VINAY SUBHIKHI,NEW DELHI vs. ITO, WARD- 72(5), NEW DELHI

ORDER PER KUL BHARAT, JM : The present three appeals filed by the assessee for the assessment years 2005-06, 2008-09 & 2010-11 are directed against the separate orders of Ld. CIT(A)-21, New Delhi, all dated 14.12.2017. Since the identical grounds have been raised, all these three appeals are taken up together and are being disposed off by way of the consolidated order. The assessee has raised following grounds in all these three appeals respectively:-

3. That the penalty levied under section 271(1)(c) of the Act is void and illegal inasmuch as the assessing officer failed to record valid satisfaction in the assessment order and failed to specify specific charge in the show cause notice for levying the penalty. 4. That on the facts and circumstances of the case and in law, the CIT(Appeals) confirmed the action of the assessing officer erred in levying penalty under section 271(1)(c) of the Act, without appreciating the fact that the appellant had neither concealed income nor furnished inaccurate particulars of income in respect of addition made in the assessment order qua Rs. 3,86,690/-, so as to warrant levy of penalty. 5. That the CIT(Appeals) erred on facts and in law in not appreciating that neither the alleged addition of Rs.63,888/- was made u/s 68 in the quantum assessment order nor the penalty was actually levied by the assessing officer. 6. That the assessing officer erred on facts and in law in imposing penalty under section 271(1)(c) of the Act, without appreciating that (a) all material facts were duly disclosed by the appellant (b) no penalty is leviable qua additions or disallowances related to issues which are debatable (c) claim made were properly explained and explanation furnished was bonafide and (d) the addition made in the assessment order were predicated on bonafide difference of opinion between the appellant and the Assessing Officer. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing.” [Assessment Year : 2008-09] 1. “That on facts and circumstances of the case and in law, the impugned ex-parte order dated 11.03.2015 passed by the assessing officer under section 271(l)(c) of the Income Tax Act, 1961 (the Act), levying penalty of Rs.2,00,931/- is without jurisdiction, bad in law and void ab initio.

2. That on the facts and circumstances of the case and in law, the impugned penalty order passed by the assessing officer is passed without complying with the principles of natural justice.

3. That the penalty levied under section 271(1)(c) of the Act is void and illegal inasmuch as the assessing officer failed to record valid satisfaction in the assessment order and failed to specify specific charge ~show cause notice for levying the penalty.

4. That on the facts and circumstances of the case and in law, the CIT(Appeals) confirmed the action of the assessing officer erred in levying penalty under section 271(1)(c) of the Act, without appreciating the fact that the appellant had neither concealed income nor furnished inaccurate particulars of income in respect of addition made in the assessment order qua Rs. 2,63,202/-, so as to warrant levy of penalty.

1. “That on facts and circumstances of the case and in law, the impugned ex-parte order dated 11.03.2015 passed by the assessing officer under section 271(1)(c) of the Income Tax Act, 1961 (the Act), levying penalty of Rs.l,40,7401- is without jurisdiction, bad in law and void ab initio.

2. That on the facts and circumstances of the case and in law, the impugned penalty order passed by the assessing officer is passed without complying with the principles of natural justice.

3. That the penalty levied under section 271(1)(c) of the Act is void and illegal inasmuch as the assessing officer failed to record valid satisfaction in the assessment order and failed to specify specific charge in the show cause notice for levying the penalty. 4. That on the facts and circumstances of the case and in law, the CIT(Appeals) confirmed the action of the assessing officer erred in levying penalty under section 271(1)(c) of the Act, without appreciating the fact that the appellant had neither concealed income nor furnished inaccurate particulars of income in respect of addition made in the assessment order qua Rs. 3,37,313/-, so as to warrant levy of penalty. 5. That the assessing officer erred on facts and in law in imposing penalty under section 271(1)(c) of the Act, without appreciating that (a) all material facts were duly disclosed by the appellant (b) no penalty is leviable qua additions or disallowances related to issues which are debatable (c) claim made were properly explained and explanation furnished was bonafide and (d) the addition made in the assessment order were predicated on bonafide difference of opinion between the appellant and the assessing officer. The appellant craves leave to add, alter, amend or vary from the above grounds of appeal at or before the time of hearing.” First, we take up Assessment Year 2005-06.

2. At the outset, Ld. Counsel for the assessee submitted that in the quantum proceedings, the Tribunal was pleased to set aside the appeals of the assessee, therefore, the penalty does not survive.

“2.6.3 On perusal of the capital account of the assessee it is seen that it has shown total drawings of Rs.1,02,932/- during the F.Y. 2004-05. But on the other hand the details of household expenses/drawings of the assessee as per the seized page number 11-12 of Annexure A-l, party H-9 are as under:

S. No. Month Amount (in Rs.) 1. April 2004 43,231 2. . May 2004 227,04-1 3. June 2004 66,000 4. July 2004 91,261 5. Aug 2004 38,419 6. Sep 2004 23,998 7. Aug 2004 42,895 8. Nov 2004 34,470 9. Dec 2004 29,694 10. Jan 2005 51,448 11. Feb 2005 22,336 12. March 2005 23,229 Total 4,94,022 Thus as per page number 11-12 of Annexure A-l, party H-9, the assessee has incurred household expenses of Rs.4,94,022/- during the FY 2004-05. Thus the household expenses of Rs.3,91,090/- (4,94,022- 1,02,932) have not been accounted by the assessee i.e. have not been shown by the assessee in its books of accounts.

2.7 Despite giving various opportunities, the assessee has not offered any explanation whatsoever regarding the source of these unaccounted household expenses of Rs.3,91,090/- incurred by him during the FY 2004-05. 2.8 To summarize, for the FY 2004-05, the amount of unexplained household expenses of the assessee is Rs.3,91,090/- and the amount of unexplained credits in its various bank accounts of the assessee is ? 63,888/- (over and above professional receipts) i.e. the amount of unexplained household expenses is more than the amount of unexplained credits in the various bank accounts of the assessee. 2.9 Subject to discussion above, as the amount of unexplained household expenses is more than the amount of unexplained credits in the various bank accounts of the assessee, the amount of unexplained household expenses of Rs.3,91,090/-, the source of which has not been explained by the assessee, is treated as undisclosed income of the assessee. (Addition of Rs.3,91,090/-)”

8. In second round of proceedings before the Ld. CIT(A), in assessment year 2005-06 the assessee filed copy of bank statements explaining the credit entries and other documents, the Ld. CIT(A) adjudicated the issue as under: “…………………………………………………………..On a comparative consideration of the arguments forwarded by the AO as well as the Appellant, it was indisputably found that the Appellant had no explanation regarding the source of house hold expenditure for the amount of Rs.[3,91,090-(3000+1400). In this view of the matter the differ5ential amount is held as unexplained expenditure of the Appellant. The addition, therefore, is required to be made for an amount of Rs.3,86,690/-.”

9. We note from para 2.8 of the assessment order for assessment year 2005-06, in the case of the assessee that credit appearing in some bank account was also unexplained. The learned Assessing Officer has not Page | 6 given benefit of said unexplained credit against unexplained house-hold withdrawal and addition has been made for the sum, which is maximum out of the two. As per law, benefit of only explained income or income on which tax has been paid (including exempt income) can be given against unexplained house-hold income, which the AO has partly given. If the unexplained credits in bank accounts, which are not utilized towards house-hold expenditure and used somewhere else, then a separate addition was required for those unexplained credits.

10. The facts and circumstances are identical in other two assessment years. In our opinion, the Ld. CIT(A) has not appreciated all the evidences furnished by the assessee and therefore, we feel it appropriate to set aside the order of the learned CIT(A) and restore the issue in dispute involved in all the three assessment years to the file of the Assessing Officer with the direction to the assessee to file necessary evidence in support of source of household expenditure declared in the books of accounts including household withdrawals declared in the capital account of the family members, who contributed household expenditure of the assessee. The Ld. Assessing Officer is directed to adjudicate the issue in dispute in accordance with law after allowing adequate opportunity of being heard to the assessee. Accordingly, the grounds raised

in all the three appeals are allowed for statistical purposes.”

5. We therefore, set aside the impugned penalty orders. However, it is clarified that if the additions are sustained, the Assessing Officer would be at liberty to decide the question of levy of penalty in accordance with law. Thus, grounds raised by the assessee in this appeal are partly allowed for statistical purposes only.

7. The facts and grounds are identical in these years as well in relating to Assessment Year 2005-06. Page | 7

Above decision was pronounced on conclusion of Virtual Hearing in the presence of both the parties on 21st October, 2021.