VINEET THAKAR,NAVI MUMBAI vs. ITO(41)(4)(4), MUMBAI

As far as the ground no.2(a) and (b) are concerned, the brief facts of the case are that that the assessee is an Individual who did not file return of income for A.Y. 2014-15 voluntarily although as per the P a g e | 3 A.Y. 2014-15 Vineet Thakar, Navi Mumbai database with the Department in ITS, he had received salary to the tune of Rs.65,37,780/-, interest of Rs.9,97,380/- and was also having Time deposit with HDFC Bank Limited amounting to Rs.59,87,858/. Therefore, the case was reopened u/s 147 of the Act. Assessment u/s 147 r.w.s. 144 of the Act was completed on 27.03.2022 determining total income at Rs.135,23,021/- comprising of salary of Rs.65,37,783/-, interest of Rs.9,97,380/- and Time Deposit of Rs.59,87,858/-, which was treated as unexplained money u/s. 69A r.w.s. 115BBE of the Act. Penalty proceedings u/s 271(1)(c) of the Act were initiated for concealment of income. During this proceeding, in response to show cause notices for imposing penalty issued on various dates, the assessee did not make any compliance. Therefore, the AO in ex parte order concluded that the assessee had committed a default within the meaning of section 271(1)(c) without any reasonable cause and rendered himself liable to such penalty. He worked the minimum penalty leviable u/s 271(1)(c) of the Act at Rs.44,03,865/- being 100% of the tax sought to be evaded. Hence, the AO imposed upon penalty of Rs. 44,03,865/- on the assessee.

The assessee filed subsequent appeal before the first appellate authority who inter alia observed that the AO levied imposed penalty of Rs.44,03,865/- u/s 271(1)(c) of the Act for concealed income of P a g e | 4 A.Y. 2014-15 Vineet Thakar, Navi Mumbai Rs.132,11,595/-. Meanwhile, the CIT(A) in the quantum appeal deleted the addition of Rs.59,87,858/- made by the AO on account of unexplained investment in Time Deposits. He further noted that the AO levied concealment penalty u/s 271(1)(c) of the Act as the appellant failed to file return of income despite having total income exceeding the exemption limit. The appellant in his submission before him stated that the mistake in failure to file ROI was genuine and tax on primary income i.e salary was already deducted in the form of TDS on salary. However, he did not bring on record any valid justification for his failure to file ROI. The appellant had not filed any detail showing that was filing ROI regularly and the failure to file ROI for the year under consideration was the only instance of default on his part. It was noticed by the ld.CIT(A) that the taxes to the extent of Rs.6,53,800/- would have escaped assessment, if the case had not been taken up for re-assessment proceedings. Therefore, he was of the opinion that the assessee had not furnished any valid justification for his failure to file return and thus concealment penalty to the extent of Rs.6,53,800/- levied by the AO was found justified in view of Explanation-3 to section 271 of the Act and therefore, out of total penalty of Rs.44,03,865/-, concealment penalty to the extent of Rs.6,53,800/- was upheld and the appellant got relief of Rs.37,50,065/-.

1 On careful consideration of all the relevant facts of the case, it is evident that the assessee did not file return of income for the AY 2014-15 despite having income exceeding exemption limit. The Department resorted to action u/s 148 on 24.03.2021 which was followed by statutory notices u/s 142(1) on several occasions. However, the assessee did not make any compliance leading to framing of ex parte assessment order u/s 144 of the Act. As per the penalty order, the assessee did not file the return even in response to the notice u/s 148 of the Act. Even penalty notices remained non complied. The reasons attributed to non compliance are too general to be accepted and appear to be a case of negligence on his part to perform a statutory duty cast upon him as a compliant taxpayer. Mere fact that TDS was already made

2 The above provisions are clearly attracted on the facts of the case. Therefore, we hold the assessee of guilty in terms of the said Explanation as there is no reasonable cause as well. As far as the quantum of penalty is concerned, the AO was fair enough to impose penalty at the rate of 100% only. Moreover, subsequent to the decision of quantum appeal, even the tax sought to be evaded came down substantially. A perusal of the assessment order as well as penalty order clearly shows that the assessee was a non-filer. We agree with the observations of the ld.CIT(A) that had the AO not issued notice u/s. 148, it could be reasonably assumed that the assessee would not have come clean. Therefore, it is a clear case of concealment of income as per Explanation 3 to section 271(1)(c) of the Act.

3 In this regard, it is worthwhile to place reliance on a recent

Therefore, from a careful perusal of the provisions of Explanation 3 to section 271(1)(c) of the Act, it is evident that in case any person fails, without reasonable cause, to file its return of income under section 139 within the period specified in section 153(1) and until the expiry of the aforesaid period, no notice has been issued to him under section 142(1) or section 148 and the Pumpkin Pictures Private Limited ITA No.4197/Mum./2024 AO is satisfied that in respect of such assessment year, such person has taxable income, then such person shall be deemed to have concealed the particulars of his income for the purpose of section 271(1)(c) of the Act. It is further provided that such an assumption shall be valid even though such person furnishes the return of his income at any time after the expiry of the period as mentioned above in pursuance of the notice issued under section 148 of the Act.

In the present case, it is evident from the record that the assessee neither filed its return of income under section 139 nor filed its return of income in response to notice issued under section 148 of the Act. It is also evident from the record that the notice under section 148 of the Act and other statutory notices were issued beyond the time period specified under section 153(1) of the Act. Further, the AO on the basis of the information received from the ITD systems and NMS portal was satisfied that the assessee has received substantial contract receipts amounting to Rs. 2.5 crore, during the year under consideration. Therefore, on a plain application of the provisions of Explanation 3 to section 271(1)(c) of the Act, the present case clearly falls in the category of "concealment of particulars of income" for the purpose of section 271(1)(c) of the Act.

Such being the facts, we find merits in the findings of the learned CIT(A), as noted in the foregoing paragraph, in rejecting the contention of the assessee that no penalty can be levied in the present case as P a g e | 8 A.Y. 2014-15 Vineet Thakar, Navi Mumbai

Insofar as the contention of the learned AR that the assessee could not file the return of income due to failure on the part of its auditor, it is pertinent to note that under the provisions of section 139 of the Act, it is the responsibility of the assessee to file its return of income within the due date and same cannot be compared to the filing of audit report under section 44AB of the Act, which specifically requires the accounts to be audited by an accountant and furnishing of such audit report in the prescribed form duly signed and verified by such accountant and setting forth such particulars as may be prescribed. Thus, we are of the considered view that even if due to the failure on the part of the auditor the assessee failed to file its audit report, as required under section 44AB of the Act, the same does not absolve the assessee from its responsibility to file the return of income under section 139 of the Act. At this stage, it is also pertinent to reiterate that the assessee also failed to file its return of income in pursuance of notice dated 30/03/2018 issued under section 148 of the Act. Thus, when the assessee has failed to comply with its statutory requirements under section 139 of the Act and also has completely ignored the notice issued under section 148 of the Act, the assessee now cannot shift its responsibility to its auditor. Accordingly, we find no merits in the aforesaid plea made on behalf of the assessee and the reliance placed on the decision of the coordinate bench rendered in assessee's own case is completely misplaced.

Since the present case squarely falls within the ambit of the provisions of Explanation 3 to section 271(1)(c) of the Act, we are of the considered view that the AO correctly levied a penalty under section 271(1)(c) of the Act in the present case and the same has been rightly upheld by the learned CIT(A). In light of our aforesaid findings, we find no infirmity in the impugned order in upholding the levy of penalty under section 271(1)(c) of the Act. As a result, the impugned order is upheld and the grounds raised by the assessee are dismissed.” 5.4 Thus, in the light of aforesaid discussions and the provisions of the Act in this regard, we hold that on the facts and in the circumstances

In the ground no.2(b) above, the assessee has contested the quantification of penalty stating that the Ld. CIT(A) erred in fact and in law by charging a penalty of Rs. 6,53,800/- u/s 271(1)(c) without

1 On careful consideration of the contentions, we find that in the case under consideration, penalty for concealment u/s 271(1)(c) has been imposed in terms of Explanation 3 thereof, being a case of deemed concealment on account of non filing of the return. According to the 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 is reproduced as under:

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) of the Act.

3 We therefore, deem it appropriate to send back this ground of appeal to the ld.Assessing Officer with a limited purpose to examine the claim of the assessee in the light of above provisions of the Act vis-a-vis the records at his end and modify the quantum of penalty accordingly, if required. The ground is therefore, allowed for statistical purposes as far as quantification of the penalty amount is concerned.

In the result, appeal of the assessee is partly allowed.