MAYUR BHARATBHAI POPAT,AHMEDABAD vs. WARD 20(2)(1), MUMBAI, MUMBAI

The brief facts of the case are that the assessee is an individual who filed his return of income for the Assessment Year 2019-20 declaring a total income of ₹5,13,630/-. The case was reopened under section 147 of the Income-tax Act (“the Act”) on the basis of information received under the Risk Management Strategy (RMS) formulated by the CBDT, which showed that the assessee had claimed deduction of ₹2,00,000/- under section 80GGC of the Act towards donation to Apna Desh Party, a registered unrecognized political party involved in providing accommodation entries through bogus political donations. During the reassessment proceedings, the Assessing Officer held that the political party was engaged in a bogus donation racket and AO relied upon the statement of its Gujarat State President, who admitted that donations received by the party were returned to the donors in cash after retaining a commission of 5% to 7%. The Assessing Officer held that the assessee was one of the beneficiaries of such accommodation entries and consequently he disallowed the deduction claimed under section 80GGC. The reassessment was completed by computing the total income at ₹7,13,630/- and, while making the addition of ₹2,00,000/-, the Assessing Officer initiated penalty proceedings under section 270A of the Act on the ground that the assessee had under-reported income in consequence of misreporting.

Thereafter, a notice under section 274 read with section 270A was issued to the assessee. The Assessing Officer noted that the assessee had also filed an application in Form No. 68 under section 270AA of the Act seeking immunity from penalty; however, the Assessing Officer rejected the said application filed by the assessee. According to the Assessing Officer, even after rejection of the immunity application and subsequent issuance of a show cause notice, the assessee failed to furnish any explanation or response. The Assessing Officer, therefore, proceeded ex parte and held that the addition was due to under- reported income arising on account of misreporting of income within the meaning of section 270A(9)(a) of the misrepresentation or suppression of facts. The Assessing Officer observed that the reassessment proceedings had uncovered income which would otherwise have escaped assessment and held that the assessee was liable for penalty at the rate prescribed under section 270A(8) of the Act, being 200% of the tax payable on the under-reported income arising from misreporting, and accordingly levied penalty of ₹1,37,334/- under section 270A of the Act.

Aggrieved by the penalty order, the assessee preferred an appeal before the Commissioner of Income-tax (Appeals). The first grievance of the assessee was that the penalty had been levied without granting a proper opportunity of being heard. The learned CIT(A), after examining the record of the penalty proceedings, held that adequate opportunities had in fact been granted to the assessee. The CIT(Appeals) noted that notices had been duly issued during the penalty proceedings and the assessee had failed to file any response within the prescribed time. The CIT(A) further observed that after rejection of the assessee's application under section 270AA of the Act, a fresh show cause notice had also been issued before levy of penalty, but no compliance was made. Accordingly, the CIT(A) held that the Assessing Officer had followed the due procedure prescribed under the Act and the penalty order could not be said to have been passed in violation of the principles of natural justice. The contention of the assessee with respect to denial of opportunity by the Assessing Officer was rejected by CIT(Appeals).

On the merits of the levy of penalty by the Assessing Officer, the learned CIT(A) examined the findings recorded by the Assessing Officer and upheld the levy of penalty under section 270A of the Act. The CIT(Appeals) noted that the deduction of ₹2,00,000/- claimed by the assessee under section 80GGC of the Act related to donation made to Apna Desh Party, which had been found by the Department to be involved in a bogus donation scam. The CIT(A) placed reliance on the material relied upon by the assessing the statement of the Gujarat State President of the political party admitting that donations received by the party were returned in cash after deducting commission. The CIT(A) observed that although the assessee had made some submissions during the appellate proceedings before him, the explanation furnished by the assessee was not satisfactory and did not dislodge the findings recorded by the Assessing Officer. The CIT(Appeals) held that the evidence available on record supported the conclusion that the assessee had claimed an incorrect deduction and the case came within the ambit of misreporting of income. Accordingly, the action of the Assessing Officer in levying penalty under section 270A of the Act was upheld by CIT(Appeals) and he confirmed the levy of penalty of ₹1,37,334/-.

The assessee is in appeal before us against the order passed by CIT(Appeals) dismissing the appeal of the assessee.

We have heard the learned Departmental Representative and perused the material available on record. Despite the appeal having been listed for hearing on more than one occasion, none appeared on behalf of the assessee. No application seeking adjournment has also been filed. It, therefore, appears that the assessee is not interested in prosecuting the present appeal. Accordingly, we proceed to dispose of the appeal on the basis of the material available on record.

We have carefully considered the findings recorded by the Revenue authorities. From the records, it is evident that penalty proceedings were initiated simultaneously with the completion of reassessment. Thereafter, notice under section 274 read with section 270A of the Act was issued to the assessee. The assessee also filed an application in Form No.68 under section 270AA of the Act seeking immunity from penalty. The Assessing Officer rejected said application and thereafter the Assessing Officer issued another show cause notice before passing the penalty order. The Assessing Officer has recorded that despite service of notices, the assessee failed to furnish any explanation. The learned CIT(Appeals), after examining the entire record, had also categorically noted that sufficient opportunities had been afforded to the assessee and the Assessing Officer had duly complied with the procedure prescribed under the Act before passing the penalty order.

Even before us, despite repeated opportunities, none appeared on behalf of the assessee nor was any adjournment application filed. Thus, no material has been placed before us to demonstrate that any statutory notice had remained unserved or that any prejudice was caused to the assessee on account of the alleged denial of opportunity.

The principles of natural justice require grant of reasonable opportunity and not endless opportunities. Once adequate opportunity has been afforded, failure of a party to avail the same cannot invalidate the proceedings.

Accordingly, we find no infirmity in the findings recorded by the learned CIT(Appeals). Ground Nos.1 and 1.1 are dismissed.

These grounds challenge the levy of penalty on merits by contending that no cogent material was available to establish misreporting of income and the Assessing Officer merely proceeded on generalized observations relating to the modus operandi of certain registered unrecognised political parties.

We do not find any merit in the above contention.

The penalty proceedings emanate from the reassessment order wherein deduction claimed by the assessee under section 80GGC of the Act was disallowed after detailed examination of the information received during search proceedings conducted on the group of Registered Unrecognised Political Parties (RUPPs). The Assessing Officer observed that Apna Desh Party was engaged in providing accommodation entries through bogus political donations and the Assessing Officer relied upon the sworn statement of the Gujarat State President of the political party admitting that donations received by the party were returned in cash after retaining commission. Based upon such material, the Assessing Officer held that the assessee had wrongly claimed deduction under section 80GGC and initiated penalty proceedings under section 270A(9)(a) treating the case as one of misrepresentation or suppression of facts.

The learned CIT(Appeals) independently examined the findings of the Assessing Officer and held that the explanation furnished by the assessee during appellate proceedings was not satisfactory and the assessee failed to rebut the material relied upon by the Assessing Officer. The learned CIT(Appeals), therefore, upheld the conclusion that the assessee had claimed an incorrect deduction thereby attracting the provisions relating to misreporting of income.

For ready reference, section 270A(9) provides as under: "The cases of misreporting of income referred to in sub-section (8) shall be the following, namely:— (a)misrepresentation or suppression of facts; (b)failure to record investments in the books of account; (c)claim of expenditure not substantiated by any evidence; (d)recording of any false entry in the books of account; (e)failure to record any receipt in books of account having a bearing on total income; (f)failure to report any international transaction or any specified domestic transaction.

The Assessing Officer has invoked clause (a) of section 270A(9) of the Act, "misrepresentation or suppression of facts". The learned CIT(Appeals) has affirmed the said finding after considering the material available on record.

We also note that the assessee has not been able to contravert the factual findings recorded by the Authorities below by producing any additional evidence. Mere assertions made in the memorandum of appeal, unsupported by any material, cannot dislodge concurrent findings of fact recorded by both the Ld. AO and CIT[A].

In the present case, no material has been brought before us to rebut the findings recorded by the Revenue authorities. We, therefore, see no reason to interfere with the order of the learned CIT(Appeals).

Ground Nos.2, 2.1 and 2.2 are accordingly dismissed.

A plain reading of the above provision clearly shows that immunity can be granted only where penalty proceedings are not initiated under section 270A(9) of the Act. Thus, where the Assessing Officer invokes the provisions relating to misreporting of income, the Statute itself excludes the applicability of section 270AA.

In the present case, the Assessing Officer has categorically invoked section 270A(9)(a) of the Act and has recorded satisfaction that the case involved misrepresentation or suppression of facts. Consequently, the statutory embargo contained in section 270AA(3) of the Act squarely applies and the assessee was not eligible for immunity.

The argument raised by the assessee that the case merely involves "under- reporting" and not "misreporting" cannot be accepted because the Revenue authorities have concurrently held that the deduction claimed under section 80GGC of the Act was based upon a transaction which constituted a bogus political donation. Such concurrent factual findings have not been rebutted by the assessee.

We, therefore, uphold the action of the Assessing Officer in rejecting the application filed under section 270AA. The learned CIT(Appeals) has rightly confirmed the same.

Ground Nos.3, 3.1, 3.2 and 3.3 are dismissed. Ground Nos. 4, 4.1 and 4.2 The assessee has lastly challenged the computation of penalty under section 270A of the Act.

Section 270A(10) further provides that tax payable in respect of under- reported income shall be computed in accordance with the formula prescribed therein depending upon the manner in which the total income is determined. From the penalty order, we find that the Assessing Officer has identified the under-reported income at ₹2,00,000/- being the inadmissible deduction claimed under section 80GGC and has computed the penalty at 200% of the tax payable thereon after treating the case as one falling under section 270A(9)(a) of the Act. The assessee has merely alleged that the computation is incorrect but has not pointed out any specific error in computation.

It is a settled proposition that a bald allegation, unsupported by any material cannot constitute a valid ground for interference. In absence of any computational error, we find no infirmity in the computation adopted by the Assessing Officer and affirmed by the learned CIT(Appeals).

Ground Nos.4, 4.1 and 4.2 are accordingly dismissed.

Ground No.5 is general in nature and does not call for separate adjudication.

In addition, we may observe that despite repeated opportunities granted by this Tribunal, none appeared on behalf of the assessee to prosecute the appeal or to controvert the concurrent findings recorded by the Authorities. The learned Departmental Representative supported the orders of the Assessing Officer and the learned CIT(Appeals). Having examined the entire material available on record, we find that the learned CIT(Appeals) has passed a well-reasoned order after considering the factual matrix as well as the applicable Statutory provisions. The assessee has failed to bring any material on record warranting interference with the impugned order. 32. Accordingly, we uphold the order of the learned Commissioner of Income-tax (Appeals) confirming the penalty of ₹1,37,334/- levied under section 270A of the Income-tax Act, 1961.

In the result, the appeal filed by the assessee is dismissed.