GAURISHANKAR CHAUDHARY,MUMBAI vs. ACIT CC-4(4), MUMBAI, MUMBAI

आदेश / O R D E R Per Amarjit Singh (AM): All the appeals are filed by the assessee, the assessee has urged identical grounds of appeal the only difference being the figures relating to amount of penalty levied u/s 271(1)(c) of the Act i.e A.Y. 2011-12 of Rs.4,39,150/-, for A.Y. 2012-13 of Rs.7,70,000/-, ITA No. 6112/Mum/2019 for A.Y. 2013-14 of Rs.2,13,7670/- and ITA No.6113/Mum/2019 for A.Y. 2014-15 of Rs.1,07,420/- respectively, ITA Nos. 6110 to 6113/Mum/2019 2 Gaurishankar Chaudhary Vs. ACIT, CC-4(4) therefore, the same are decided by way of this common order by taking the as a lead case and its findings will be applied to other cases.

Manjunatha Cotton and Ginning Factory (359 ITR 565), the penalty is invalid. ii. The additional income of Rs. 8,51,000/- was voluntarily offered in the return filed in response to notice u/s 148 @ 0.25% p.m. as commission/brokerage for arranging loans. iii. The further addition of Rs.1,70,200 towards suppressed commission/brokerage income has been made by the AO by estimating @ 0.30% p.m. as against the estimate done by him @25% pm in the return filed in response to notice u/s 148. iv. The details in respect of the cash loan of Rs. 4,00,000/- were available in the seized records and therefore it cannot be said that the relevant particulars were not disclosed by him. Whether penalty proceedings have been vitiated, since the AO in the assessment order has initiated penalty for "furnishing of inaccurate particulars of income whereas he has finally levied penalty on the charge of "concealment of particulars of income" as per the decision of the Karnataka HC in the case of Manjunatha Cotton and Ginning Factory (supra) 5.3. The assessee contends that the AO is not sure as to what is the specific charge against him considering that in the assessment order, it has been mentioned that penalty is initiated for inaccurate particulars of income" whereas the finally penalty has been levied for "concealment of particulars of income" Therefore the assessee contends that as per the decision of the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (359 ITR 565), the penalty u/s 271(1)(c) gets vitiated. The assessee has further submitted that the decision of Karnataka High Court in of 2015 in the case of SSA Emerald Meadows wherein decision of Manjunatha Cotton and Ginning Factory (supra) was followed, has become final since the Hon'ble Supreme Court has dismissed the SLP of the Department Accordingly, the assessee contends that the penalty proceedings have been vitiated and therefore, the penalty levied by the AO u/s 271(1)(c) should be cancelled. 5.4 I have gone through the decisions of Karnataka High Court in the said 2 cases. It has been held in these decisions that in the interest of natural justice, the AO should specify the charge on which penalty was initiated and then should levy penalty on the same charge for which it was initiated. The Hon'ble Karnataka High Court further held that the assessee must be aware of the specific charge so that he can file appropriate response to the show cause notice u/s 274. It finally concluded that if the AO has not applied his mind at the time of initiation of penalty and the assessee has not been made aware of the specific charge due to non-striking of redundant words in the show cause notice issued u/s 274, the penalty proceedings would get vitiated. This issue has also been adjudicated by the jurisdictional Bombay High Court in case of Smt. Kaushalya Devi and Others (216 ITR 0660) wherein it has been held that if the specific charge is mentioned in the assessment order while initiating the penalty then mere non striking of the redundant portion of the notice u/s 274 would not vitiate the penalty proceedings to 6113/Mum/2019 5 Gaurishankar Chaudhary Vs. ACIT, CC-4(4)

5.5 In a recent judgment in the case of Maharaj Garage & Co. Vs. Commissioner of Income-tax, Nagpur, [2017] 85 taxmann.com 86 (Bombay), the Hon'ble Bombay High Court has held that the requirement of section 274 for granting reasonable opportunity of being heard in the matter cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged. The assessee was supplied with the findings recorded in the order of re- assessment, which was passed on the same date on which the notice under section 271(1)(c) was issued, initiating the proceedings of imposing the penalty. The assessee had sufficient notice of the action of imposing penalty, therefore, there was neither any jurisdictional error or unjust exercise of power by the authority The relevant excerpts of the said judgment are reproduced hereunder: “15. The requirement of Section 274 of the Income Tax Act for granting reasonable opportunity of being heard in the matter cannot be stretched to the extent of framing a specific charge or asking the assessee an explanation in respect of the quantum of penalty proposed to be imposed, as has been urged The assessee was supplied with the findings recorded in the order of re-assessment, which was passed on the same date on which the notice under Section 271(1)(c) was issued, initiating the proceedings of imposing the penalty The assessee had sufficient notice of the action of imposing penalty. We, therefore, do not find either any jurisdictional error or unjust exercise of power by the authority.

situation, from the assessment order it will be clear to the assessee as to what is/are the charge(s) that are being levied by the AO and therefore the assessee will not be put to a disadvantageous position or will impair or prejudice assessee's right of reasonable opportunity of being heard and (ii) the AO has also levied penalty u/s 271(1)(c) for the same charge(s) for which penalty has been initiated in the assessment order. 5.7 To examine whether the aforesaid conditions have been satisfied or not in the penalty levied u/s 271(1)(c) in the instant case, the assessment order wherein the said penalty was initiated, the notice issued u/s 274 and the penalty order were examined. From the notice issued u/s 274, it is observed that the AO has duly licked off the redundant portion and as per this notice, the charge against the assessee is of concealment of particulars of income" The AO has levelled this charge since the additional income of Rs.8,51,000/ offered by the assessee in his return filed in response to notice u/s 148 was not disclosed in the original return of income Moreover this charge has also been levelled by the AO for the addition made of Rs. 1,70,200 by estimating the brokerage income @ 0.30% p.m as against 0.25% p.m. offered by the assessee and also the addition made of Rs.4,00,000/- in respect of an alleged cash loan arranged since these transactions related to arranging loans were never disclosed by the assessee in the original return of income. Moreover, the AO has also finally levied penalty for a charge which is not different from the charge of "concealment of particulars of income" Therefore, the ratio of said decision in the case of Manjunatha Cotton and Ginning Factory (supra) cannot be applied to the facts of the case of our assessee and accordingly the penalty initiated and levied on the assessee u/s 271(1)(c) is held to have not been vitiated. Whether the additional income of of Rs 8,51,000/- offered by the assessee in the return filed in response to notice u/s 148 can be considered as voluntarily 5.8 The assessee further contends that its disclosure of the additional income of Rs.8,51,000/- in the return in response to notice u/s 148 has been voluntarily made and therefore it is not liable for levy of penalty "Voluntarily means out of free will ie without any compulsion. It has been held in the cases of K.L. Swamy Vs. CIT (Kar) 239 ITR 386, Bhairav Lal Verma Vs Union of India (All) 230 ITR 855 and M.N. Rajaraman Vs. ACIT (ITAT, Chennai) 119 ITD 362 that if the department has incriminating material with regard to the undisclosed income, the disclosure made by the assessee cannot be considered to be voluntary. Further, in the cases of P.C. Joseph & Bros. Vs. CIT (Ker) 240 ITR 818, CIT vs. Rakesh Suri (All) 331 ITR 458 and CIT vs. Sushma Devi Agarwal (ITAT, Kol-TM) 67 DTR 430, it has been held that simply because the assessee agreed for addition of undisclosed income subsequent to detection thereof and filed return in response to notice u/s 148 offering the said amount as additional income, the assessee cannot escape levy of penalty u/s 271(1)(c). In the instant case, the said additional income on account of brokerage for arranging loans was never disclosed in the original retum of income and only due to the impounding of incriminating documents in the survey action, the assessee was left with no option but to include the said brokerage income in the return in response to notice u/s 148 Thus, the claim of the assessee that the said additional income of Rs 8,51,000/- was voluntarily to 6113/Mum/2019 7 Gaurishankar Chaudhary Vs. ACIT, CC-4(4) declared in the return of income in response to notice u/s 148, cannot be accepted 5.9 The facts of the case of the assessee are some what similar to the cases decided by the Hon'ble Supreme Court in the cases of Mak Data (P) Ltd (38) Taxman.com 448) and K P Madhusudanan (118 Taxman 224) wherein the said assessees had come forward with an offer of undisclosed income in course of the assessment proceedings on being confronted with adverse evidences, however, the levy of penalty on the undisclosed income offered was upheld. Therefore, the contention of the assessee that it had voluntarily offered the said additional brokerage income of Rs. 8,51,000/- and therefore penalty is not leviable, is rejected. Whether penalty is leviable where the addition of Rs 1.70,200/ has been made on an estimated basis 5.10 It has further been contended by the assessee that the addition of Rs.1,70,200/- to the brokerage income has been made by the AO on estimated basis by applying a rate of 0.30% pm as against 0.25% pm offered by him and therefore, penalty u/s 271(1)(c) cannot be levied As noted earlier, the transactions related to activity of arranging loans was never disclosed in the original return of income and the said income was offered in the subsequent return only after the detection in course of the survey action. It is clear that the of the assessee was to take a risk and disclose a lesser income than what he was actually earning In this case, the quanturn of loans arranged by the assessee on commission/brokerage basis has not been estimated but it is only the profit earned which has been estimated @ 0.30% p.m. as against @0.25% p.m. offered in the subsequent return. Therefore, the benefit of non levy of penalty cannot be extended to the assessee. In support of this view, reliance is placed on the decision of the Hon'ble Delhi High Court in the case of Kalindi Rail Nirman Engg. Ltd. 51 taxmann.com 523 (Delhi) wherein levy of penalty on the additions made by estimating the income of the assessee by applying rate of 11% (agreed by the assessee) on the gross receipts which were actual, has been upheld. Therefore, the contention of the assessee that penalty is not leviable in its case since the said addition of Rs. 1,70,200/- has been made on an estimated basis, is rejected. Whether the ratio of the decision of the Hon'ble Supreme Court in the case of Reliance Petroproducts (322 ITR 158) can be applied to the facts of the case of our assessee. 5.11 The assessee also contends that all the relevant details were duly disclosed to the AO and therefore, the additions made do not automatically lead to levy of penalty as held by the Hon'ble Supreme Court in the case of Reliance Petroproducts (supra). In the instant, it is observed that the assessee had not at all disclosed the transactions related to his business activity of arranging loans on commission/brokerage basis in the original return of income and the said brokerage income was offered in the subsequent return only after the detection in course of the survey action The fact that the details related to this activity of arranging loans were available with the AO from the material seized in course of the survey action cannot be considered in favour of the assessee to hold that all the material facts were duly disclosed to the AO. Even if the relevant facts related to 6113/Mum/2019 8 Gaurishankar Chaudhary Vs. ACIT, CC-4(4) to this activity were disclosed to the AO in the re-assessment proceedings, the same was only after detection in the survey action. Moreover, the details related to the cash loan of Rs 4,00,000/- were not disclosed even in the re-assessment proceedings. Therefore, the ratio of said decision in the case of Reliance Petroproducts (supra) cannot be applied to the facts of the case of our assessee. As regards, the contention of the assessed that in respect of the cash loan of Rs 4,00,000, penalty should have been levied u/s 271D/E and not u/s 271(1)(c), it is noted that the AO in the quantum order has added the said amount of Rs.4,00,000/- by treating it to be income of the assessee itself and has not treated it as a loan given/received. Therefore penalty has been rightly levied by the AO u/s 271(1)(c) in respect of quantum addition of Rs.4,00,000/-. 5.12 In view of the above detailed discussion, no infirmity is found in the action of the AO of levying penalty of Rs.4,39,150 @ 100% of the tax sought to be evaded. on the aggregate concealment of income of Rs.14,21,200/-. Accordingly, both the grounds of appeal of the assessee are dismissed.”

5. Heard the ld. D.R and perused the material on record. During the course of appellate proceedings before the ld. CIT(A) the assessee has categorically brought to the notice of the ld. CIT(A) that in the assessment order the A.O has initiated penalty proceedings on account of furnishing inaccurate particular of income, however, in the notice u/s 274 r.w.s 271 of the Act dated 20.06.2018 the A.O has charged the assessee for levy of penalty on account of concealment of particular of income. The assessee also submitted before the ld. CIT(A) that A.O was not sure on the foundation on which the penalty was to be initiated. The assessee had also placed reliance on the decision of Karnataka High Court in the case of Manjunatha Cotton and Ginny Factory 359 ITR 565 during the course of appellate proceedings before the ld. CIT(A). However, the ld. CIT(A) referred the decision of Hon’ble jurisdictional Bombay High Court in the case of Smt. Kaushalya Devi & Others (216 ITR 0660) wherein it has been held that if the specific charge is mentioned in the assessment order while initiating penalty the mere non striking of the redundant portion of the notice u/s 274 would not vitiate the penalty proceedings. In this regard we find that Hon’ble jurisdictional Bombay to 6113/Mum/2019 9 Gaurishankar Chaudhary Vs. ACIT, CC-4(4)

High Court in the case of Mohd Farhan A. Shaikh Vs. DCIT (2021) 125 taxmann.com 253 (Bom) after considering the decision in the case of Smt. Kaushalya Devi & Others held that the case of Smt. Kaushalya Devi & Others does not lay down the correct position of the law. Therefore, after considering the decision of Hon’ble Supreme Court in the case of Dilip N. Shroff the Hon’ble jurisdictional court in the case as supra held that a contravention of a mandatory condition or requirement to be valid communication is fatal with no further proof. It is in the interest of the fairness and justice that the notice must be precise. It should not give room for ambiguity. We have also considered the decision of coordinate bench of the ITAT, Mumbai, in the case of Dharni Developers Vs. ACIT (2015) 65 taxmann.com 208 (Mumbai Trib) wherein it is held that where an A.O initiated proceedings u/s 271(1)(c) for concealment of particular of income by assessee but levy penalty for furnishing of inaccurate particular of income impugned penalty could not be sustainable. It is undisputed fact that as per notice u/s 274 r.w.w 271 of the Act dated 20.06.2018 the A.O has initiated the penalty for concealment of particular of income, however, in the assessment order dated 19.06.2018 the A.O recorded satisfaction as per para 12 of the assessment order that assessee has furnished inaccurate particular of income. Even in the penalty order u/s 271(1)(c) of the Act dated 19.11.2018 at para 8 of the penalty order the A.O simply stated that assessee has concealed his income, without specifying whether the penalty was levied for furnishing inaccurate particular of income or concealment of particular of income. We therefore hold that impugned order imposing penalty in all the 4 assessment years are invalid and consequently penalty imposed are cancelled. Therefore, legal ground no. 1 of the assessee of the 4 appeals are allowed. to 6113/Mum/2019 10 Gaurishankar Chaudhary Vs. ACIT, CC-4(4)

no. 2 on merit in all the 4 appeals are dismissed having become infructuous as we have already deleted impugned penalty of legal ground for all the 4 assessment years under consideration.