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Facts
The assessee did not file the original return of income for AY 2015-16 but paid self-assessment tax. The case was reopened under Section 148, and the return filed declared income of Rs. 72,16,330. Penalty proceedings were initiated under Section 271(1)(c), resulting in a penalty of Rs. 15,63,281. The assessee cited personal reasons for the delay.
Held
The Tribunal held that the penalty under Section 271(1)(c) was not leviable because the self-assessment tax paid by the assessee (Rs. 2,16,470) exceeded the total tax assessed (Rs. 2,08,142). As per Explanation 4(c) of Section 271(1)(c), when self-assessment tax paid before the notice is more than the tax sought to be evaded, the penalty cannot be levied.
Key Issues
Whether penalty under Section 271(1)(c) is leviable when the self-assessment tax paid exceeds the tax sought to be evaded, and whether the assessee had sufficient cause for not filing the return on time.
Sections Cited
147, 148, 271(1)(c), 144B, 139(1), 156, 143(3)
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “G”: NEW DELHI
O R D E R PER M. BALAGANESH, A. M.: 1. The appeal in AY 2015-16, arises out of the National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „ld. NFAC‟, in short] in Appeal No. ITBA/NFAC/S/250/2024-25/1069390295(1) dated 04.10.2024 against the order of assessment passed u/s 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred to as „the Act‟) dated 15.09.2023 by the Assessing Officer, Assessment Unit, Income Tax Department (hereinafter referred to as „ld. AO‟).
The only issue to be decided in this appeal is as to whether the Learned CITA was justified in confirming the levy of penalty under section 271(1)(c ) of the Act in the facts and circumstances of the instant case.
We have heard the rival submissions and perused the materials available on record. For the year under consideration, the Assessee did not file his original return of income. The Assessee, however, had paid the entire self-assessment taxes due by him. The case of the Assessee was sought to be reopened vide issuance of notice under section 148 of the Act dated 30-3-2022. In response to the said notice, the Assessee filed the return of income on 29-04-2022 declaring total income of Rs 72,16,330/-. The assessment was completed under section 147 read with section 144B of the Act determining total income at Rs 72,16,330/-. Penalty proceedings under section 271(1)(c ) of the Act were initiated for concealment of income vide notice dated 26-03-2022, which culminated in the levy of penalty in the sum of Rs 15,63,281/-. The Assessee pleaded that he had remitted the entire taxes that are payable by him in time, but due to the untimely death of his 42-year-old son, he was terribly disturbed and he could not concentrate on the statutory compliances of filing of return in time. The Assessee pleaded that he had no intention to conceal any income nor evade any taxes. By the time he recovered from the trauma of the death of his son, the time limit for filing of return had expired and hence Assessee could not come forward to file the return. However, once the notice under section 148 of the Act was issued, the Assessee grabbed the said opportunity and filed the return at the first available opportunity given to him. This response was however, not found satisfactory and the Learned AO levied a concealment penalty under section 271(1)(c) of the Act vide order under section 271(1)(c ) of the Act dated 15-09-2023. This action of the Learned AO was upheld by the Learned CITA.
The facts narrated above are not in dispute. Under these facts and circumstances, whether the Concealment Penalty under section 271(1)(c) of the Act could be levied or not was subject matter of consideration by the Coordinate Bench of Indore Tribunal in the case of Smt Kavitha Sachdev vs ITO in dated 16-05-2024. The relevant operative portion of the said order is reproduced here under:-
“4. We have considered the rival submissions as well as material placed on record. The assessee in the application as well as supporting affidavit has explained reasons for delay as suffering from various diseases and serious ailments. The summary of the medical ailments and hospitalization is given in para 4 of the affidavit as under :- “4 I affirm that during the year 2022, I endured hospitalizations for various ailments as outlined below S.No. Reasons for Date of Date of Name of Hospital admission (as per Admission Discharg discharge summary e Left Eye Vitrectomy 04.02.22 05.02.22 Shankara 1. with Retinal Hospital Detachment Typical Pneumonia 23.04.22 07.05.22 Arihant Hospital 2. with Acute Respiratory Distress Syndrome (ARDS), Respiratory failure, Left Ventricular Dysfunction with Cardiac Failure BL Pneumonitis, 3. ARDS, Sepsis, 29.05.22 08.06.22 Arihant Hospital Multiple Organ Failures & Hepatitis Acute Febrile Illness 26.06.22 03.07.22 Arihant Hospital 4. (AFI), Urinary Tract Infection and ARDS Left Ventricular 18.10.22 21.10.22 Suyog Hospital 5. Ejection Fraction (LVEF) 45-50 %, Urinary tract infection, DMII and HIN Vitreo Retinal surgery 05.12.22 06.12.22 Shankara Hospital 6. for Retinal Detachment We further note that the assessee has supported the reasons with medical record showing that the assessee was undergoing treatment of various ailments and was advised complete rest and in isolation for a period of about 6 months. Therefore, having considered the reasons explained by the assessee that she was suffering from various ailments and undergoing treatment, we are satisfied that the assessee was having sufficient cause for not filing the appeal within the period of limitation and accordingly the delay of 165 days in filing the present appeal, is condoned.
The assessee has raised following grounds of appeal :-
1. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding, the penalty order which is bad in law, unjustified, illegal, void ab-initio.
2. On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in upholding, the penalty u/s 271(1)(c) of Rs. 2,10,000/- which is not leviable
6. In the case of the assessee, the assessment u/ 143(3) read with Section 147 was completed on 21 December, 2018, at a total income of Rs. 12,00,400/-. The AO noted that the assessee did not file original return of income for the year under consideration and as per the information the assessee sold the immovable property with nine other co- owners for a consideration of Rs. 1,13,94,700/-. The AO issued notice u/s 148 on 31 March, 2018. In reply, the assessee filed her return of income declaring total income of Rs. 12,00,400/- from long term capital gain interest and other sources. The AO also initiated the penalty proceedings u/s 271(1)(c) and levied a penalty equivalent to 100% of the tax sought to be evaded, amounting to Rs. 2,10,000/-. The assessee challenged the action of the AO before the Ld. CIT(A) and explained that the assessee paid self-assessment tax of Rs. 2,02,083/ on 29.07.2011 and thereafter a further self-assessment tax of Rs. 8,310/- was also deposited on 19.06.2017. Thus, the assessee pleaded that when the assessee had already paid self-assessment tax and there was no outstanding demand u/s 156 of the Income-tax Act, 1961, then penalty levied u/s 271(1)(c) of the Act is not valid/justified and the same be deleted. The Ld. CIT(A) did not accept the contention of the assessee and confirmed the penalty le vied by the AO while passing the impugned order
7. Before the Tribunal, the Ld. Authorized Representative of the assessee has submitted that the assessee diligently and voluntarily computed and paid self assessment tax of Rs. 2,16,470/- through challan dated 29.07.2011. However, due to the medical conditions and various ailments, the assessee is able to trace the return of income. Even in response to notice u/s 148, the assessee filed the return of income and declared the income of Rs. 12,00,400/-, which was accepted by the AO while passing the order u/s 147 read with Section 143(3) of the Act. There is no addition made by the AO in the assessment framed u/s 147 read with section 143(3). Further, as per Explanation 4(c), when the assessee has already paid self-assessment tax and nothing was outstanding, then penalty u/s 271(1)(c) is not leviable. He has referred to the computation of income and penalty by the AO as well as the demand u/s 156 and submitted that the AO has accepted the self-assessment tax paid by the assessee, seven years prior to the notice issued u/s 148, then the amount of penalty ought to have been calculated, as per the formula provided in clause (c) of Explanation 4 to Section 271(1)(c) of the Act. In the case of the assessee, if the self-assessment tax paid prior to notice issued u/s 148 is taken into consideration then there is no amount remains as tax sought to be evaded and consequently, no penalty is leviable u/s 271(1)(c) of the Income-tax Act, 1961. The Ld. Authorized Representative of the assessee has further submitted that the assessee has paid self-assessment tax voluntarily much prior to the notice issued u/s 148 and, therefore, there is no concealment of income or furnishing of inaccurate particulars of income on the part of the assessee. Further, the return of income filed by the assessee was accepted by the AO on which the self-assessment tax was paid, seven years prior to the notice issued u/s 148. Hence, the penalty levied by the AO, u/s 271(1)(c) is not justified and is liable to be deleted. In support of his contention, he has relied upon the following decisions:- (1) CIT vs. Pushpendra Surana, (2014) 264 CTR 204 (Raj). (ii) CIT vs. Suresh Chandra Mittal, 241 ITR 124 (MP) (iii) CIT vs. Gujarat State Electricity Corporation Ltd., 144 taxmann.com 165.
8. On the other hand, the Ld. Departmental Representative had relied upon the orders of the authorities below and submitted that the assessee did not file the return of income u/s 139(1) of the Income-tax Act, 1961, but the return was filed after issue of notice u/s 148. Therefore, the income declared by the assessee is not voluntary, but in response to the notice u/s 148 of the Income-tax Act, 1961 9. We have carefully considered the rival submissions as well as the material placed on record. Though the assessee did not file a valid return u/s 139, however, the self-assessment tax was paid by the assessee of Rs. 2,16,470/- vide challan dated 29.07.2011, placed at page no. 17 of the paper book. Thereafter, the assessee has paid tax of Rs. 8,310/- vide challan dated 19.06.2017 The AO has acknowledged the self-assessment tax paid by the assessee in computation of income and calculation of tax of Rs. 2,16,470/-, which is placed at page no. 8 of the paper book. This fact is also reflected in Form No. 26AS placed at page no. 18 of the paper book. Therefore, there is no dispute that the assessee paid self- assessment tax amounting to Rs. 2,16,470/- prior to the notice issued u/s 148 and, therefore, as per Explanation 4 to Section 271(1)(c), the amount of tax sought to be evaded shall be determined in accordance with the formula provided in clause (a) to (c) of the said Explanation. For ready reference, clause (c) of Explanation 4 to Section 271(1)(c) of the Act are reproduced as under :- "(c) where in any case to which Explanation 3 applies, the amount of tax sought to be evaded shall be the tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice under section 148."
Thus, the amount of tax sought to be evaded shall be determined by taking into consideration the amount of tax on the total income assessed as reduced by the amount of advance tax, tax deducted at source, tax collected at source and self-assessment tax paid before the issue of notice u/s 148. The case of the assessee is covered by this clause (c) of Explanation 4 to Section 271(1)(c) and, hence, when the AO has determined the total tax on the income assessed at Rs. 2,08,142/-whereas the self-assessment tax paid by the assessee before the notice u/s 148 was issued is Rs.2,16,470/-, then balance would be nil and consequently, there would be nil amount of tax sought to be evaded for the purpose of levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961. Accordingly, when the amount of tax to be evaded is nil in the case of the assessee, then question of levy of levy of penalty u/s 271(1)(c) does not arise and hence, the penalty levied by the AO u/s 271(1)(c) of Rs. 2,10,000/- is not justified and the same is deleted. Though the Ld. Authorized Representative of the assessee has advanced various contentions against the levy of penalty, however, the penalty found to be not justified and liable to be deleted, on the ground of no amount of tax sought to be evaded, then other pleas raised by the Ld. Authorized Representative of the assessee becomes academic in nature and we do not propose to decide each and every argument advanced by the assessee.”
5. Respectfully following the same, we delete the levy of penalty under section 271(1)(c ) of the Act. Accordingly, the grounds raised by the Assessee are allowed.
In the result, the appeal of the Assessee is allowed.
Order pronounced in the open court on 20/05/2025.