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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SMT. BEENA PILLAI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
These appeals filed by the assessee are directed against order of NFAC dated 24.1.2023 for the AYs 2014-15 to 2016-17. These appeals are clubbed together, heard together and disposed of by this common order for the sake of convenience. The grounds raised in these appeals are common except figures, hence, we reproduce here the grounds of appeal raised in as follows:
1. The order of the learned Commissioner of Income tax [Appeals] passed under Section 250 of the Act, in so far as it is against the Appellant is opposed to law, weight of evidence, natural justice, probabilities, facts and circumstances of the Appellant's case.
2. The Appellant denies himself liable for penalty imposed by the learned assessing officer under Section 271[1][c] of the Act amounting to Rs. 70,188/- and the same having been confirmed by the learned Commissioner of Income tax [Appeals] under the facts and circumstances of case.
Page 2 of 9 3. The learned Commissioner of Income tax [Appeals] erred in not adjudicating all the grounds raised in appeal before him on the facts and circumstances of the case.
4. The learned Commissioner of Income tax [Appeals] failed to appreciate that the levy of penalty is not automatic and further erred in holding that the learned assessing officer was justified in imposing penalty under the facts and circumstances of the case.
5. The learned Commissioner of Income tax [Appeals] failed to appreciate that the Appellant was misled by one tax consultant Mr. Nagesh Shastri and the original return of income claiming false deductions was filed by the said Mr. Nagesh Shastri without the knowledge of the Appellant on the facts and circumstances of the case.
6. The learned Commissioner of Income Tax [Appeals] failed to appreciate that the Appellant was under a bona fide belief that he is eligible for certain deductions on the advice of Mr. Nagesh Shastri and that his income was filed declaring the true and correct income on the facts and circumstances of the case.
7. The learned Commissioner of Income tax [Appeals] erred in holding that the Appellant connived with the said Mr. Nagesh Shastri and concealed particulars of his income without bringing any evidence on record to prove the same on the facts and circumstances of the case. 8. The learned Commissioner of Income tax [Appeals] failed to appreciate that the Appellant had no intention to defraud revenue or evade tax on the facts and circumstances of the case. 9. The learned Commissioner of Income tax [Appeals] failed to appreciate the fact that the Appellant had provided all the details and co-operated in the assessment proceedings voluntarily and in good faith under the facts and circumstances of the case. 10. The learned Commissioner of Income tax [Appeals] failed to appreciate the fact that there was no concealment nor furnishing of inaccurate particulars of income warranting levy of penalty under the provisions of Section 271[1][c] of the Act under the facts and circumstances of the case. 11. The learned Commissioner of Income tax [Appeals] erred in upholding penalty imposed amounting to Rs. 70,188/- for concealing particulars of income whereas the learned assessing officer had initiated and imposed penalty for furnishing of Page 3 of 9 inaccurate particulars of income under the facts and circumstances of the case.
The learned Commissioner of Income tax [Appeals] failed to appreciate the fact that the order passed by the learned assessing officer under Section 271[1][c] of the Act is without assumption of proper jurisdiction as the mandatory conditions for invoking the provisions of Section 271[1][c] of the Act has not been complied with under the facts and circumstances of the case.
The learned Commissioner of Income tax [Appeals] failed to appreciate that the penalty proceedings are independent with that of the assessment proceedings and ought to have verified the facts of the case independently under the facts and circumstances of the case.
The learned Commissioner of Income tax [Appeals] failed to appreciate that proper satisfaction has not been recorded by the learned assessing officer in the order of assessment passed under Section 143[3] r.w.s. 147 of the Act dated 20/06/2019 and consequently in the absence of proper satisfaction recorded for the initiation of penalty proceedings the entire penalty proceedings is bad in law and void-ab-into under the facts and circumstances of the case.
The learned Commissioner of Income tax [Appeals] erred in passipg the impugned appellate order on mere surmises, conjunctures and suspicion without bringing into record any evidence and without independent application of mind under the facts and circumstances of the case.
Without Prejudice, the learned Commissioner of Income tax [Appeals] erred in upholding penalty of Rs. 70,188/- based on the original return of income filed on 19/07/2014 when the learned assessing officer had accepted the return of income dated 16/05/2018 filed in response to notice u/s. 148 of the Act during the assessment proceedings thereby regularizing the return dated 16/05/2018 and hence no penalty could have been imposed in relation to the particulars of income declared in the original return of income under the facts and circumstances of the case.
Without prejudice to the above, the penalty levied is highly excessive and liable to reduced substantially.
The Appellant craves leave to add, alter, delete or substitute any of the grounds urged above.
Page 4 of 9 In the view of the above and other grounds that may be urged at the time of the hearing of the appeal, the Appellant prays that the appeal may be allowed and appropriate relief may be granted in the interest of justice and equity.
Facts of the case are that the assessee Mr. Vinod Radhakrishna. being an Individual, is a salaried employee of M/s. Mindtree Ltd., Bengaluru ("the employer" for short). and earning income assessable to tax under the head Salaries in terms of the provisions of the statute, apart from others.
2.1 In respect of salary income received during the FY 2013-14 from the employer, the assessee filed the original return of income u/s. 139(1) of the Income-tax Act,1961 ['the Act' for short] in Form ITFR-1 on 19.07.2014, disclosing a total income of Rs. 4,38,540/-, after claiming deduction under Chapter VIA of the Act to the extent of Rs, 1,95,600/-, apart from claiming loss under the head House property of (-) Rs. 1,55,000/-, which resulted in claiming of refund of Rs. 67,950/- out of TDS effected by the employer of Rs. 90,463/-.
2.2 The said return of income was processed u/s. 143(1) of the Act by the AO at Centralized Processing Centre (CPC), Bengaluru, vide intimation/order dated 30.09.2015, accepting the returned income of the assessee at Rs.4,38,540/- and, as a natural corollary, refund of Rs. 70,670/-, inclusive of interest u/s. 244A of the Act of Rs. 2,7210/-, was granted to the assessee and the same was duly paid to the assessee.
2.3 In the meanwhile, the AO came to know that the assessee had indulged in obtaining fraudulent refund from the Income Tax Department/CPC by claiming bogus loss under the head to 209/Bang/2023 Sri Vinod Radhakrishna, Bengaluru •
Page 5 of 9 House Property and deduction under Chapter VIA of the Act, but without there being any loss and actual investment made during the year under consideration, respectively, and, therefore, the case of the assessee was reopened u/s. 147 of the Act by issuing a notice u/s. 148 of the Act dated 04.04.2018, calling for the return of income within 30 days from the date of receipt of the notice.
2.4 In response to the notice issued u/s. 148 of the Act (supra), the assessee filed the return of income on 16.05.2018, disclosing a total income of Rs.7,99,990/-. While doing so, the assessee revised his claim of deduction under Chapter VIA of the Act to Rs.1,15,000/- as against the claim made in the original return of income of Rs.1,95,600/-. Further, the assessee withdrew his claim of loss under the head House Property to the extent of (-) Rs. 1,55,000/-. Also, the assessee disclosed income under the head -Salaries of Rs.9,04,144/- as against Rs. 7,89,140/- disclosed in the original return of income filed.
2.5 Accordingly, on account of withdrawal of loss under the head House Property of Rs. 1,55,000/-, increase in income under the head Salaries to the extent of Rs. 1,15,004/- (9,04,144 — 7,89,140) and reduction in deduction claimed under Chapter VIA of the Act to the extent of Rs.80,600/- (1,95,600 — 1,15,000), the assessee disclosed a total income of Rs. 7,99,990/-as against Rs. 4,38,540/- admitted in the original return of income filed. As such, the assessee disclosed additional income to the extent of Rs.3,61,450/-. As a natural corollary, on account of initiation of proceedings u/s. 147 of Page 6 of 9 the Act, the assessee withdrew his fraudulent claim of refund of Rs. 67,950/-.
2.6 After having received the return of income in response to notice u/s. 148 of the Act, the AO issued the statutory notices u/s. 143(2) and 142(1) of the Act and conducted E- assessment proceedings through ITBA. Accordingly. the AO completed the re-opened assessment proceedings by passing an order u/s.143(3) r.w.s. 147 of the Act on 20.06.2019, accepting the revised income disclosed by the assessee of Rs. 7,99,990/-.
2.7 Further, during the course of re-assessment proceedings, the AO initiated penalty proceedings u/s. 271(1)(c) of the Act for furnishing inaccurate particulars of income. Accordingly, the AO issued a show cause notice u/s. 274 r.w.s. 271(1)(c) of the Act dated 20.06.2019 and in response thereto, the assessee filed certain written submissions through his Authorized Representative. After having considered the submissions made by the assessee. the AO completed the penalty proceedings u/s. 271(1)(c) of the Act, vide the impugned order dated 7.2.2020 by levying a minimum penalty of Rs.70,188/-, being 100% of tax sought to be evaded.
Against this assessee went in appeal before the NFAC who has dismissed the appeal of the assessee filed against the penalty order u/s 271(1)(c) of the Act for the AY 2014-15 by the AO by observing as follows:
Page 7 of 9 3.1 The ld. NFAC observed that the assessee has failed to prove his bona fides in so far as claiming bogus loss under the head House Property to the extent of (-) Rs. 1,55,000/- and excess bogus amount of deduction under Chapter VIA of the Act to the extent of Rs.80,600/- while filing original return of income u/s. 139(1) of the Act. Also, while filing the original return of income, the assessee concealed Salary income to the extent of Rs.1,15,004/- (9,04,144 — 7,89,140) and Income from other sources to the extent of Rs.10,846/-. As such, NFAC held that the assessee has willfully concealed the particulars of his income under various heads i.e., Salaries, income from other sources and Income from House Property, by way of claiming bogus loss under the head House Property and excess bogus claim of deduction under Chapter VIA of the Act, apart from others, with a mala fide intention to reduce his taxable income to the extent of Rs. 3,61,450/- (7,99,990 — 4,38,540) under the provisions of the statute and to obtain TDS effected by the employer on salary income as a refund from the Income Tax Department. While doing so, the assessee connived with the tax consultant Mr. Nagesh Shastri and, therefore, after considering the involvement of the tax consultant in obtaining fraudulent refund from the Department, NFAC was of the considered opinion that the assessee is liable to pay minimum penalty of 100% of tax sought to be evaded instead of maximum penalty of 300% of tax sought to be evaded. Since, the AO has actually levied only a minimum penalty of 100% of tax sought to be evaded, which worked out to Rs.70,188/-, NFAC did not find any fault with the AO in regard to quantum of penalty levied, which is absolutely in tune with the ratio laid down by the Hon'ble High Court of Page 8 of 9 Allahabad in the case of Mool Chand Gupta vs. C1T [2013] 40 taxmann.6om 296 (Allahabad) (supra). With these observations, the NFAC dismissed the appeal of the assessee raised against the penalty order u/s 271(1)(c) of the Act for the AY 2014-15. 4. After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in the case of Shri Ravikiran Netla in dated 10.9.2020 wherein held as under:
“We have heard both the parties and perused the material on record. In the quantum appeal order dated 19.2.2018, the CIT(Appeals) recorded these facts in para 5 of his order that Mr. Nagesh Shastry was instrumental in filing the revised return. However, the same facts and arguments in the penalty proceedings are not considered by the CIT(Appeals). In our opinion, it is proper to examine whether Mr. Nagesh Shastry is instrumental in claiming fraudulent refund on behalf of assessee by indulging in malpractices. If Mr. Nagesh Shastry is found solely responsible for such fraudulent act and that assessee’s act is bonafide, penalty cannot be levied. With these observations, we remand this issue to the file of the CIT(Appeals) to consider all these facts and decide the issue afresh in accordance with law, after affording assessee opportunity of being heard.
In the result, the appeal of assessee is allowed for statistical purposes.” 4.1 Further, similar view has been taken in the case of Mr. Veereshayya Angadi in & 11/Bang/2023 vide order dated 19.6.2023.
4.2 It is also followed in the case of Shri Bolar Jayaraj Shetty in to 186/Bang2023 dated 8.5.2023 by the Tribunal.
Page 9 of 9 4.3 In view of the above, taking a consistent view, we remit this issue in dispute to the file of AO for fresh consideration to see whether the assessee is bonafide in claiming excessive refund. If the AO finds that if the assessee is bonafide and it was acted at the instigation of the tax consultant Mr. Nagesh Shastry, no penalty shall be levied u/s 271(1)(c) of the Act.
The issue in other appeals in & 209/Bang/2023 for the AYs 2015-16 & 2016-17 are similar and applying the same ratio, the issue in these two appeals is remitted to the file of AO on similar directions.
6. In the result, all the appeals of the assessee in to 209/Bang/2023 for the AYs 2014-15 to 2016- 17 are partly allowed for statistical purposes. Order pronounced in the open court on 20th June, 2023