THE DCIT, CIRCLE-2(1), NOW CIRCLE-1(2),, BARODA vs. SMT. INDRAMATI C. PANDEY WIDOW & L/H OF LATE CHANDRABHAN R. PANDEY,, BARODA

Revenue’s appeal filed against order of the ld.CIT(A)-II, Baroda dated 20.1.2011 passed for the Asstt.Year 2007-08. On receipt of notice on this Revenue’s appeal, assessee has filed cross objection bearing no.32/Ahd/20187. Assessee is also in appeal against order of ld.CIT(A)-II, Baroda dated 12.11.2014 challenging confirmation of penalty under section 271(1)(c) of the Act. All these appeals are disposed of by this common order for the sake of convenience.

First we take along with CO No.32/Ahd/2018. Registry has pointed out that CO filed by the assessee is time barred by 1030 days. Revenue in its appeal challenged deletion of addition as set out in the grounds of appeal.

The ld.counsel for the assessee at the outset submitted that tax effect by way of relief given by the ld.CIT(A) is less than Rs.50 lakhs. He submitted that by virtue of recent CBDT Circular No.17 of 2019 dated 8.8.2019, Department has been instructed not to file appeal before the Tribunal where tax effect is below Rs.50 lakhs. This instruction is applicable to the pending cases also. Therefore, the present appeal of the Revenue is liable to be dismissed at the threshold. He filed a calculation sheet demonstrating tax effect on the addition confirmed by the ld.CIT(A) is less than Rs.50 lakhs. It reads as under:

After hearing both the sides and after perusal of the above CBDT Instruction, we are of the view that the present appeal of the Revenue falls within the purview of the CBDT Instruction cited (supra). We have noted that the quantum of penalty disputed by the Revenue is less than Rs.50 lakhs, and therefore, keeping in view the above CBDT circular and provisions of section 268A of the Income Tax Act, we are of the view that the present appeal of the Revenue deserves to be dismissed. It is dismissed.

Now we take ITA No.445/Ahd/2015.

In this appeal, the assessee has challenged confirmation of penalty amounting to Rs.2,76,012/- levied by the AO under section 271(1)(c) of the Act.

Brief facts of the case are that the assessee has filed her return of income electronically on 30.10.2017 declaring total income at Rs.8,19,930/-. Return was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. The AO has confronted the assessee that AIR wing has transmitted an information that the assessee has deposited a sum of Rs.11,20,000/- in cash in saving bank account no.20855 with Punjab National Bank. He directed assessee to explain the source of deposits. It was contended by the assessee that this bank account belonged to HUF, and out of agriculture income, the cash was deposited in HUF account. The ld.AO accepted the explanation of the assessee of the source of income to the extent of Rs.3 lakhs, and made addition of Rs.8,20,000/- under section 68 of the Act.

Appeal to the CIT(A) did not bring any relief to the assessee. The assessee thereafter did not challenge this addition, but filed CO in the appeal of the Revenue challenging this addition. The CO is time barred by 1030 days, and therefore, it was not pressed. Hence, addition stands confirmed.

The ld.counsel for the assessee contended that confirmation of addition does not denue the assessee from right to aver penalty is not imposable

We have duly considered rival submissions and gone through the record carefully. Section 271(1)(c) of the Income Tax Act, 1961 has direct bearing on the controversy. Therefore, it is pertinent to take note of the section.

A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, the penalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the With CO 7 deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of the assessee for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished.

In the light of the above, let us consider facts of the present case. No doubt the addition on account of unexplained credit found deposited in the bank account with Punjab National Bank, has been made at Rs.8,20,000/-. This addition stand confirmed at the end of the ld.CIT(A), and thereafter, the assessee did not press CO before us. Question is, if an issue has been decided against the assessee on the wrong premise, can that be used against the assessee in the penalty proceedings also ? The bank account is in the name of HUF, and the HUF is a separate taxable independent entity. If an account is being maintained by the HUF, then the assessment in the hands of HUF ought to have been made. In the present case that has not been done. Since the quantum is not open before us, we cannot touch it. The assessee has to pay tax on the addition made by the AO. But penalty is a separate proceedings, and on account of any technical issue, if an assessee can absolve himself from visiting with penalty, then, all those plea are available with the assessee. Since the addition itself ought not have been made in the hands of the assessee, because this bank account did not belong to the assessee, rather it belonged to HUF, therefore, for the purpose of penalty, we are satisfied that With CO 8 the assessee does not deserves to be visited with penalty in these circumstances. We allow the appeal of the assessee, and delete penalty of Rs.2,76,012/-.

In the result, CO No.32/Ahd/2018 are dismissed, and is allowed.