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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, AM:
These appeals of the assessees are directed against the different orders of the
CIT(A)-III, Kochi dated 20/02/2019 and pertain to the assessment years 2002-03 to
2008-09.
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 2. The grounds of appeals in the case of the assessee Smt. Thankamani
Varadarajulu which are common in nature except for change in amount read as
follows:
The learned deputy commissioner of income tax erred in levying a penalty of Rs 51.151/- u/s 271(1) (C) of the Income Tax Act 1961overlooking the explanations offered by the appellant.
The learned deputy commissioner of income tax ought to have appreciated that failure to disclose property income was purely accidental. The appellant's husband already having conceded to the department that the appellant was in possession of two properties there was no question of the appellant wilfully concealing the particulars of income in respect of these properties.
The learned deputy commissioner of income tax erred in concluding that the addition made on account of unexplained deposits in S.B account with Canara Bank, Kottayam amounted to concealment, overlooking the fact that it was appellant's late husband, who was handling the tax affairs and having lost him, there was no way by which the appellant could properly explain the source of deposit with evidence.
The learned deputy commissioner of income tax ought to have distinguished between an accidental omission and a wilful concealment, as also a failure to explain an item properly and the explanation having been made, the department not being satisfied with the explanation offered.
The learned deputy commissioner of income tax ought to have appreciated the circumstances under which the addition was agreed to, merely because the appellant had surrendered or agreed to an addition, it would not automatically go to conclude that the appellant had in fact concealed the particulars of her income.
The learned deputy commissioner of income tax ought to have appreciated that the appellant, being a widow of Varadarajulu, who was the main person in charge of family affairs, failure to offer explanation, on account of the death of the said Varadarajulu, was quite natural and to expect something contrary from the appellant is to expect something impossible.
The CIT (A) erred in confirming the penalty of Rs 51.151/- u/s 271(1) (C) of the income Tax Act 1961 overlooking the explanations offered by the appellant.
The CIT (A) also should have appreciated the factual position that the major addition in income was due to the appellant's inability to explain the deposit in 2
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 bank account in the absence of her late husband who was handling her tax matters.
Since the business of M/s Parthas Textiles was a joint family business, the key member of the family handled the business and the other members of the family assisted him. The key member was responsible for managing the transactions of the business and the income tax matters of other members of the family. The sudden demise of key member, S Varadarajulu, made the other members handicapped to properly explain the transactions in their account.
The CIT (A) also should have appreciated the fact that the return of income of the appellant for the Assessment Year 2002 - 2003 was filed on 20/11/2009. The appellant's husband, who was handling the accounts and tax affairs of the appellant, was died on 05/09/2009. Before the death the appellant's husband undergone for continuous treatments in relation to his illness. At that time the appellant had to devote her full attention and care to her husband. Her beloved husband's health condition worried her a lot and she gave more importance for the survival of her husband rather than income tax matters. Soon after her husband passed away and the sudden demise of the leader of the family made them mentally weak. In such a situation the department asked the appellant to file the return and produce the supporting evidence. Hence the appellant filed a return based on her limited knowledge and produced the supporting evidences to the best of his knowledge. Since the return was filed at a time when the appellant was a shaken person, following the death of her husband and differences in the family, she couldn't provide more attention to the tax matters. CIT (A) should have consider the human emotions behind the situation and treat the omissions as unintentional not as concealment.
Therefore the surrender of the amounts was not because they were income, but due to impossibility of proving the credits in view of the death of the appellant's husband. This admission can't be construed as concealment by any stretch of imagination
More over in the case of Late S Varadarajulu the Cochin bench of ITAT Cochin vide order dated 07.09.2012 held that : "It is well settled principle of law that all additions made in the assessment proceedings do not automatically result in levy of penalty, The assessing, authority is expected to reappreciate the evidence available on record independently in the penalty proceedings and thereafter if he comes to the conclusion that there was concealment of particulars of income or the tax payer has furnished inaccurate particulars with regard to that income penalty may be levied. In this case, admittedly, the tax payer expired in the month of September 2009. It is also not in dispute that the tax payer was expelled from the partnership firm on the allegation of misappropriation of firm's fund. The factual situation could have been well explained before the assessing authority by the tax 3
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 payer himself. Unfortunately the tax payer is no more. Therefore the legal representatives of the tax payer were practically handicapped in explaining the real situation which resulted in credit of the amount in the bank account. In such a circumstance, we may not be able to blame the legal heirs in not furnishing a satisfactory explanation. By taking into consideration the death of the tax payer and the practical difficulty faced by the legal heirs in furnishing the reasons for not offering the amount found in the bank account, this Tribunal is of the considered opinion that this is not a fit case for levy of penalty. Therefore the Commissioner of Income Tax (A) has rightly deleted the penalty. We do not find any infirmity in the order of the lower authority. Accordingly the same is confirmed".
The CIT (A) also should have appreciated the fact that the appellant is a housewife supporting her husband in the business needs without having any knowledge in tax and accounting matters. The sudden demise of her husband made her shaken and at that time filing of return becomes necessary and she had filed the return based on available documents with her. The actual intention was to file the return and not conceal any income. Her inability to explain things in the absence of her husband lead to the situation of differences in income.
The CIT (A) also should have appreciated the fact that the appellant lost her husband. Emotions can affect the mind of a person for a long period. It will take a lot of time to recover from the mental illness caused by such emotions. In this case the appellant's husband died in the year 2009. Since the appellant was very much closer to her husband it took a lot of time to the appellant to recover from that Actually the appeal was considered by the CIT(A) in the year 2019. A look back into such a situation after a long period of 10 years made an impression that the appellant got about 3 months to file the return after the death of her husband and got enough time to produce evidences because she is an adult person. However the sudden demise of her husband, the expulsion from the family and family business etc destroyed her financial and mental strength. In such a situation, even if she is an adult person, she was not able to recollect the financial transactions in her bank account without the presence of her husband. The appellant took a lot of time to recover from that. If the CIT (A) had considered the situation from that point of view they did not conclude like that.
These and other grounds of appeal that may be raised during the course of appeal proceedings
Your appellant prays that the penalty of Rs 51,151/- levied u/s 271(1) (c) of the Income Tax Act 1961 be cancelled.
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 3. The facts of the case in the case of Smt. Thankamani Varadarajulu, ex partner of
M/s. Parthas Textiles is the wife of Sri. S Varadarajulu, ex-partner of M/s Parthas
Textiles, Kottayam, a related concern of M/s Parthas Textiles, Trivandrum, which
was subjected to search u/s 132 of the Income Tax Act 1961 on 11.10.2007. In
response to notice u/s 153C, the appellant filed a return admitting an income of Rs
7,49,88/-. The assessment was completed on a total income of Rs 9,20,385/-.
Penalty proceedings u/s 271(1)( c) of the Income Tax Act 1961was initiated, in
completing the assessment. According to the assessing officer, as per written
submission filed by Sri. S Varadarajulu, it was mentioned that two properties with
residential building i.e., Thrayambakom and Guna Nivas were purchased in the
name of the assessee . However the assessing officer noticed that the assessee had
not returned any rental income from the same nor any satisfactory explanation was
offered by the assessee for not including rental income. The assessing officer
included the rental income of Rs 15,960/- which was agreed to by the assessee.
This omission on the part of the assessee, to return the rental income, was
deliberate according to the Assessing officer. Consequently she concluded that there
was a wilful attempt on part of the assessee to furnish inaccurate particulars of
income, by concealing the rental income. A sum of Rs 1,54,542/- was added in the
assessment in respect of alleged unaccounted deposit in the assessee’s S.B Account
No.7961 with Canara bank, Kottayam. This amount was added as income from
other sources, on account of failure on the part of the assessee to explain the
sources of the same. According to the Assessing officer, this addition attracted the
provisions of section 271(1) (c) of the Income Tax Act 1961. 5
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 3.1 It was the case of the assessee that income from house properties was a pure
accidental omission and the assessee was not in receipt of any rent for most parts
of the year and at the time of filing the return, this fact was completely overlooked.
As a new tax consultant was handling the affairs, on account of dispute in the
family, failure to return the income was not intentional. Regarding deposit in her S.B
Account, the assessee could not explain the same, since it was her late husband
Varadarajulu, who was handling her accounts and tax matters and in view of the
fact that he had expired before the assessment was completed, the assessee could
not properly explain the source for the deposits. The assessee also submitted that
the additions were agreed to merely on account of her inability to explain things
properly to the department, as a result of the death of her husband and with a view
to purchase peace and to bring about a finality to the assessment proceedings and
not on account of the fact that these represented undisclosed income. Therefore it
was the case of the assessee that the addition did not tantamount to concealment,
even though they were agreed to. The Assessing officer rejected the explanation
offered and went on to levy a penalty of Rs 51,151/- u/s 271(1) (c) of the Income
Tax Act 1961.
3.2 On appeal, the CIT(A) rejected the appeal of the assessee stating that stating
that the assessee’s husband's presence and ability to explain these items would
have resulted in no addition at all, does not hold any ground in the cases of the
assessee as she being an independent adult is responsible for her own action,
particularly since she was and is the direct beneficiary of the investments. 6
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019
3.3. Against this, the assessee is in appeal before us.
The grounds of appeals raised in the case of the assessee Smt. Anita
Nagendran which are also common in nature except for change in figures read as
follows:
The learned deputy commissioner of income tax erred in levying a penalty of Rs 60,558/- u/s 271(1)(c)of the Income Tax Act 1961 in respect of certain deposits made in the bank account of the appellant, overlooking the explanations offered by the appellant.
The learned deputy commissioner of income tax overlooked the fact that these deposits were in the form of clearing cheques and the failure to explain the same with proper evidence was on account of the fact that the appellant's father, who was handling the accounts and tax affairs of the appellant had expired during the course of assessment proceedings.
The learned deputy commissioner of income tax ought to have appreciated that it is one thing to offer an explanation and another thing to offer explanation, but not supporting such explanation with any documentary evidence. Mere failure to do so cannot lead to a conclusion that the explanation offered is false or untrue.
The learned deputy commissioner of income tax ought to have appreciated the fact that mere surrendering of an amount as income with a view to purchasing peace will not tantamount to concealment as defined in the Act The reason for agreeing for an addition may be on several counts that alone cannot be a ground for concealment of income.
The CIT (A) erred in confirming the penalty of Rs 60,558/- u/s 271(1) (C) of the Income Tax Act 1961 overlooking the explanations offered by the appellant.
The CIT (A) also should have appreciated the factual position that the major addition in income was due to the appellant's inability to explain the deposit in bank account in the absence of her late father who was handling her tax matters.
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 7. Since the business of M/s Parthas Textiles was a joint family business, the key member of the family handled the business and the other members of the family assisted him. The key member was responsible for managing the transactions of the business and the income tax matters of other members of the family. The sudden demise of key member, S Varadarajulu, made the other members handicapped to properly explain the transactions in their account
The CIT (A) also should have appreciated the fact that the return of income of the appellant for the Assessment Year 2002-2003 was filed on 20/11/2009. The appellant's father, who was handling the accounts and tax affairs of the appellant, was died on 05/09/2009. Before the death the appellant's father undergone for continuous treatments in relation to his illness. At that time the appellant had to devote her full attention and care to her father. Her beloved father's health condition worried her a lot and she gave more importance for the survival of her father rather than income tax matters. Soon after her father passed away and the sudden demise of the leader of the family made them mentally weak. In such a situation the department asked the appellant to file the return and produce the supporting evidence. Hence the appellant filed a return based on her limited knowledge and produced the supporting evidences to the best of his knowledge. Since the return was filed at a time when the appellant was a shaken person, following the death of her father and differences in the family, she couldn't provide more attention to the tax matters. CIT (A) should have consider the human emotions behind the situation and treat the omissions as unintentional not as concealment.
Therefore the surrender of the amounts was not because they were income, but due to impossibility of proving the credits in view of the death of the appellant's father. This admission can't be construed as concealment, by any stretch of imagination
More over in the case of Late S Varadarajulu the Cochin bench of ITAT Cochin vide order dated 07.09.2012 held that: "It is well settled principle of law that all additions made in the assessment proceedings do not automatically result in levy of penalty. The assessing authority is expected to reappreciate the evidence available on record independently in the penalty proceedings and thereafter if he comes to the conclusion that there was concealment of particulars of income or the tax payer has furnished inaccurate particulars with regard to that income penalty may be levied. In this case, admittedly, the tax payer expired in the month of September 2009, It is also not in dispute that the tax payer was expelled from the partnership firm on the allegation of misappropriation of firm's fund. The factual situation could have been well explained before the assessing authority by the tax payer himself. Unfortunately the tax payer is no more. Therefore the legal representatives of the tax payer were practically handicapped in explaining the real situation which resulted in credit of the amount in the bank account In such a circumstance, we may not be 8
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 able to blame the legal heirs in not furnishing a satisfactory explanation. By taking into consideration the death of the tax payer and the practical difficulty faced by the legal heirs in furnishing the reasons for not offering the amount found in the bank account, this Tribunal is of the considered opinion that this is not a fit case for levy of penalty. Therefore the Commissioner of Income Tax (A) has rightly deleted the penalty. We do not find any infirmity in the order of the lower authority. Accordingly the same is confirmed".
The CIT (A) also should have appreciated the fact that the appellant is a housewife supporting her father in the business needs without having any knowledge in tax and accounting matters. The sudden demise of her father made her shaken and at that time filing of return becomes necessary and she had filed the return based on available documents with her. The actual intention was to file the return and not conceal any income. Her inability to explain things in the absence of her father lead to the situation of differences in income.
The CIT (A) also should have appreciated the fact that the appellant lost her father. Emotions can affect the mind of a person for a long period. It will take a lot of time to recover from the mental illness caused by such emotions. In this case the appellant's father died in the year 2009. Since the appellant was very much closer to her father it took a lot of time to the appellant to recover from that. Actually the appeal was considered by the CIT (A) in the year 2019. A look back into such a situation after a long period of 10 years made an impression that the appellant got about 3 months to file the return after the death of her father and got enough time to produce evidences because she is an adult person. However the sudden demise of her father, the expulsion from the family and family business e.tc destroyed her financial and mental strength. In such a situation, even if she is an adult person, she was not able to recollect the financial transactions in her bank account without the presence of her father. The appellant took a lot of time to recover from that. If the CIT (A) had considered the situation from that point of view they did not conclude like that.
These and other grounds of appeal that may be raised during the course of appeal proceedings
Your appellant prays that the penalty of Rs 60,558/- levied u/s 271(1)(c) of the Income Tax Act 1961 be cancelled.
4.1 The facts of the case are that the assessee is the daughter of Sri. S
Varadarajulu, ex-partner of M/s Parthas Textiles, Kottayam, a related concern of M/s
Parthas Textiles, Trivandrum, which was subjected to search u/s 132 of the Income
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 Tax Act 1961 on 11.10.2007. In response to notice u/s 153C, the assessee filed a
return admitting an income of Rs 1,80,366/-. The assessment was completed on a
total income of Rs 3,82,226/-. Penalty proceedings u/s 271(1)(c) of the Income Tax
Act 1961was initiated, in completing the assessment. The only addition made in the
assessment was a sum of Rs 2,01,860/- in respect of certain deposit in the
assessee’s Account No.12669 with Canara Bank, Kottayam on various dates in
January 2002. On the ground that the assessee had not satisfactorily explained the
source for these deposits and the further fact that the assessee had agreed for the
addition, the Assessing officer came to the conclusion that the assessee had
concealed her income. Further, the Assessing officer was of the opinion that the
search brought to light incriminating materials that led to the addition, which also
amounted to concealment. The Assessing officer rejected the assessee’s contention
that failure to explain the source with evidence was on account of the fact that the
details were known only to the assessee’s father, late Varadarajulu, who died during
the course of assessment proceedings, Further, she also did not take to notice of
fact that these deposits were not cash deposits, but clearing cheques which could
have been easily ascertained from the banks. The Assessing officer rejected the
explanation offered and went on to levy a penalty of Rs 60,558/- u/s 271(1)(c) of
the Income Tax Act 1961.
4.2 On appeal, the CIT(A) rejected the appeal of the assessee by stating that the
assessee’s father's presence and ability to explain these items would have resulted
in no addition at all, does not hold any ground in the cases of the assessee as she 10
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 being an independent adult (date of birth 26.10.1976- She was over 24 years old at
the time of the relevant year) is responsible for her own action, particularly since
she was and is the direct beneficiary of the investments.
4.3 Against this, the assessee is in appeal before us.
There was a short delay of 5 days in filing the appeals before the Tribunal in
both the cases. The Ld. AR has filed condonation petitionss accompanied by an
affidavit in the case of Smt. Thankamani Varadrajulu which reads as follows:
“I am ane assessee in the jurisdiction of the assessing officer at Kottayam. I am the wife of late S Varadarajulu, Ex-partner of M/s Parthas Textiles, Kottayam. Following a search in the case of Parthas Textiles, Kottayam/Trivandrum, the files of the petitioner were also transferred from the assessing officer at Kottayam to Central Circle, Trivandrum.
Apart from the fact that I am assessed to income tax for the last few years, my tax affairs were completely managed by my husband, S Varadarajulu. A search u/s 132 of the Income Tax Act 1961 took place on 11.10.2007. I lost my husband after a prolonged illness. Thereafter an assessment was completed on me and penalty u/s 271(1)(c) of the Income Tax Act 1961 was levied on me. I challenged the levy of penalty before Hon'ble CIT (A) III, Cochin and the Hon'ble CIT (A) III, Cochin confirmed the penalty vide order u/s 250 dated 20.02.2019. The order was communicated to me on 06.03.2019 and the appeal against the order was to be filed within 60 days (i.e. on 05.05.2019). There is a delay of 5 days in filing the appeal. It is submitted that I was abroad at that time and came back to India at the end of the March 2019. After coming back to India I had to give attention for few days to the business activities carried out by me. At the same time I had to appear before the Assessing Officer in Kottayam in relation to a summons received earlier. With respect to that I had to submit documents also. Since the documents related to old years I took lot of time to collect the same. To make the matters worse a notice was received u/s 148 of the Income Tax Act 1961 for reassessment u/s 147 of the Income Tax Act 1961 for the AY 2012-13 from the Income Tax Authorities in Kottayam requiring submission of income tax return of that year. In relation to that, I had to collect documents relating to past years (Especially Bank Statements). Obtaining bank statements from bank at a time when they were 11
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 under statutory audit was very difficult and some of the statements were not yet received. In addition to that I had to follow up with CCIT, Trivandrum regarding the status of "Interest waiver petition" submitted earlier by me relating to AY 2002 -03 to AY 2008-09. Since the "Interest waiver petition" was also submitted long years ago I had to take more efforts to identify the current position, which required continuous communications with Income Tax Authorities in Kottayam, Ernakulum and Trivandrum. Moreover there was a lot of pressure on me to remit various tax demands pertaining to the period from AY 2002-03 to AY 2008- 09. All these situations lead to a busy schedule for me in the month of April 2019.
In the month of April 2019 I was busy with the aforesaid matters and I was not able to prepare all the appeal documents before the ITAT. Since the case related to earlier years, obtaining the documents relating to those years were a herculean task. Only few documents were available with me. The Assessment orders of those years were not available with me. the case were earlier handled by another firm of chartered accountants who were also in possession with the assessment orders. The case was handled by the Income Tax authorities in Trivandrum and thereafter files are transferred to Ernakulum and presently my cases are handled by Income Tax Authorities in Kottayam. Hence for obtaining the documents I had to make inquiries in each of the above jurisdictions and I got only scattered informations from each jurisdiction. Finally after a long period of inquiries in various income tax jurisdictions, I got the copy of the assessment orders in the beginning of May 2019. Thereafter the appeal documents were prepared and I had remitted the fee for appeal filing on 03.05.2019. I intended to fie the same by 04.05.2019. I was under the strong belief that "Form 36” is to be submitted electronically. Only on inquiry with your office on 03.05.2019 I came to know that the submission should be filed manually. Since the information was obtained afternoon it was not possible to submit the documents at Cochin on that date. Unfortunately the coming two days i.e., Saturday and Sunday the office of ITAT was not working. Due to the aforementioned reasons I could not submit the appeal within due date. It is submitted that the delay in filing the appeals is not deliberate and has happened due to the aforementioned circumstances.
In these circumstances, I humbly pray that the Hon'ble ITAT may kindly condone the delay of 5 days in filing the appeal.”
5.1 The Ld. AR has filed condonation petitions accompanied by an affidavit in the
case of Smt. Anita Nagendran which reads as follows:
“I am an assessee in the jurisdiction of the assessing officer at Kottayam. I am the daughter of late S Varadarajulu, Ex-partner of M/s Parthas Textiles, 12
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 Kottayam. Following a search in the case of M/s Parthas Textiles, Kottayam/ Trivandrum, the files of the petitioner were also transferred from the assessing officer at Kottayam to Central Circle, Trivandrum.
Apart from the fact that I am assessed to income tax for the last few years, my tax affairs were completely managed by my father, S Varadarajulu. A search u/s 132 of the Income Tax Act 1961 took place on 11.10.2007. 1 lost my father after a prolonged illness. Thereafter an assessment was completed on me and penalty u/s 271(1)(c) of the Income Tax Act 1961 was levied on me. I challenged the levy of penalty before Hon'ble CIT (A) III, Cochin and the Hon'ble CIT (A) III, Cochin confirmed the penalty vide order u/s 250 dated 20.02.2019. The order was communicated to me on 06.03.2019 and the appeal against the order was to be filed within 60 days (i.e, on 05.05.2019). There is a delay of 5 days in filing the appeal.
It is submitted that actually the penalty was relating to my assessed income of AY 2002-03, 2003-04, 2004-05 and 2005-06. Since the assessment was done based on a search conducted in the family of us, I was also served with a penalty order. All the documents and communications relating to that search assessment were handled and kept by my mother. On receipt of the order u/s 250 as mentioned above my mother was abroad and she came back to India at the end of March 2019. Since the filing of appeal before ITAT required copy of the assessment orders of earlier years I contacted my mother and she replied that old documents may be with her. After coming back to India my mother was busy with various income tax matters and only on a thorough search it was known that the documents are not available. Since the case related to earlier years, obtaining the documents relating to those years were a herculean task. Only few documents were available with me. The Assessment orders of those years were not available with me. Since the case were earlier handled by another firm of chartered accountant who were also not in possession with the assessment orders. The case was handled by the income tax authorities in Trivandrum and thereafter some files are transferred to Ernakulum and presently my cases are handled by income tax authorities in Kottayam. Hence for obtaining the documents I had to make inquiries in each of the above jurisdictions and the petitioner got only scattered informations from each jurisdiction. Finally after a long period of inquiries in various income tax jurisdictions, I got the copy of the assessment orders. Thereafter the appeal documents were prepared and I had remitted the fee for appeal filing on 03.05.2019. I intended to file the same by 04.05.2019. I was under the strong belief that "Form 36" is to be submitted electronically. Only on inquiry with your office on 03.05.2019 I came to know that the submission should be filed manually. Since the information was obtained afternoon it was not possible to submit the documents at Cochin on that date. Unfortunately the coming two days i.e., Saturday and Sunday the office of ITAT was not working. Due to the aforementioned reasons I could not submit the appeal within due date. The 13
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 assessment orders were not yet received and the time for filing the appeal also lapsed; now I am forced to file the appeal without submitting the assessment orders.
It is submitted that the delay in filing the appeal is not deliberate and has happened due to the aforementioned circumstances.
In these circumstances, I humbly pray that the Hon'ble ITAT may kindly condone the delay of 5 days in filing the appeal.”
5.2 We have gone through both the condonation petitions. We find there is
sufficient cause for filing the appeals in both the cases belatedly before the
Tribunal. Accordingly, we condone the short delay of 5 days in filing the appeals of
both the assessees and admit the appeals for adjudication.
The assessees have also filed petitions for admission of the additional ground of
appeals in all cases as follows:
“When the Appeal came up for hearing,the Hon'ble Bench directed the Appellant to produce a copy of the penalty notice received by the Appellant for the Asst. Years under appeal.”
6.1 We find bona fide reasons in the act of the assessee in not raising the
additional ground on an earlier occasion by placing reliance on the judgment of the
Supreme Court in the case of National Thermal Power Corporation Ltd. vs. CIT (229
ITR 383) wherein it was held that Tribunal has the discretion to allow or not to
allow additional ground to be raised for the first time before the Tribunal.
Accordingly, we admit the additional ground for adjudication.
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 6.2 We have heard the rival submissions and perused the record. We find bona
fide reasons in the act of the assessee in not raising the additional ground on an
earlier occasion by placing reliance on the judgment of the Supreme Court in the
case of National Thermal Power Corporation Ltd. vs. CIT (229 ITR 383) wherein it
was held that Tribunal has the discretion to allow or not to allow additional ground
to be raised for the first time before the Tribunal. Accordingly, we admit the
additional ground for adjudication.
Coming to the merits of the additional ground, the Ld. AR drew our attention to
all the notice issued for imposing penalty u/s. 274 of the Act and one such notice
issued for AY 2002-03 in the case of Smt. Anita Nagendran dated 31/12/12009
reads as follows:
ENCLOSURE 1 - Notice Under Section 274 of The Income Tax Act 1961 NOTICE UNDER SECTION 274 READ WITH SECTION 271 OF THE INCOME-TAX ACT, 1961 PAN: ABFPV7178.I Office of the Assistant Commissione of of Income-tax, Central Circle-2, ‘Devikripa'. Pettah, Pallimukku, Trivandrum-695 024.
Dated: 31.12.2009 PR (56)/09-10 To Smt. Anita Nngendran, "SRI SAILAM", Union Club Road, Kottayam - 686 001
Whereas in the course of proceedings before me for the assessment year 2002-03 it appears to me that you:- *have_without reasonable cause failed to comply with a notice under section 142(1)/143(2) of the Income-tax Act, 1961, 15
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019
*have concealed the particulars of your income or furnished inaccurate particulars of such Income,
You are hereby requested to appear before me at 03.30PM on 2I.0L2010 and show cause why an order imposing a penalty on you should not be made under section 71 of the Income-tax Act, 1961. If you do not wish to avail yourself of this opportunity of being heard in person or through authorized representative you may show cause in writing on or before the said date which will be considered before any such order is made under section 271.
Seal sd/- (S. MOHD. MUSTAFA) Assistant Director of income-tax(lnv.), Tvm, Holding concurrent jurisdiction over Central Circle-2, Trivandrum
7.1 The Ld. AR submitted that the penalty initiated u/s 271(1)(c) was invalid for
the reason that the default for which the penal action was taken has not been
specified in the notice issued. The notice mentioned both the defaults viz.
concealment of income and furnishing of inaccurate particulars of income. it was
submitted that the Assessing Officer had not struck off the irrelevant portion of the
penalty notice which was not applicable to the assessee and does not clearly
mention whether he proposed to levy penalty for concealment of income or
furnishing of inaccurate particulars of income.
7.2 The Ld. AR relied on the recent judgments of the Karnataka High Court in the
case of Muninaga Reddy vs. ACIT reported in 396 ITR 398 and in the case of S.
Chandrasekar Vs. ACIT reported in 396 ITR 538 and also that of Telangana &
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 Andhra Pradesh High Court in the case of Pr.CIT Vs. Smt. Baisetty Revathi reported
in 398 ITR 88. Hence, it was submitted that the penalty levied may be cancelled.”
The Ld. DR submitted that it was only a technical mistake which was not to be
considered and the appeal should be decided on merit.
We have heard the rival submissions and perused the record. We have
carefully gone through the notice issued u/s. 274 r.w.s. 271 of the Act narrated in
para 4 of this order. As seen from the above notice issued u/s. 274 of the Act, the
Assessing Officer has not struck out the irrelevant portion of the notice. In other
words he has not specified whether he is levying penalty for concealment of
particulars of income or furnishing of inaccurate particulars of income. As held by
the Karnataka High Court in the case of CIT & Anr. vs. M/s. SSA’s Emerald Meadows
(2015) (11) TMI 1620 that the notice issued by the Assessing Officer u/s. 274 r.w.s
271(1)(c) is to be bad in law as it did not specify which limb of section 271(1)(c) of
the Act, the penalty proceedings had been initiated, i.e., whether for concealment of
particulars of income or furnishing of inaccurate particulars of income. This view
was confirmed by the Supreme Court in the same case, i.e., CIT & Anr. vs. M/s.
SSA’s Emerald Meadows reported in (2016) (8) TMI 1145.
9.1 In view of the above discussion, we are inclined to hold that the penalty
proceedings initiated by the AO is void ab initio and allow the appeal of the
I.T.A. Nos.374-380/Coch/2019 381 to 384/coch/2019 assessee. Since we have quashed the penalty proceedings itself, we refrain from
adjudicating the other grounds of appeals raised by the assessee.
In the result, appeals of the assesses are allowed. Order pronounced in the open court on 27th September, 2019.
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER
Place: Kochi Dated: 27th September, 2019 GJ Copy to: 1. Smt. Thankamani Varadarajulu, Thryambakom (H), Poduval Lane, Puthanangadi P.O., Kottayam-686 001. 2. Smt. Anita Nagendran, Thryambakom (H), Poduval Lane, Puthanangadi P.O., Kottayam-686 001. 3. The Deputy Commissioner of Income-tax, Central Circle-2, Trivandrum. 4. The Commissioner of Income-tax(Appeals)-III, Kochi. 5. The Commissioner of Income-tax, Central, Kochi. 6. D.R., I.T.A.T., Cochin Bench, Cochin. 7. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin