DANIEL BABY,GOREGAON WEST vs. INCOME TAX OFFICER, MUMBAI

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ITA 1564/MUM/2026Status: DisposedITAT Mumbai30 June 2026AY 2011-20127 pages

In favour of the Revenue: the assessee's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal upheld the CIT(A)'s order, finding no reason to interfere with the penalty levied under Section 271(1)(c). The assessee's grounds of appeal were dismissed.

What were the facts?

The assessee's appeal against a penalty order was dismissed by the CIT(A). The assessee did not appear before the ITAT, and the appeal was heard ex parte. The penalty was levied for concealment of income related to unexplained investment and expenditure from penny stock transactions.

What were the issues?

Whether the penalty levied under Section 271(1)(c) for concealment of income related to unexplained investments and expenditures is justified. Whether the assessee provided satisfactory explanations for the transactions.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 68,Section 69C,Section 143(3),Section 147

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI

Before: SANDEEP GOSAIN & BIJAYANANDA PRUSETH

For Respondent: Shri Annavaram Kosuri,Sr. AR

PER SANDEEP GOSAIN, JUDICIAL MEMBER:

This appeal is filed by the Assessee against the order of Ld. Ward 34(1)(4) vide DIN: ITBA/NFAC/S/250/2025-26/1083735400 dated 13-Feb- 2026 for the Assessment Year 2011-2012. The Assessee has raised the following grounds of appeal:

2.

None appeared on behalf of the assessee when the case was called out repeatedly. From the case records, we note that summons in this case were sent by the Registry through Speed Post as well as email. More than one month has passed since the summons were issued to the address provided by the assessee in Form No. 36; therefore, drawing an inference under the General Clauses Act, it is presumed that the service of summons/notice has been duly effected.

3.

On the other hand, the Ld. DR present in the Court was ready with the arguments, therefore, we have decided to proceed with the hearing of the appeal ex parte.

4.

From the records, we noticed that the assessee was ex parte and the Ld. CIT(A) dismissed the appeal of the assessee on the basis of the documents placed on record.

5.

After having gone through the facts of the present case, we further noticed that the ground raised by the assessee before us has already been dealt with in detail by the Ld. CIT(A). The operative portion of the order of the Ld. CIT(A) is contained in paragraphs 6 to 6.1.5, and the same is reproduced herein below:

6.

Findings & Decision:

In this case, the 3 grounds of appeal. All of these grounds of appeal relate to the single issue of levying of penalty u/s 271(1)(c) of the Act and are therefore, being decided together.

6.1 The grounds of appeal 1 to 3 are related to levy of penalty u/s 271(1)(c) of the Act. The appellant has contented that the Assessing Oficer passed order without appreciating the facts of the case and also without initiating penalty proceedings on the said addition. It has been also contended that the Assessing Officer erred in holding that the appellant has concealed particualars of income u/s 271(1)(c) of the Act read with explantion 1 thereto. The appellant has further contended that that the transctions were duly reflected in the Demat Account and the amount paid and received on sale of shares was through banking channels and relected in bank statements. Hence, the penalty levied u/s 271(1)(c) of the Act may be deleted.

6.1.1 I have carefully gone through grounds of appeal, statement of facts, assessment order, penalty order, written submissions and the material on record. On perusal of the assessment order, it is seen that in this case during assessment proceedings, notices u/s 142(1) of the Act and show cause notice were issued on various dates. The appellant complied to these notices time to time. However, the appellant did not submit satisfactory explanations before the Assessing Officer. Accordingly, the assessment was completed u/s 143(3) r.w.s.147 of the Act at total income of Rs. 5,03,536/- (rounded off to Rs.5,03,540/-) with additions of Rs. 1,98.907/- as unexplained investment u/s 68 of the Act, Re:5,967/- as unexplained expenditure u/s 69C of the Act and Rs.34,020/- as short term capital gain. The Assessing Officer initiated penalty proceedings u/s 271(1)(c) of the Act for concealing particulars of income/furnishing inaccurate particulars of income. The relevant part of the assessment order at para 8.3 to 9 and 11 is reproduced for reference as under.

"........8.3. In the case of these type of accommodation entries cash is received from beneficiaries which after passing through a multiple layers of concerns controlled by him, was retumed in the form of sale price of shares to the beneficiaries of the accommodation entry. The value of sale consideration claimed is Rs. 1,98,907/- whereas the cost of purchase shown by the assessee is Rs.23,351/- The sale price received as accommodation entry is nothing but the return of amount in lieu of cash that the assessee would have paid to hawala operators over and above Rs. 1,98,907/- paid by the assessee by cheque at the time of purchase of penny stock. Therefore the entire sale consideration of Rs. 1,98,907/- shown to have been received by the assessee would represent the value of cash which has been laundered in the form of bogus profit on sale of shares. Therefore, the sum of Rs. 1,98,907/- represents the unexplained investment u/s 68 made by assessee in cash to obtain the equivalent amount as bogus purchase of shares. Alternatively, it can also be concluded that the sum of Rs. 1,98,907/- represents income from other sources and not the income in the nature of capital gain. Looked in whatever manner, the basic fact remains that the sum of Rs. 198907/- is taxable income of the assessee and not in nature of Long Term Capital Gain and taxed accordingly u/s 68 of the I.T. Act, 1961.

8.4. Further, it has beer. admitted bv various hawala operators in similar kind of cases that they were providing the accommodation entries to bertcficiaries by charging commission @3% of amunt of accommodation entries, accordingly the payment of commission would also have been given in cash over and above the cash of Rs. 1,98,907/- paid by the assessee to the Hawala Operator. This amount comes to Rs.5,967/-. Since this cash commission paid is also from unexplained sources, the same would be unexplained expenditure u/s 69C of the I.T. Act which is being added to the total income of the assessee. Penalty proceedings u/s 271(1)(c) r.w.s. 274 of the Income Tax Act, 1961 are separately initiated for concealing particulars of income/furnishing inaccurate particulars of income

9.

During the of assessment proceedings, it is seen from the revised computation filed by the assessee that he has declared Short Term Capital Gain of Rs.34,020/-. The assessee has declared the STCG only after his case re-opened u/s 147 of the Act and notice u/s 148 of the Act issued to him. The STCG declared by the assessee of amounting to Rs. 34,020/- is added to the total income. Penalty proceedings u/s 271(1)(c) r.w.s. 274 of the Income Tax Act, 1961 are separately initiated for concealing particulars of income...

11.

Assessed u/s 144 r.w.s. 147 of the I.T. Act, 1961. Interest u/s 243A, 2348 & 234C as applicable are chared as per form No. ITNS 150A, annexed which is a part of this order. Give credit for prepaid taxes allowed as per data appearing in the computerized system OLTAS/NSDL. Notice of demand u/s 156 is issued accordingly. Penalty proceeding u/s 271(1)(c) is initiated separately.

6.1.2 It is important to mention here that the appellant had also filed quantum appeal against the assessment order dated 21.12.2018. The appeal of the appellant against this assessment order which the basis of imposition of penalty u/s 271(1)(c) of the Act, was dismissed by Ld. CIT (Appeals)-57, Mumbai vide appeal No. CIT(A)-57/Arr. 113/2019-20, dated 22.07.2022.

6.1.3 During the present appeal, the appellant has relied upon various case laws and has pleaded that no penalty needs to be levied on him. On examination of these case laws it is found that these are distinguishable on facts and are not applicable to case of the appellant.

6.1.4 While levying penalty, the Assessing Officer has elaboratedly discussed the issue in the penalty order, reproduced as under:

".......In the instant case, information was received from the DDIT(Inv.)-IV(I), Thane that M/s. KCL Infra Projects Ltd.

[KCLIPL] is established as Penny Scrip and has been used by the Operator, Entry/Exit Providers to claim Business Loss/LTCG/STCL for the purpose of introducing unaccounted Cash in the Books of Accounts or to create Fictitious Losses in the return of income to avoid paying taxes due. The assessee is one of the Seller who transacted the scrip valued at Rs. 1,98,907/- during the year under consideration. For this reason, the case was re- opened u/s 147 of the I.T. Act, 1961 and the income was assessed at Rs. 5,03,536/- u/s 143(3) r.w.s. 147 of the I.T. Act, 961 dated 21.12.2018 with addition of Rs. 2,38,894/- and also initiated penalty proceedings u/s 271(1)(c) of the I.T. Act, 1961 on such concealment of income i.e. Rs. (5,03,536-2,64,642) 2,38,894/-. Being aggrieved the assessment order, the assessee preferred appeal before the Ld. CIT (A)-57, Mumbai on 11.01.2019 and the Ld. CIT(A) dismissed the appeal of the assessee vide order u/s 250 of the I.T. Act, 1961 on 22.07.2019. So, notice u/s 274 of the I.T. Act, 1961 dated 06.01.2021 was issued and duly served on the assessee requesting him to furnish reasons/grounds as to why penalty under section 271(1)(c) should not be imposed in this case but the assessee did not comply with the same.

Thereafter, the case was transfer to ReFAC for imposing penalty proceeding in faceless manner under Faceless Penalty Scheme similar to Faceless Assessment Scheme 2019. So, another notice u/s 274 r.w.s. 271(1)(c) of the I.T. Act, 1961 dated 23.02.2022 was issued and duly served on registered e-mail of the assessee requesting him to furnish reasons/grounds, if any. In response to the same, the A/R of the assessee submitted a reply on 03.03.2022 on behalf of the assessee which duly perused but not acceptable since the assessee did not prove the same issue before the Ld. CIT(A) -57, Mumbai and the assessee prefer not to file further appeal against the order of the appellant authority.

Hence, having considered the facts and circumstances of the case, I have reason to believe that the assessee had concealed his income of Rs. 2,38,894/-. I am satisfied that this is a fit case for imposition of penalty u/s. 271(1)(c) of the I.T. Act., 1961.

The amount of tax sought to be evaded is computed as under:

(a) Tax on Assessed Income of Rs. 5,03,536/-: Rs. 35,748/-

(b) Tax on Returned Income of Rs. 2,64,642/-: Rs. 10,778/-

Tax sought to be evaded on concealment of income [a-b] : Rs. 24,970/-

Minimum penalty leviable @100% in this case works out at Rs. 24,970/- while the maximum penalty leviable @ 300% of the tax sought to be evaded comes to Rs. 74,910/- Having due regards to the facts and circumstances of the case and for the sake of equity and natural justice and after careful consideration of the all the issues involved, I, therefore, impose minimum penalty which is equal to 100% of the amount sought to be evaded i.e., Rs. 24,970/- only u/s 271(1)(c) of the I.T. Act, 1961 for the A.Y. 2011-12.

1961 1 Order u/s 271(1)(c) of the I.T. Act, 1961 is passed after obtaining prior approval from the competent authority. Issue demand notice, challan and copy of this order to the assessee.

6.1.5 Therefore, in view of above discussion, I find no reason to interfere with the penalty order passed by the Assessing Officer under section 271(1)(c) of the Act. Thus, the penalty levied u/s 271(1)(c) of Rs. 24,970/-is upheld and grounds of appeal 1 to 3 are dismissed.

6.

No new facts, circumstances, or documents have been placed on record by the assessee in order to controvert or rebut the lawful findings so recorded by the Ld. CIT(A). Therefore, after having gone through the facts we see no reason to interfere with or deviate from the findings so recorded by the Ld. CIT(A). Accordingly, we dismiss the grounds raised by the assessee and uphold the order of the Ld. CIT(A).

7.

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

Order pronounced in the open court on 30.06.2026.

Sd/- Sd/- BIJAYANANDA PRUSETH SANDEEP GOSAIN ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai Dated: 30.06.2026 RY-Sr PS Copy to:

DANIEL BABY, B 18/16 BEST NAGAR, GOREGAON WEST, 1 MUMBAI-400104, MAHARASHTRA

INCOME TAX OFFICER, WARD 34(1) (4),PRATYAKSHAKAR 2 BHAVAN, C-12, BANDRA KURLA COMPLEX, BANDRA EAST, MUMBAI, MUMBAI-400051, MAHARASHTRA 3 THE PCIT / CIT, 4 THE D.R., ITAT, MUMBAI BENCH 5 GUARD FILE

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