NARAYAN GOYAL,SIKAR vs. ACIT, CENTRAL CIRCLE-3, JAIPUR, JAIPUR

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ITA 485/JPR/2026Status: DisposedITAT Jaipur31 August 2026AY 2015-169 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the omission of income previously declared and on which tax was paid, especially when the final assessment restored the original income figure, did not constitute concealment or furnishing of inaccurate particulars. The explanation of oversight was considered bona fide.

What were the facts?

The assessee filed a return under section 153A declaring a lower income than the original return filed under section 139(1), omitting Rs. 1,44,500 of interest income previously declared. The Assessing Officer initiated penalty proceedings under section 271(1)(c) for concealment of income.

What were the issues?

Whether the omission of previously declared income in a return filed under section 153A, when the final assessment restored the original income, attracts penalty under section 271(1)(c) for concealment or inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 139(1),Section 153A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ‘SMC’ BENCH, JAIPUR

Before: Shri T.R. Senthil Kumar & Shri Prakash

IN THE INCOME TAX APPELLATE TRIBUNAL ‘SMC’ BENCH, JAIPUR (PHYSICAL HEARING) Before: Shri T.R. Senthil Kumar, Judicial Member And Shri Prakash, Accountant Member

ITA No: 485/JPR/2026 Assessment Year: 2015-16

Narayan Goyal ACIT, Shahpura Road, Neem Ka Central Circle-03, Thana, Sikar Vs Jaipur PAN: AEOPG2797Q (Respondent) (Appellant)

Assessee Represented: Sh. P. C. Parwal, CA Revenue Represented: Mrs. Arti Rawat, JCIT Date of hearing : 25-08-2026 Date of pronouncement : 31-08-2026 आदेश/ORDER

PER : PRAKASH, ACCOUNTANT MEMBER:-

1.

This appeal by the Assessee is directed against the order of the learned Commissioner of Income Tax (Appeals) [hereinafter referred to as “the learned CIT(A)”] dated 27.01.2026 arising out of the penalty order dated 16.03.2022 passed by the Assessing Officer (hereinafter referred to as “the AO”) under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for the assessment year 2015-16.

2.

The grounds of appeal raised by the Assessee before us in the memorandum of appeal in Form No. 36 read as under:

ITA No. 485/JPR/2026 Narayan Goyal “1. The Ld. CIT(A) has erred on facts and in law in confirming the levy of penalty of Rs.29,767/- u/s 271(1)(c) of IT Act, 1961 on the amount of Rs.1,44,500/-, being the difference in the total income declared in the return filed u/s 139(1) and that declared in the return filed u/s 153A by not accepting the contention of assessee that interest credited in his capital account by M/s United Mineral in which he is a partner was not included in the return filed u/s 153A by oversight though it was declared in the original return and thus it is not a case of concealment of income. 2. The appellant craves to alter, amend and modify any ground of appeal. 3. Necessary cost to be awarded to the assessee.” 3. Briefly stated, the facts of the case are that the assessee, an individual, is the proprietor of M/s Grasim Mineral and is also a partner in M/s Goyal Mineral and M/s United Mineral. For the year under consideration, the assessee filed his original return of income under section 139(1) of the Act on 28.09.2015 declaring total income of Rs 8,80,230, the tax due thereon having been paid in full. A search and seizure action under section 132(1) of the Act was carried out on 23.01.2019 in the case of the Goyal Group, to which the assessee belongs. In response to the notice issued under section 153A of the Act, the assessee filed his return on 02.04.2021 declaring total income of Rs 7,35,730 and claiming a refund of Rs 1,38,790. The AO found that the income so declared was lower by Rs 1,44,500 than the income declared in the original return. He added that amount, completed the assessment on 29.09.2021 under section 143(3) read with section 153A of the Act at a total income of Rs 8,80,230, being the very figure originally returned by the assessee, and initiated penalty proceedings under section 271(1)(c) of the Act.

4.

In the penalty proceedings, a show cause notice dated 20.01.2022 was issued to the assessee. The explanation furnished by the assessee, as recorded in paragraph 4 of the penalty order, was that:

“due to oversight assessee filed the return of income u/s 153A declaring total income of Rs.7,35,730/-. There was no intention of the assessee to conceal the income but only due to oversight it happened so.”

ITA No. 485/JPR/2026 Narayan Goyal 5. The AO did not accept the explanation. Invoking Explanation 1 to section 271(1)(c) of the Act, he imposed a penalty of Rs 29,767 by order dated 16.03.2022, being 100 per cent of the tax sought to be evaded on Rs 1,44,500. The operative finding in paragraph 5 of the penalty order reads as under:

“From the above discussion, it is a clear case that assessee has concealed the income. Thus, it is clear that the assessee had concealed the particulars of his income by not disclosing income of Rs.1,44,500/-. The arguments furnished by the AR of the assessee are only for the sake of argument without any legal base.” 6. Aggrieved, the assessee carried the matter in appeal. The learned CIT(A) confirmed the penalty. The relevant findings in paragraph 4.2 of the impugned order read as under:

“It is undisputed that the return filed u/s 153A replaces the original return and the appellant is required to disclose true and complete income therein. In the present case, despite having disclosed the interest income in the original return and being fully aware of the same, the appellant chose to file a return u/s 153A declaring a lower income and even claimed refund. The explanation of “oversight” is not supported by any contemporaneous material and does not appear to be bona fide, particularly when the omission resulted in reduction of taxable income and refund claim. The fact that income was disclosed in the original return does not absolve the appellant from the obligation to correctly disclose income in the return filed u/s 153A. The omission led to furnishing of inaccurate particulars of income within the meaning of section 271(1)(c). The judicial decisions relied upon by the appellant are distinguishable on facts, as the present case does not involve a debatable issue or clerical error but omission of a known and accepted item of income.” 7. The learned Authorised Representative (hereinafter referred to as “the learned AR”) submitted before us that the sum of Rs 1,44,500 represents interest credited to the capital account of the assessee by M/s United Mineral, a firm in which the assessee is a partner, that the said interest was not declared in the return of income filed under section 153A of the Act, and that the omission was a bona fide mistake. He placed reliance on the

ITA No. 485/JPR/2026 Narayan Goyal judgment of the Hon’ble Supreme Court in Price Waterhouse Coopers (P.) Ltd. v. CIT [2012] 348 ITR 306 (SC).

8.

The learned Departmental Representative (hereinafter referred to as “the learned DR”) relied upon the orders of the authorities below.

9.

We have heard the rival contentions and perused the material available on record. The short question for our consideration is whether the omission of Rs 1,44,500 from the return of income filed under section 153A of the Act, when that very amount stood declared in the original return filed under section 139(1) of the Act, attracts penalty under section 271(1)(c) of the Act.

10.

Certain facts are not in dispute. The interest of Rs 1,44,500 credited by M/s United Mineral was declared by the assessee in his original return filed on 28.09.2015 and the tax due on the returned income of Rs 8,80,230 was paid in full. The search took place on 23.01.2019, that is, more than three years after that return was filed. Neither the assessment order nor the penalty order refers to any seized material in relation to this amount. The difference came to the notice of the AO on a comparison of the two returns filed by the assessee himself, as recorded in paragraph 5 of the assessment order:

“During the assessment proceedings, difference between the income declared in the return filed u/s 139 of the I T Act, 1961 & u/s 153A. As per return filed u/s 139, the assessee has declared income at Rs. Rs.8,80,230/- however, the income u/s 153A has declared at Rs.7,35,730/- wherein the amount of Rs.1,44,500/- has not disclosed in the return filed u/s 153A.” 11. It is equally undisputed that the assessment was finally completed at a total income of Rs 8,80,230, which is precisely the income that the assessee had himself declared in his original return. The assessment therefore did not bring to tax any amount over and above what the assessee had already offered to tax before the search. The refund of Rs 1,38,790 claimed in the

ITA No. 485/JPR/2026 Narayan Goyal return filed under section 153A of the Act did not survive the assessment, the total income having been restored to the figure originally returned.

12.

As the year under consideration is a year covered by a search, we have first examined whether the deeming fiction contained in Explanation 5A to section 271(1)(c) of the Act is attracted. That Explanation applies where, in the course of a search initiated under section 132 of the Act, the assessee is found to be the owner of any asset, or of any income based on an entry in the books of account or other documents or transactions, relating to a previous year which has ended before the date of search, and,

“(a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or” 13. The condition so prescribed is not satisfied in the present case. The return of income for the assessment year 2015-16 was furnished on 28.09.2015, that is, before the date of search, and the income of Rs 1,44,500 was duly declared therein. The deeming fiction in Explanation 5A therefore fails at the threshold. The case has consequently to be tested on the substantive provisions of section 271(1)(c) of the Act read with Explanation 1 thereto, which is the provision the AO in fact invoked.

14.

Under Explanation 1 to section 271(1)(c) of the Act, the deeming provision operates where the assessee fails to offer an explanation, or offers an explanation which is found to be false, or offers an explanation which he is not able to substantiate and fails to prove to be bona fide with all the material facts having been disclosed by him. The assessee did offer an explanation, namely, that the interest credited by M/s United Mineral was left out of the return filed under section 153A of the Act by oversight. That explanation has not been held to be false by either authority. The learned CIT(A) has held it to be “not supported by any contemporaneous material” and to not “appear to be bona fide”. However, in our view, the 5

ITA No. 485/JPR/2026 Narayan Goyal contemporaneous material supporting the explanation is the original return itself. An assessee who has voluntarily disclosed an item of income and paid tax on it more than three years before the search can have no discernible motive to conceal that very item thereafter, and no such motive has been suggested by the Revenue. All the facts relating to this receipt and material to the computation of the total income stood disclosed by the assessee. The explanation is therefore bona fide within the meaning of clause (B) of Explanation 1, and the deeming fiction is not attracted.

15.

The plea of the assessee that the omission was a bona fide mistake finds support in the judgment of the Hon’ble Supreme Court in Price Waterhouse Coopers (P.) Ltd. (supra). In that case the assessee, while filing its return, failed to add back a provision for gratuity which its own tax audit report had disclosed as inadmissible. The Hon’ble Court held that the omission had occurred through a bona fide and inadvertent error, that it was a “human error which we are all prone to make”, that it amounted neither to concealment of income nor to furnishing of inaccurate particulars, and that the imposition of penalty was not justified. The principle applies with greater force to the facts before us, because the disclosure by the assessee was made not in an accompanying report but in a return of income filed with the Department and acted upon by payment of tax.

16.

Neither of the two limbs of section 271(1)(c) of the Act is, in our view, made out on these facts. The AO levied the penalty for concealment of the particulars of income, whereas the learned CIT(A) sustained it as furnishing of inaccurate particulars of income. Concealment postulates the withholding of an item of income from the knowledge of the Department, which cannot be said of an amount that the assessee had himself placed on the record of the Department. As regards the second limb, the Hon’ble

ITA No. 485/JPR/2026 Narayan Goyal Supreme Court in CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158 (SC) explained the expression in paragraph 9 of the judgment as under:

“Reading the words in conjunction, they must mean the details supplied in the Return, which are not accurate, not exact or correct, not according to truth or erroneous.” 17. Judged by that test, the figure of total income carried into the return filed under section 153A of the Act was undoubtedly incorrect. However, that incorrectnessrelated to a receipt whose true particulars were provided by the assessee himself in the return of income voluntarily filed by him three years ago. An inaccuracy of this character, which is not intended to deceive anyone and yields nothing, does not answer the description of furnishing inaccurate particulars of income for the purpose of section 271(1)(c) of the Act.

18.

The reliance placed by the AO in paragraph 5 of the penalty order on the decision of the Hon’ble Supreme Court in Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277 (SC) does not advance the case of the Revenue. That decision holds that mens rea is not an essential ingredient for the levy of a civil penalty. It does not hold that penalty follows automatically upon the making of an addition. The conditions upon which section 271(1)(c) of the Act operates must still be shown to exist, as the Hon’ble Supreme Court itself made clear while considering Dharamendra Textile Processors (supra) in Reliance Petroproducts (P.) Ltd. (supra). For the reasons already recorded, those conditions are not satisfied in the present case.

19.

We are conscious that a return filed under section 153A of the Act takes the place of the original return for the purpose of the assessment to be framed in consequence of the search, and to that extent the observation of the

ITA No. 485/JPR/2026 Narayan Goyal learned CIT(A) is correct. That proposition, however, governs the computation of total income. It does not have the effect of converting every difference between the two returns into concealment of income or into furnishing of inaccurate particulars of income, irrespective of the nature of the difference and of what the Department already knew. The substance of the matter is that the income was offered by the assessee, the tax on it was paid, and the assessment was finally framed at that very figure.

20.

In these circumstances, we are of the considered view that the levy of penalty under section 271(1)(c) of the Act on the sum of Rs 1,44,500 is not sustainable. We accordingly set aside the order of the learned CIT(A) on this issue and direct the AO to delete the penalty of Rs 29,767. Ground No. 1 of the appeal is allowed.

21.

Ground No. 2 is general in nature and does not call for any separate adjudication. By Ground No. 3 the assessee seeks the award of costs. No case for the award of costs has been made out and the ground is accordingly rejected.

22.

In the result, the appeal filed by the Assessee is partly allowed.

Order pronounced in the open court on 31.08.2026

Sd/- Sd/- (T.R. SENTHIL KUMAR) (PRAKASH) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated 31/08/2026 *Ganesh Kr., Sr. PS आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 8

ITA No. 485/JPR/2026 Narayan Goyal 4. CIT (A) 5. DR, ITAT 6. Guard file. By order/आदेश से, सहायक पंजीकार आयकर अपील�य अ�धकरण, t;iqj

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