c) of the Act had been initiated for “concealment of income”. And thereafter, in the penalty order dated 27.08.2021, he had found the assessee at fault for furnishing “inaccurate particulars of income”. From the aforesaid discussion it is noted that on 27.03.2015 while framing the assessment order, the AO initiated penalty proceedings was for the fault of “concealment of income” when the fact remains that the assessee had shown the receipt A.Y. 2010-11 to 2012-13 Avinash Narayan Sutar of Rs.30 Lakhs in his balance-sheet. And by oversight has not shown in the return of income whereas it was duly reflected in the balance- sheet filed along with return of income. Therefore, it cannot be said that the assessee had concealed this income. And on realizing the mistake, the assessee has offered the same and has not challenged the action of the AO on this issue before the First/Second Appellate Authority. Thus, from the facts discussed (supra), the penalty levied by AO on this issue is not warranted for two reasons. One is that AO initiated penalty for concealment of income on this issue (refer assessment order dated 27.03.2015) and finally levied penalty on this issue for furnishing of inaccurate particulars. Such an action of AO is not legally sustainable after initiating penalty for concealment of income, when the assessee had shown the same in his balance-sheet. Therefore, penalty is not legally sustainable. Secondly, there is reasonable cause for non-levy of penalty as per-section 273B of the Act, since assessee had shown Rs.30 Lakhs in his balance-sheet and by mistake didn’t offer for taxation; and realizing his mistake has offered and did not litigate thereafter. Therefore, the penalty levied cannot be sustained. Therefore, the penalty levied to the tune of Rs.13,85,787/- is directed to be deleted.

Coming to the penalty appeal for AY. 2011-12, it is noted that the quantum assessment in this assessment year was completed on 27.03.2015 at Rs.6,60,46,280/- (addition was to the tune of Rs.6,42,19,440/-). On appeal, the Ld. CIT(A) partly allowed the appeal. Still not satisfied, the assessee preferred an appeal before the Tribunal and the Tribunal was pleased to allow the appeal of the assessee. Meaning the entire additions made by the AO in the quantum A.Y. 2010-11 to 2012-13 Avinash Narayan Sutar assessment has been deleted vide the Ld. CIT(A)/Tribunal order in assessee’s own case for AY. 2011-12 vide order dated 12.12.2022 (supra).

Meanwhile, the AO initiated the penalty proceedings and levied penalty u/s 271(1)(c) of the Act to the tune of Rs.53,22,125/- which was confirmed by the Ld. CIT(A). However, since the quantum addition made by AO has been deleted by Ld. CIT(A)/Tribunal, the penalty imposed by the AO cannot be sustained since very foundation on which penalty has been imposed has been removed. So penalty has to be deleted. [refer the Hon’ble Supreme Court decision in the case of K. C. Builders (supra)], therefore, the penalty of Rs.53,22,125/- is directed to be deleted.

Coming to the penalty appeal for AY. 2012-13. Brief facts are that the AO completed assessment u/s 143(3) r.w.s. 147 of the Act vide order dated 27.03.2015 at a total assessed income of Rs.85,07,130/- (addition of Rs.77,61,350/-). Aggrieved, the assessee preferred an appeal before the Ld. CIT(A) and later before this Tribunal; and the Tribunal was pleased to delete the entire addition vide order dated 12.12.2022 (supra).