CHATTANATHAN DEVARAJAN ,MUMBAI vs. INCOME TAX OFFICER 34(1)(1), MUMBAI

Grounds taken by the assessee are reproduced as under: “A. On the facts and circumstances of the case, CITA and Income Tax Officer 34(1)(1), Mumbai ("the A.O.") has erred in levying the penalty of Rs. 25,63,119/- being 100% of the tax sought to be evaded.

Facts of the case are that assessee did not file his return of income for the year under consideration. Ld. Assessing Officer took note of the information about financial transactions and activities undertaken by the assessee from the ITBA system of the department. Details of the information appearing in ITS is summarized as under: S. No. Info Code Info Description Total Value in Rs. (a) TDS-192

1. Since the amount exceeded the maximum amount which is not chargeable to tax for which the assessee had not filed his return of income, case was taken up for reopening by initiating proceedings u/s. 147 r.w.s.148. Accordingly, notice u/s. 148 was issued on 30.03.2021. In response to the said notice, assessee filed his return of income on 04.05.2021, reporting total income at Rs.88,21,870/-.

2. In the course of reassessment proceedings, ld. Assessing Officer noted that on verification of Form 26AS and interest certificate issued by ICICI Bank, certain interest on fixed deposits were not included in the Form 26AS due to no deduction of tax at source on such FDR interest. The details of this interest are tabulated below: Sr.no. as per certificate FD's account number certificate

3. Ld. Assessing Officer thus, completed the assessment by making an addition of this short disclosure of interest on FDs, amounting to Rs.39,685/- and assessed the total income at Rs. 88,61,553/-. Notice of demand issued u/s.156 on completion of the said reassessment stated ‘zero’ amount payable by the assessee. In this respect, computation sheet forming part of the impugned reassessment order is reproduced below, which is material to deal with the issue raised by the assessee in the present appeal:

4. From the above computation sheet, it is noted that total income assessed is at Rs. 88,61,550/-, as appearing in Row no.18. On the said assessed total income, total taxes payable by the assessee comes to Rs. 25,70,730/-, as stated in Row no. 45 which includes interest and surcharge, wherever applicable. At Row no. 46 of this computation sheet, TDS amount reflected is Rs. 25,78,036/- which is more than the aggregate income tax liability, resulting into a refund of Rs.7,306/- as stated in Row no. 52 and finally, at Row no. 59. 4. Subsequent to the reassessment, ld. Assessing Officer initiated the proceedings for levy of penalty u/s. 271(1)(c). In para 7 of the impugned penalty order, ld. Assessing Officer noted that the total amount for which the reassessment has been completed is at Rs. 88,61,550/-. Assessee is deemed to have concealed this income. He thus, proceeded to levy penalty at the rate of 100% of tax sought to be 6 Chattanathan Devarajan AY 2014-15

Ld. Counsel for the assessee submitted that contention was raised before the ld. CIT(A) that there was no tax payable on the return filed in response to notice u/s.148 and the addition made by the ld. Assessing Officer was tax neutral, there being no prejudice caused to the interest of Revenue. It is a fact on record which was claimed before the ld. CIT(A) that assessment has resulted into refund without any payment of advance or self-assessment tax. Assessee relied on certain judicial precedents including that of Hon'ble High Court of Delhi in the case of CIT vs. SAS Pharmaceuticals 335 ITR 259 (Del). In this decision, reference was made to explanations 4, 5 and 5A of section 271(1)(c), that no penalty can be imposed unless conditions stipulated in these provisions are duly and unambiguously met.

Before us, ld. Counsel for the assessee referred to clause (c) of explanation 4 to section 271(1)(c) to state that the amount of tax sought to be evaded is nil in the present case, since tax liability on the assessee, despite small addition of Rs.39,085/-, has ultimately resulted into a refund of Rs. 7,306/- and therefore is squarely covered by this said clause. Contents of the said clause (c) are reproduced for ready reference. “(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.” 6.1. From the above, it was pointed out that in a case where 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 7 Chattanathan Devarajan AY 2014-15

The Assessee 2. The Respondent 3. DR, ITAT, Mumbai 4. 5. Guard File CIT BY ORDER,