MOHAN THAKURDAS GURNANI,NAVI MUMBAI vs ITO CENTERAL CIRCLE 5(2), MUMBAI

IN THE INCOME-TAX APPELLATE TRIBUNAL “D” BENCH,
MUMBAI
BEFORE SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER
&
SMT. RENU JAUHRI, ACCOUNTANT MEMBER

आयकर अपील सं./ITA No. 435/MUM/2025
(निर्धारण वर्ा / Assessment Year :2010-11)
आयकर अपील सं./ITA No. 436/MUM/2025
(निर्धारण वर्ा / Assessment Year :2011-12)
आयकर अपील सं./ITA No. 437/MUM/2025
(निर्धारण वर्ा / Assessment Year :2012-13)
आयकर अपील सं./ITA No. 438/MUM/2025
(निर्धारण वर्ा / Assessment Year :2013-14)
आयकर अपील सं./ITA No. 439/MUM/2025
(निर्धारण वर्ा / Assessment Year :2016-17)

Mohan Thakurdas Gurnani
Flat No. 2101, Moraj Casa
Grande, Plot No. 57, Sector
17, Koperkhairne,
Maharashtra-400709
v/s.
बिधम
ITO Central Circle 5(2)
Room No. 427, 4th Floor,
Kautilya Bhavan, Bandra
Kurla Complex, Bandra
East,
Maharashtra-400051
स्थायी लेखा सं./जीआइआर सं./PAN/GIR No: AACPG8827D
Appellant/अपीलधर्थी
..
Respondent/प्रनिवधदी

निर्ााररती की ओर से /Assessee by:
None
रधजस्व की ओर से /Revenue by:
Shri R. R. Makwana

सुिवधई की िधरीख / Date of Hearing
12.03.2025
घोर्णध की िधरीख/Date of Pronouncement
28.03.2025

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

आदेश / O R D E R

PER RENU JAUHRI [A.M.] :-

These appeals are filed by the assessee against the orders of the Learned
Commissioner of Income-tax (Appeals), Mumbai-53 [hereinafter referred to as “CIT(A)”] dated 28.11.2024 passed u/s. 250 of the Income-tax Act, 1961
[hereinafter referred to as “Act”] for Assessment Years [A.Ys.] 2010-11, 2011-12,
2012-13, 2013-14 & 2016-17. 2. The assessee has raised the following grounds of appeal:
AY 2010-11
“GROUND NO. 1: LEVY OF PENALTY U/S 271(1)(c) OF RS. 1,05,214/-
(a) The Id. CIT(A) erred in law and on facts in confirming the levy of penalty u/s. 271(1)(c), for concealment of income, by ld. AO of Rs. 1,05,214/- being
100% of the tax on income of Rs. 4,01,727 on the notional income of Rs.
2,03,727/-representing the annual letting value and undisclosed income of Rs.
1,98,000 determined by AO and further erred in levying penalty u/s 271(1)(c) in respect of a search assessment u/s 143(3) r.w.s. 153A ignoring that; i. AO had failed to recompute the Annual Letting Value as per the direction of ITAT, and was yet to give effect to the order of ITAT ii. provisions of S. 271(1)(c) were inapplicable to the case of search assessmentsthe addition was made vide an order u/s 153A, iv. the addition was in respect of such income for which no incriminating material was available, v. the addition was not sustainable in law, vi. the penalty was initiated without specifying any charge in the assessment order or penalty notices or penalty orders, vii. the appellant was prevented by a reasonable cause, viii. the order passed was beyond the time permissible u/s 275, ix. passing an order dt. 04.03.2022 u/s. 271(1)(c) in respect of the proceedings which had been time barred by operation of law and provisions of S. 275 of the Income Tax Act, Χ. levying penalty u/s. 271(1)(c) simply by relying on the order of assessment without examining the facts afresh in penalty proceedings, xi. the appellant had requested the ld. AO for extension of time pending the adjudication of appeal on merits of the case by the ITAT, xii. levying the penalty @ 100% of tax when there had been no concealment of income and appellant had furnished accurate particulars of income, xiii. ignoring the fact that the appellant had determined the total income as per the provisions of the Income Tax Act,

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani xiv. by simply relying on the finding in the assessment order without in any manner applying his mind as to whether in the assessment order could be construed to represent any concealment of income, xv. without determining whether the assessee had furnished any inaccurate particulars of income or concealed income xvi. ignoring that the appellant had neither furnished accurate particular of income and nor had concealed any income, xvii. without identifying one of the two offences for which he proposed to levy penalty and informing the same to your appellant for responding to the same and further erred in passing the order of penalty once again by not identifying one of the two offences and instead levy penalty for allegedly concealing the particulars of income by furnishing inaccurate particulars of income, xviii. in initiating penalty proceedings without recording his satisfaction in the assessment order or in notice that the facts recorded in assessment satisfied him to initiate penalty proceedings.
xix. levying the penalty without giving any opportunity to your appellant to present the case on merits as to why penalty be not levied,
XX. Ignoring the explanations furnished by the appellant in good faith vide letter dt. 16.10.2024, 19.11.2024 and 22.11.2024 in response to the Show Cause
Notice dt. 10.10.2024 and 08.11.2024 (b) Your appellant strongly submits that the appellant had furnished accurate particulars of income for the year under consideration.
(c) Your appellant prays that the penalty of Rs. 1,05,214/- levied u/s. 271(1)(c) of the Act be deleted.

GROUND NO. 2: VIOLATION OF PROVISION OF S. 275
(a) The Id. CIT(A) erred in law and on in facts in confirming the order of penalty passed by AO in violation of limitation u/s 275 of the Act.
(b) Your appellant submits that the provisions of s. 275 required an AO to pass the order within the time prescribed under the law on passing the order by CIT(A) on merit of the case.
(c) Your appellant prays that an order passed in specific violation of s. 275 be quashed.

GROUND NO. 3: SERIOUS VIOLATION OF NATURAL JUSTICE AND OF S.
274 AND S. 275
(a) The Id. CIT(A) erred in law in confirming the order of the AO in gross violation of the provisions of natural justice; i. by denying any opportunity to your appellant to present the case on merits, ii. by not giving effect to the order of ITAT on merits of the case, iii. in not giving any opportunity to show cause on merits as to why penalty shall not be levied.
(b) Your appellant submits that the Id. AO has grossly violated the provisions of natural justice,
(c) Your appellant pleads that a penalty order passed in violation of the provisions, of natural justice be quashed.”

AY 2011-12
“GROUND NO. 1: LEVY OF PENALTY U/S 271(1)(c) OF RS. 46,527/-

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

(a) The Id. CIT(A) erred in law and on facts in confirming the levy of penalty u/s. 271(1)(c), for concealment of income, by ld. AO of Rs. 46,527/- being 100%
of the tax on notional income of Rs. 2,15,107/- representing the annual letting value determined by AO and further erred in levying penalty u/s 271(1)(c) in respect of a search assessment u/s 143(3) r.w.s. 153A ignoring that; i. AO had failed to recompute the Annual Letting Value as per the direction of ITAT, and was yet to give effect to the order of ITAT ii. provisions of S. 271(1)(c) were inapplicable to the case of search assessmentsthe iii. addition was made vide an order u/s 153A, iv. the addition was in respect of such income for which no incriminating material was available, v. the addition was not sustainable in law, vi. the penalty was initiated without specifying any charge in the assessment order or penalty notices or penalty orders, vii. the appellant was prevented by a reasonable cause, viii. the order passed was beyond the time permissible u/s 275, ix. passing an order dt. 04.03.2022 u/s. 271(1)(c) in respect of the proceedings which had been time barred by operation of law and provisions of S. 275 of the Income Tax Act, Χ. levying penalty u/s. 271(1)(c) simply by relying on the order of assessment without examining the facts afresh in penalty proceedings, xi. the appellant had requested the ld. AO for extension of time pending the adjudication of appeal on merits of the case by the ITAT, xii. levying the penalty @ 100% of tax when there had been no concealment of income and appellant had furnished accurate particulars of income, xiii. ignoring the fact that the appellant had determined the total income as per the provisions of the Income Tax Act, xiv. by simply relying on the finding in the assessment order without in any manner applying his mind as to whether in the assessment order could be construed to represent any concealment of income, xv. without determining whether the assessee had furnished any inaccurate particulars of income or concealed income xvi. ignoring that the appellant had neither furnished accurate particular of income and nor had concealed any income, xvii. without identifying one of the two offences for which he proposed to levy penalty and informing the same to your appellant for responding to the same and further erred in passing the order of penalty once again by not identifying one of the two offences and instead levy penalty for allegedly concealing the particulars of income by furnishing inaccurate particulars of income, xviii. in initiating penalty proceedings without recording his satisfaction in the assessment order or in notice that the facts recorded in assessment satisfied him to initiate penalty proceedings.
xix. levying the penalty without giving any opportunity to your appellant to present the case on merits as to why penalty be not levied,
XX. Ignoring the explanations furnished by the appellant in good faith vide letter dt. 16.10.2024, 19.11.2024 and 22.11.2024 in response to the Show Cause
Notice dt. 10.10.2024 and 08.11.2024 (b) Your appellant strongly submits that the appellant had furnished accurate particulars of income for the year under consideration.

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

AY 2012-13
“GROUND NO. 1: LEVY OF PENALTY U/S 271(1)(c) OF RS. 49,236/-
(a) The ld. CIT(A) erred in law and on facts in confirming the levy of penalty u/s. 271(1)(c), for concealment of income, by ld. AO of Rs. 49,236/- being 100%
of the tax on notional income of Rs. 2,27,625/- representing the annual letting value determined by AO and further erred in levying penalty u/s 271(1)(c) in respect of a search assessment u/s 143(3) r.w.s. 153A ignoring that;i. AO had failed to recompute the Annual Letting Value as per the direction of ITAT, and was yet to give effect to the order of ITAT ii. provisions of S. 271(1)(c) were inapplicable to the case of search assessment the addition was made vide an order u/s 153A, iv. the addition was in respect of such income for which no incriminating material was available, v. the addition was not sustainable in law, vi. the penalty was initiated without specifying any charge in the assessment order or penalty notices or penalty orders, vii. the appellant was prevented by a reasonable cause, viii. the order passed was beyond the time permissible u/s 275, ix. passing an order dt. 15.03.2022 u/s. 271(1)(c) in respect of the proceedings which had been time barred by operation of law and provisions of S. 275 of the Income Tax Act, Χ. levying penalty u/s. 271(1)(c) simply by relying on the order of assessment without examining the facts afresh in penalty proceedings,

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani xi. the appellant had requested the ld. AO for extension of time pending the adjudication of appeal on merits of the case by the ITAT, xii. levying the penalty @ 100% of tax when there had been no concealment of income and appellant had furnished accurate particulars of income, xiii. ignoring the fact that the appellant had determined the total income as per the provisions of the Income Tax Act, xiv. by simply relying on the finding in the assessment order without in any manner applying his mind as to whether in the assessment order could be construed to represent any concealment of income, xv. without determining whether the assessee had furnished any inaccurate particulars of income or concealed income xvi. ignoring that the appellant had neither furnished accurate particular of income and nor had concealed any income, xvii. without identifying one of the two offences for which he proposed to levy penalty and informing the same to your appellant for responding to the same and further erred in passing the order of penalty once again by not identifying one of the two offences and instead levy penalty for allegedly concealing the particulars of income by furnishing inaccurate particulars of income, xviii. in initiating penalty proceedings without recording his satisfaction in the assessment order or in notice that the facts recorded in assessment satisfied him to initiate penalty proceedings.
xix. levying the penalty without giving any opportunity to your appellant to present the case on merits as to why penalty be not levied,
XX. Ignoring the explanations furnished by the appellant in good faith vide letter dt. 16.10.2024, 19.11.2024 and 22.11.2024 in response to the Show Cause
Notice dt. 10.10.2024 and 08.11.2024 (b) Your appellant strongly submits that the appellant had furnished accurate particulars of income for the year under consideration.
(c) Your appellant prays that the penalty of Rs. 49,236 /- levied u/s. 271(1)(c) of the Act be deleted.

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

(b) Your appellant submits that the Id. AO has grossly violated the provisions of natural justice,
(c) Your appellant pleads that a penalty order passed in violation of the provisions of natural justice be quashed.”

AY 2013-14
“GROUND NO. 1: LEVY OF PENALTY U/S 271(1)(c) OF RS. 92,600/-
(a) The ld. CIT(A) erred in law and on facts in confirming the levy of penalty u/s. 271(1)(c), for concealment of income, by ld. AO of Rs. 92,600/- being 100%
of the tax on notional income of Rs. 4,29,223/- representing the annual letting value determined by AO and further erred in levying penalty u/s 271(1)(c) in respect of a search assessment u/s 143(3) r.w.s. 153A ignoring that; i. AO had failed to recompute the Annual Letting Value as per the direction of ITAT, and was yet to give effect to the order of ITAT ii. provisions of S. 271(1)(c) were inapplicable to the case of search assessment iii. the addition was made vide an order u/s 153A, iv. the addition was in respect of such income for which no incriminating material was available, v. the addition was not sustainable in law, vi. the penalty was initiated without specifying any charge in the assessment order or penalty notices or penalty orders, vii. the appellant was prevented by a reasonable cause, viii. the order passed was beyond the time permissible u/s 275, ix. passing an order dt. 02.03.2022 u/s. 271(1)(c) in respect of the proceedings which had been time barred by operation of law and provisions of S. 275 of the Income Tax Act, Χ. levying penalty u/s. 271(1)(c) simply by relying on the order of assessment without examining the facts afresh in penalty proceedings, xi. the appellant had requested the ld. AO for extension of time pending the adjudication of appeal on merits of the case by the ITAT, xii. levying the penalty @ 100% of tax when there had been no concealment of income and appellant had furnished accurate particulars of income, xiii. ignoring the fact that the appellant had determined the total income as per the provisions of the Income Tax Act, xiv. by simply relying on the finding in the assessment order without in any manner applying his mind as to whether in the assessment order could be construed to represent any concealment of income, xv. without determining whether the assessee had furnished any inaccurate particulars of income or concealed income xvi. ignoring that the appellant had neither furnished accurate particular of income and nor had concealed any income, xvii. without identifying one of the two offences for which he proposed to levy penalty and informing the same to your appellant for responding to the same and further erred in passing the order of penalty once again by not identifying one of the two offences and instead levy penalty for allegedly concealing the particulars of income by furnishing inaccurate particulars of income, xviii. in initiating penalty proceedings without recording his satisfaction in the assessment order or in notice that the facts recorded in assessment satisfied him to initiate penalty proceedings.

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani xix. levying the penalty without giving any opportunity to your appellant to present the case on merits as to why penalty be not levied,
XX. Ignoring the explanations furnished by the appellant in good faith vide letter dt. 16.10.2024, 19.11.2024 and 22.11.2024 in response to the Show Cause
Notice dt. 10.10.2024 and 08.11.2024 (b) Your appellant strongly submits that the appellant had furnished accurate particulars of income for the year under consideration.
(c) Your appellant prays that the penalty of Rs.92,600/- levied u/s. 271(1)(c) of the Act be deleted.

AY 2016-17
“GROUND NO. 1: LEVY OF PENALTY U/S 271(1)(c) OF RS. 21,780/-
(a) The Id. CIT(A) erred in law and on facts in confirming the levy of penalty u/s. 271(1)(c), for concealment of income, by ld. AO of Rs. 21,780/- being 100%
of the tax on notional income of Rs. 89,929/- representing the annual letting value determined by AO and further erred in levying penalty u/s 271(1)(c) in respect of a search assessment u/s 143(3) r.w.s. 153A ignoring that; i. AO had failed to recompute the Annual Letting Value as per the direction of ITAT, and was yet to give effect to the order of ITAT ii. provisions of S. 271(1)(c) were inapplicable to the case of search assessments iii. the addition was made vide an order u/s 153A, iv. the addition was in respect of such income for which no incriminating material was available,
V. the addition was not sustainable in law, vi. the penalty was initiated without specifying any charge in the assessment order or penalty notices or penalty orders, vii. the appellant was prevented by a reasonable cause,

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani viii. the order passed was beyond the time permissible u/s 275, ix. passing an order dt. 02.03.2022 u/s. 271(1)(c) in respect of the proceedings which had been time barred by operation of law and provisions of S. 275 of the Income Tax Act,
X levying penalty u/s. 271(1)(c) simply by relying on the order of assessment without examining the facts afresh in penalty proceedings, xi. the appellant had requested the ld. AO for extension of time pending the adjudication of appeal on merits of the case by the ITAT, xii. levying the penalty @ 100% of tax when there had been no concealment of income and appellant had furnished accurate particulars of income, xiii. ignoring the fact that the appellant had determined the total income as per the provisions of the Income Tax Act, xiv. by simply relying on the finding in the assessment order without in any manner applying his mind as to whether in the assessment order could be construed to represent any concealment of income,
XV. without determining whether the assessee had furnished any inaccurate particulars of income or concealed income xvi. ignoring that the appellant had neither furnished accurate particular of income and nor had concealed any income, xvii. without identifying one of the two offences for which he proposed to levy penalty and informing the same to your appellant for responding to the same and further erred in passing the order of penalty once again by not identifying one of the two offences and instead levy penalty for allegedly concealing the particulars of income by furnishing inaccurate particulars of income, xviii. in initiating penalty proceedings without recording his satisfaction in the assessment order or in notice that the facts recorded in assessment satisfied him to initiate penalty proceedings.
xix. levying the penalty without giving any opportunity to your appellant to present the case on merits as to why penalty be not levied,
XX. ignoring the explanations furnished by the appellant in good faith vide letter dt. 16.10.2024, 19.11.2024 and 22.11.2024 in response to the Show Cause
Notice dt. 10.10.2024 and 08.11.2024
b) Your appellant strongly submits that the appellant had furnished accurate particulars of income for the year under consideration.
(c) Your appellant prays that the penalty of Rs. 21,780/- levied u/s. 271(1)(c) of the Act be deleted.

GROUND NO. 3: SERIOUS VIOLATION OF NATURAL JUSTICE AND OF S.
274 AND S. 275
(a) The Id. CIT(A) erred in law in confirming the order of the AO in gross violation of the provisions of natural justice;

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani i. by denying any opportunity to your appellant to present the case on merits, ii. by not giving effect to the order of ITAT on merits of the case, iii. in not giving any opportunity to show cause on merits as to why penalty shall not be levied.
(b) Your appellant submits that the Id. AO has grossly violated the provisions of natural justice,
(c) Your appellant pleads that a penalty order passed in violation of the provisions of natural justice be quashed.”

Since common issues are involved in all these appeals, these are being disposed of by a common order. AY 2010-11 is being taken as a lead case. ITA No. 435/Mum/2025 for AY 2010-11 4. Brief facts of the case are that a search and seizure action was undertaken in the Gurnani Group on 04.02.2016, subsequent to which the assessee’s case along with those of the other members of the group were centralised and notices u/s 153A were issued. The assessee filed return declaring income of Rs. 78,98,470/- on 16.01.2017 in response to this notice. During the course of the assessment, the Ld. AO observed that several immovable properties appeared in the balance sheet of the assessee. However, notional income on the same was not declared in the return of income. Accordingly, a sum of Rs. 2,03,727/- was computed as notional income which was added to the returned income while making the assessment u/s 143(3) r.w.s. 153A of the Act. Penalty proceedings u/s 271(1)(c) for concealment of income were also initiated. Subsequently, Ld. CIT(A) dismissed the assessee’s appeal against the quantum addition and upheld the addition made on account of notional income from house property vide order u/s 143(3) r.w.s. 153A dated 26.10.2021. Thereafter, the Ld. AO

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani issued a show cause notice to the assessee to explain as to why penalty should not be levied u/s 271(1)(c) of the Act for concealment of income. As the assessee had filed a second appeal against the assessment order, he requested the AO to keep the penalty proceedings in abeyance till its disposal by the coordinate bench. However, Ld. AO proceeded to impose the penalty of Rs. 1,24,130/-
@100% of tax sought to be evaded in respect of the notional income.
5. Aggrieved with the penalty order, the assessee preferred an appeal before
Ld. CIT(A). Vide order dated 28.11.2024, Ld. CIT(A) observed that the co- ordinate bench has, in the meanwhile, decided the quantum appeal and has directed the AO to allow standard deduction @30% ALV u/s 24 of the Act, while upholding the action of the Ld. AO in taxing notional income, following its own decision in the case of M/s Priya Gurnani. Accordingly, Ld. CIT(A) directed the Ld. AO to recompute the penalty after recomputing the notional income from house property as per the directions of the co-ordinate bench.
6. Aggrieved with the order of Ld. CIT(A), the assessee is in appeal before the Tribunal. Before us, several grounds relating to the legality and validity of penalty proceedings have been raised. Ld. AR has relied upon the decision of the co-ordinate bench in the case of Shri Suresh Shivlal Bhasin v/s ACIT ITA
No. 1705 & 1707/Mum/2017 wherein the levy of penalty u/s 271(1)(c) in a case of addition made on account of notional income from the house property has been deleted. Relevant portion of the order is reproduced below:

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

“5. .................................................As regards imposition of penalty on the addition made on account of notional house property income, it goes without saying that in reality the assessee has not earned any income from house property. The Assessing
Officer himself has observed that the addition made on account of income from house property is notional. In that view of the matter, penalty u/s. 271(1)(c) of the Act cannot be imposed in respect of addition made on account of notional income from house property. Thus, on over all consideration of facts and circumstances, we are of the opinion that imposition of penalty u/s. 271(1)(c) of the Act, in the facts of the present appeals is not justified ....................................................”

On the other hand, Ld. DR has also filed written submissions relying on the decision of the Hon’ble Delhi High Court in the case of PSB Industries India Pvt. Ltd. (2011) 15 taxmann.com 201 (Delhi) wherein penalty for concealment on notional income has been upheld. 8. We have considered the rival submissions and perused the material placed before us. With regard to the submissions of the Ld. DR, we find that the decision of the Hon’ble Delhi High Court in the case of PSB Industries India Pvt. Ltd. v/s CIT (supra) is distinguishable on the facts of the present case. 8.1 In the case of PSB Industries India Pvt. Ltd. v/s CIT (supra), the assessee had let out its property to a bank at a rental income of Rs. 1 lakh per annum for a term of 25 years and had also received interest-free deposit of Rs. 67 cr. from the bank. The annual rental value of the property, on the basis of valuation done by a Government registered valuer was found to be Rs. 75,63,360/- per annum. Accordingly, penalty was levied u/s 271(1)(c) on the ground that the annual rental value of Rs. 1 lakh disclosed by the assessee on the basis of the lease agreement was wrong and having regard to the fact that the assessee had also received the sum of Rs. 67 cr. as interest-free deposit from the lessee in the P a g e | 13

ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani absence of which the rent would have been much higher and, therefore, the ALV was ultimately determined at Rs. 75,63,360/-. Under these circumstances, the Ld. AO had held that the assessee had concealed material particulars and furnished inaccurate particulars of income and therefore penalty u/s 271(1)(c) was levied. The Hon’ble High Court upheld the penalty after observing that the explanation of the assessee was not bonafide and therefore Explanation 1 to section 271(1)(c) would be applicable in this case.
8.2
In the present case, the assessee has not received any rental income and the properties in question are shown in the balance sheet. It is not the case of the department that the assessee has not shown the properties in hand or has received some rental income which was not declared. Hence, the case of the assessee is distinguishable on facts.
8.3
On the other hand, in several decisions of the co-ordinate benches including the one cited by the assessee in the case of Shri Suresh Shivlal Bhasin
(supra), it has been held that penalty for concealment of income cannot be levied on notional income from the house property.

4 Since the facts of the case in hand are identical, respectfully following the above decision of the co-ordinate bench, we hereby hold that the penalty levied u/s 271(1)(c) for concealment of notional income is bad in law and is therefore quashed. ITA No. 436, 437 & 438/Mum/2025 for AY 2011-12, 2012-13, 2013-14

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

The facts in these appeals are being identical to AY 2010-11, the above decision will apply mutatis mutandis to these appeals also. Accordingly, the penalties u/s 271(1)(c) levied for AY 2011-12 (Rs. 46,527/-), AY 2012-13 (Rs. 49,236/-), and 2013-14 (Rs. 92,600/-) are also quashed. ITA No. 439/Mum/2025 for AY 2016-17 10. In AY 2016-17, the assessee has raised the issue of initiation of penalty under wrong provisions of the Act. It has been contended that after the insertion of sections 271(AAA) and 271(AAB), the penalty in this case should have been levied u/s 271(AAB) as against 271(1)(c) of the Act, since the date of search in this case is 04.02.2016 and section 271(AAB) is applicable in the present case. 11.1 From the plain reading of section 271AAB, it is clear that where a search u/s.132(1) was initiated on or after the 1st day of July, 2012, penalty is leviable on the undisclosed income at the rate and conditions specified under section 271AAB(1) for the specified previous year. Further, the section also defines the term "specified previous year" as under:- "specified previous year" means the previous year— (i) which has ended before the date of search, but the date of furnishing the return of income under sub-section (1) of section 139 for such year has not expired before the date of search and the assessee has not furnished the return of income for the previous year before the date of search; or (ii) in which search was conducted;

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

11.

2 Applying the above definition to the assessment year under consideration, penalty is to be levied under section 271AAB for AY 2016-17 as it falls under the second limb of the definition. It is also noted that there is no undisclosed income declared by the assessee as contemplated under section 271AAB. 11.3 Moreover, section 271AAB starts with non obstante clause and excludes applicability of section 271(1)(c), if the undisclosed income pertains to the specified previous year. 11.4 Based on the above, we hold that, penalty levied under section 271(1) (c ) for AY 2016-17 is bad in law, void ab initio and deserves to be quashed.

12.

In the result, all the five appeals of the assessee are partly allowed. Order pronounced in the open court on 28.03.2025. RAHUL CHAUDHARY RENU JAUHRI (न्यधनयक सदस्य/JUDICIAL MEMBER) (लेखधकधर सदस्य/ACCOUNTANT MEMBER

Place: म ुंबई/Mumbai
दिन ुंक /Date 28.03.2025
अननकेत स ुंह र जपूत/ स्टेनो
आदेश की प्रनतनलनि अग्रेनित/Copy of the Order forwarded to :
1. अपीलार्थी / The Appellant
2. प्रत्यर्थी / The Respondent.
3. आयकर आयुक्त / CIT

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ITA No. 435 to 439/Mum/2025
A.Y. 2010-11, 11-12, 12-13, 13-14 & 16-17

Mohan Thakurdas Gurnani

विभागीय प्रविविवि, आयकर अपीलीय अविकरण DR, ITAT, Mumbai 5. गार्ड फाईल / Guard file.

सत्यानित प्रनत ////
आदेशािुसार/ BY ORDER,

सहायक िंजीकार (Asstt.

MOHAN THAKURDAS GURNANI,NAVI MUMBAI vs. ITO CENTERAL CIRCLE 5(2), MUMBAI