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Income Tax Appellate Tribunal, ‘’ A’’ BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned three appeals have been filed at the instance of the assessee against the common order of the Learned Commissioner of Income Tax(Appeals)-1, Vadodara, dated 08/12/2016 (in short “Ld.CIT(A)”) arising in the matter of Penalty Order passed under s.271(1)(c)of the Income Tax Act, 1961 (here-in-after referred to as "the Act") dt.04/08/2015, 26/08/2015 & relevant to the Assessment Years2005-06, 2007-08 & 2009-10.
-703/AHD/2017 Asstt. Years 2005-06, 2007-08 & 2009-10 2
Since the issues raised in all the appeals are common and related to the same assessee, therefore, we proceed to adjudicate the same through this common order for the sake of convenience and brevity.
We take up Assessment Year 2005-06 as the lead case for adjudication. The assessee has raised the following grounds of appeal. The Id. CIT(A)-I has erred in law and facts in confirming a penalty of Rs. 1,01,000/- in concluding that the Assessee has furnished inaccurate particulars of income and thereby concealed income by understating his household expenditure. The Id. CIT(A)-I has failed to appreciate that the addition on account of household expenditure was purely based on an estimate without any specific findings related to any unexplained expenditure or income.
The penalty confirmed by the Id. CIT(A)-I, Vadodara is without appreciating the facts of the case and the prevailing law and judicial decisions on the matter.
The only issue raised by the assessee is that the ''Ld.CIT (A)'' erred in confirming the penalty u/s 271(1)(c) of the Act for Rs.1,01,000/-on account of household expenses.
The facts in brief are that the assessee in the present case is an individual and declared his income under the head salary, business and profession and other sources. The assessment u/s.143(3) r.w.s 153A was completed at Rs. 9,47,800/- after making an addition of Rs. 3,00,000/- on account of low household expenses vide order dated 31/03/2013.
5.1 The AO with respect to such addition i.e. low household expenses initiated penalty proceedings u/s 271(1)(c) of the Act on account of furnishing inaccurate particular of income.
5.2 The assessee during the penalty proceeding submitted that he has not furnished any inaccurate particular of income deliberately. Similarly, the addition -703/AHD/2017 Asstt. Years 2005-06, 2007-08 & 2009-10 3 made by the AO which was confirmed by the ''Ld.CIT (A)'' on account of low house hold expenses was based on estimated basis.
5.3 Accordingly, the assessee claimed that there cannot be any penalty proceeding u/s 271(1)(c) of the Act on account of such addition. However, the AO disagreed with the contention of the assessee and held that the assessee has furnished inaccurate particular of income and thereby concealed his income to avoid the tax. Accordingly, the AO levied the penalty of Rs.1,01,000/- on account of low household expenses being 100% of the tax amount sought to be evaded.
Aggrieved assessee preferred an appeal to the ''Ld.CIT (A)'' but no success.
Being aggrieved by the order of the ''Ld.CIT (A)'' the assessee is in appeal before us.
The Ld.AR before us through written submission submitted that there cannot be any penalty with respect to the addition made on estimated basis.
On the other hand, the Ld. DR vehemently supported the order of the authorities below.
We have heard the Ld. DR and perused the materials available on record. In the present case the penalty has been levied with respect to the addition made on account of low house hold expenses. As such the house hold expenses shown by the assessee for Rs. 4,87,500.00 mainly consist of the payment towards interest premium and children’s education fees. Therefore, the AO made an estimated addition of Rs. 3 Lacs on account of household expenses incurred from the income of undisclosed sources. Accordingly the AO during the penalty proceedings held that the assessee has furnished inaccurate particular of income and thereby concealed his income with respect to such low household expenses. Thus the penalty was levied by the AO for Rs. 1,01,000.00 being 100% of the -703/AHD/2017 Asstt. Years 2005-06, 2007-08 & 2009-10 4 amount of tax sought to be evaded which was subsequently confirmed by the learned CIT (A).
9.1 Now the controversy before us arises so as to adjudicate whether the assessee has furnished inaccurate particulars of income with respect to the addition on account of low household expenses. The term inaccurate particular of income has not been defined under the provisions of section 271(1)(c) or elsewhere in the Act the Act. However, the meaning of the term inaccurate has been discussed by the Hon’ble Supreme Court in the case of Reliance Petroproducts (P) Ltd reported in 189 taxman 322 wherein it was held that the term ‘inaccurate’ signifies deliberate act or omission on the part of the assessee. As such, the details/informations contained in the return of income /financial statements /audit report which are not correct according to truth, and were furnished by the assessee with the dishonest intent shall be treated as inaccurate particulars. In holding so, we find support and guidance from the judgment of Hon’ble Supreme Court in the case of Reliance Petroproducts (P) Ltd (supra). We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as :— "not accurate, not exact or correct; not according to truth; erroneous; as an inaccurate statement, copy or transcript." We have already seen the meaning of the word "particulars" in the earlier part of this judgment. Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous. We must hasten to add here that in this case, there is no finding that any details supplied by the assessee in its Return were found to be incorrect or erroneous or false 9.2 Now, if we analyze the facts of the present case in the light of the above stated discussion, we find that the addition made by the AO and confirmed by the learned CIT (A) was based on estimate. As such in the present case, the addition was not based on any tangible material suggesting that the assessee has either concealed income or furnishing inaccurate particulars of income. Thus in the absence of such materials, the addition made during the quantum proceedings cannot be subject to levy of penalty as the quantum and penalty proceedings are -703/AHD/2017 Asstt. Years 2005-06, 2007-08 & 2009-10 5 separate and distinct to each other. Furthermore, to levy the penalty there has be independent enquiries to arrive at the conclusion that the assessee has either concealed or furnished the inaccurate particulars of income. Accordingly, such addition during the assessment proceedings being estimated household expenses does not automatically attract the penalty provisions as envisaged under the provisions of section 271(1)(c) of the Act. As such, the onus, in the present case, lies on the Revenue to prove that such low household expenses is the real income of the assessee from the undisclosed sources in order to attract the penalty provisions specified under section 271(1)(c) of the Act. In holding so we find support and guidance from the judgment of Hon’ble Jurisdictional High Court in the case of Jumabhai Premchand (HUF) Vs. CIT reported in 243 ITR 812 wherein it was held as under: “The two things were different. If the house-hold expenses were unbelievably low, the orders which were passed in the assessment proceedings were proper. But in the proceedings for imposition of penalty, that fact alone was not sufficient. Something more was required. The burden was on the department to prove deliberate concealment of income which was not discharged. Only on the basis of the estimate of expenses, the order of penalty was passed against the assessee which was not legal and valid. Hence, the ITO had not discharged the onus in establishing that the assessee had met his household expenses for the relevant assessment years from income from undisclosed sources”.
9.3 Thus the penalty in the present case levied by the AO which was subsequently confirmed by the learned CIT-A is not sustainable. . Hence, we set aside the finding of the ''Ld.CIT (A)'' and direct the AO to delete the penalty levied by him. Thus the ground of appeal of the assessee is allowed.
In the result, the appeal of the assessee is allowed.
Now coming the for the Assessment Year 2007-08 & 2009-10. The assessee has raised the following grounds of appeal:
1. ITAT No.702/Ahd/2017 The Id. CIT(A)-I has erred in law and facts in confirming a penalty of Rs. 1,38,000/- in concluding that the Assessee has furnished inaccurate particulars of income and thereby -703/AHD/2017 Asstt. Years 2005-06, 2007-08 & 2009-10 6
concealed income by understating his household expenditure. The Id. CIT(A)-I has failed to appreciate that the addition on account of household expenditure was purely based on an estimate without any specific findings related to any unexplained expenditure or income.
The penalty confirmed by the Id. CIT(A)-I, Vadodara is without appreciating the facts of the case and the prevailing law and judicial decisions on the matter.
2. ITAT No.702/Ahd/2017 The Id. CIT(A)-I has erred in law and facts in confirming a penalty of Rs. 1,83,600/- in concluding that the Assessee has furnished inaccurate particulars of income and thereby concealed income by understating his household expenditure. The Id. CIT(A)-I has failed to appreciate that the addition on account of household expenditure was purely based on an estimate without any specific findings related to any unexplained expenditure or income.
The penalty confirmed by the Id. CIT(A)-I, Vadodara is without appreciating the facts of the case and the prevailing law and judicial decisions on the matter.
At the outset we note that, we have decided the identical issue in the own case of the assessee in Assessment Year 2005-06 wherein the ground of appeal of the assessee was allowed. For detailed discussion, please refer the paragraph number 9 of this order. Respectfully following the same, we allow the above two appeals raised by the assessee also.
In the combined results, all the appeals of the assessee are allowed.
Order pronounced in the Court on 20/02/2020 at Ahmedabad.