MS. BINNA NITIN PARIKH,MUMBAI vs. ACIT CIRCLE-19(1), MUMBAI

O R D E R PER S. RIFAUR RAHMAN (AM)

2. Brief facts of the case are that, assessee is an individual having income from Salary, House Property, share of profit from partnership (A.Y: 2012-13) Ms. Binna Nitin Parikh firms, capital gain and other sources. The assessee filed its Return of Income for the A.Y. 2012-13 on 24.07.2012 declaring total income at Rs.2,43,54,526/- and the same was revised on 31.08.2012 declaring total income at Rs.1,40,36,035/-. The assessment of the assessee was completed u/s. 143(3) of the Act on 30.12.2014 assessing the total income at Rs.1,40,36,035/- as returned by the assessee. The case was reopened u/s. 147 of the Act based on the information received from DDIT(Inv.), Kolkata that Directorate of Kolkata has initiated survey action in the case of School of Human Genetics & Population Health (SHGPH). In the survey it was observed that assessee is one of the beneficiaries. Accordingly, during the re-assessment proceedings, it was held that donation made by the assessee is an accommodation entry and disallowed the deduction claimed by the assessee. Accordingly, penalty proceedings under section 271(1)(c) of the Act was initiated in respect of the said additions. During assessment proceedings assessee vide its reply letter dated 02.11.2016 by stating that though the assessee has in his possession all the documents regarding the above said donation, however, he decided to withdraw the claim of weighted deduction to avoid litigation and to buy peace. After considering the submissions of the assessee, Assessing Officer levied the penalty u/s. 271(1)(c) of 100% of the tax sought to be (A.Y: 2012-13) Ms. Binna Nitin Parikh evaded which works out to ₹.3,05,375/-. Aggrieved assessee preferred an appeal before Ld.CIT(A), before the Ld.CIT(A) assessee submitted a detailed submission which is reproduced by the Ld.CIT(A) in his order. However, for the sake of clarity it is reproduced below: - “5. Submissions of the appellant: During the appellate proceedings, the Authorized Representative of the appellant submitted as under: “2. During the course of assessment proceedings, the assessee submitted vide its letter dated 02.11.2016 (Annexure-A) as under: “I am assessed to tax under PAN: AADPP1671P with your charge. I have filed my Income-tax Return relating to the Asstt. Year 2012-13 which was re-opened by the issue of notice u/s.148 dated 04.03.2016. The aforesaid case was re-opened u/s.147 of the IT. Act as the assessee has given donation of Rs.5,00,000/- to School of Women Genetics & Population Help in which the assessee is one of the beneficiary/ bogus donors. In this connection, I have submitted donation receipt and bank statement from which the aforesaid payment was made in your office through my C.As, M/s.Karnavat & Co. I have claimed deduction of Rs.8,75,000/- (175% of Rs.5,00,000/-) against my business income in respect of aforesaid donation of Rs.5,00,000/-. I am filing my Income-tax Return regularly and paying all my due taxes. The aforesaid donation of Rs.5,00,000/- is genuine donation given by me. I have received the statement of some of the persons of School of Women Genetics & Population Help that donation of received by them are bogus donations. However, to avoid litigation and to buy peace of mind, I hereby offer to withdraw the claim of deduction of Rs.8,75,000/- u/s.35(1)(ii) of the IT. Act against the business income. I also pray not to initiate/levy penalty u/s.271(1)(c) as I have offered the aforesaid amount voluntarily to avoid litigation and to buy peace of mind with the Income tax Department. Please find the above in order”.

4. In the instant case, the penalty proceedings u/s.271(1)(c) has been initiated on the disallowance which has been voluntarily offered by the assessee as additional income to avoid litigation and to buy peace of mind and accordingly such addition of acceptance does not lead to the concealment of income, The assessee has also submitted submitted detailed explanation vide its letter dated 23.02.2017. However, in the impugned order made u/s.271(1)(c) of the IT. Act, 1961, the Assessing Officer has ignored the contentions of the assessee and levied penalty of Rs.3,05,375/-.

(A.Y: 2012-13) Ms. Binna Nitin Parikh 3. Kindly give us the copies of the statement recorded based on which aforesaid proceedings was initiated for our further explanation.

(A.Y: 2012-13) Ms. Binna Nitin Parikh I am filing my Income-tax Return regularly and paying all my due taxes. The aforesaid donation of Rs.5,00,000/- is genuine donation given by me. I have received the statement of some of the persons of School of Women Genetics & Population Help that donation of received by them are bogus donations. However, to avoid litigation and to buy peace of mind, I hereby offer to withdraw the claim of deduction of Rs.8,75,000/- u/s.35(1)(ii) of the LT. Act against the business income. I also pray not to initiate/levy penalty u/s.271(1)(c) as I have offered the aforesaid amount voluntarily to avoid litigation and to buy peace of mind with the Incometax Department. (b) Nowhere assessee’s name is appearing in the statement recorded. However, to avoid litigation and to buy peace of mind, the assessee has voluntarily declared the additional income of Rs.8,75,000/-”. It is therefore submitted that the assessee has filed an explanation and it is not found to be false by the LAO. Clause (B) of Explanation- 1 applies to a situation where the assessee is not able to substantiate or fails to prove the bonafides. Even clause (B) does not apply because the assessee has submitted the full details of the donation viz. letter, receipt, exemption certificate etc. vide letter dated 03.09.2016 (Annexure-B). It is, therefore, submitted that the Explanation-1 to Section 271(1)(c) does not apply to the case of the appellant.

(A.Y: 2012-13) Ms. Binna Nitin Parikh “5. The surrender made by the assessee is clearly a conditional surrender and the Department has chosen to accept part of the proposal favourable to it and deny the other part of the same proposal, which is not favourable to the Revenue, This position of the Revenue is unacceptable. This issue was decided in favour of the assessee in the case of Harnam Singh Bishan Singh Jewellers (P) Ltd. v. Asstt. CIT (supra). The observation of the CIT(A) regarding the conditional surrender that there is nothing on record to suggest that such a request of the appellant was ever accepted by the AO or an understanding to that effect reached between the assessee and the AO, is not sustainable”.

(A.Y: 2012-13) Ms. Binna Nitin Parikh 3. After considering submissions of the assessee, Ld.CIT(A) sustained the penalty with the following observation: - “6. Decision: I have carefully considered the penalty order and the submissions of the appellant. This ground pertains to levy of penalty u/s 271(1)(c) of the IT Act, 1961 on the ground of disallowance of bogus donation. After taking into consideration totality of facts, circumstances and relevant law, the appeal is disposed of as under: 6.1 The Authorized Representative of the assessee was asked during the assessment proceedings to explain as to why the claim made by the assessee u/s 35(1)(ii) should not be disallowed in view of findings of the investigation wing. He was also given copies of the statement of the persons recorded by the investigation wing. In response, the representative of the assessee explained that to avoid litigation and to buy peace of mind the assessee vide letter dated 02/11/2016 withdrawing the claim of donation u/s 35(1)(ii) and offered income of Rs.8,75,000/- for taxation. The Assessing Officer concluded, from the reply of the assessee, it evident that the assessee has not offered any explanation against the findings of the investigation wing, Kolkata and the assessee has offered for tax a sum of Rs.8,75,000/- by withdrawing the claim of deduction, u/s. 35(1)(ii) of I.T. Act only when confronted with the facts of the case. The Assessing Officer thus disallowed Rs.8,75,000/- and added to the total income of the assessee. 6.2 It is pertinent to note that the Assessee has not filed any appeal against the assessment order. Therefore, the quantum proceedings have reached finality. 6.3 During the penalty proceedings also, the appellant could not furnish explanation to the satisfaction of the Assessing Officer. The assessee emphasized that addition was accepted by the it on reasons that they wanted to avoid litigation and buy peace of mind that itself cannot be construed a furnishing of inaccurate particulars of income or concealment of income. Therefore, the Assessing Officer has levied penalty u/s.271(1)(c). 6.4 During the appeal proceedings, the Ld. Authorized Representative requested that the penalty be deleted. 6.5 It is worthwhile to note that the fact of bogus donation claimed by the appellant has reached finality as the appellant has accepted the assessment order and no appeal was filed by the (A.Y: 2012-13) Ms. Binna Nitin Parikh appellant. During the appellate proceedings also, the appellant could not furnish reply to the satisfaction to the AO. 6.6 Penalty u/s. 271(1)(c) can be levied if the assessee furnishes inaccurate particulars of income or conceals the particulars of income. In the instant case, the appellant by claiming bogus donation has furnished inaccurate particulars of income. Further, as a result of false claim of bogus donation, the income was suppressed. This has resulted in concealment of particulars of income. The assessee withdrew the claim of donation u/s 35(1)(ii} and offered Rs.8,75,000/- for taxation only after the initiation of assessment proceedings and issue of notice u/s 143(2) of the IT Act, 1961 which cannot be accepted as voluntarily. The assessee had not offered this bogus donation for taxation while filing original return of income or even while filing revised return of income. 6.7 Case laws cited by the appellant during the appellate proceedings is distinguishable in the present case to the extent that the appellant withdrew the claim of donation u/s 35(1)(ii) only after the initiation of assessment proceedings and issue of notice u/s 143(2) of the IT Act, 1961, when confronted by the Assessing Officer. 6.8 As discussed supra, present case is a clear case of furnishing of inaccurate particulars of income as well as concealment of particulars of income. Therefore, it is a fit case for levy of penalty u/s.271(1)(c) of the Act.”

4. Aggrieved assessee preferred an appeal before us, raising following grounds in the appeal: - “1. On facts and in law, the learned CIT(A) had erred in confirming the penalty levied u/s.271(1)(c) without appreciating that the appellant has neither concealed the income nor furnished inaccurate particulars of income. Under the facts and circumstances of the matter, no penalty is leviable u/s.271(1)(c) of the Act.

2. On facts and in law, the learned CIT(A) had erred in not deleting the penalty of Rs.3,05,375/- levied by the Assessing Officer u/s.271(1)(c) of the I.T. Act, 1961. Under the facts and circumstances of the matter, he ought to have deleted the penalty of Rs.3,05,375/- levied by the Assessing Officer U/s.271(1)(c) of the Act.

(A.Y: 2012-13) Ms. Binna Nitin Parikh 3. The Appellant craves leave to add, alter, vary, omit, substitute or amend the above grounds of appeal, at any time before or at, the time of hearing of the appeal, so as to enable the Hon. ITAT to decide this appeal according to law.”

5. At the time of hearing, Ld.AR submitted that assessee has made a donation to School of Human Genetics & Population Health (SHGPH) and subsequently the assessee has surrendered the claim during the reassessment proceedings and he brought to our notice Page No. 5 of the Paper Book to submit that assessee has voluntarily surrendered the above donation in order to buy peace and avoid litigation. Assessee also prayed not to initiate any penalty proceedings before the Assessing Officer. He also brought to our notice Page No. 11 of the Paper Book wherein the submissions made by the assessee during the penalty proceedings before the Assessing Officer. Further by relying on the decision of the Coordinate Bench in the case of Sandeep Bhimrao Lad v. DCIT (ITA.No. 1620/Mum/2018 dated 31.10.2019 Ld.AR prayed to delete the penalty levied by the Assessing Officer.

6. On the other hand, Ld. DR relied on the orders of the lower authorities.

(A.Y: 2012-13) Ms. Binna Nitin Parikh 7. Considered the rival submissions and material placed on record, we observed from the record that assessee has made donation to School of Human Genetics & Population Health (SHGPH) of ₹.5,00,000/- and during the assessment proceedings when the matter was brought to the notice of the assessee that the donation is bogus donation and the benefit claimed by the assessee is not allowable. The assessee in order to buy peace and avoid litigation, he surrendered the bogus donation. We observe from the record that in the similar situation the Coordinate Bench has deleted the penalty and it held as below: - “13. With regard to other assessment years, we notice that assessing officer has made the addition without establishing or without making any investigation on bogus purchases. He made the addition merely because it is not established by assessee and observed that as the onus on assessee to prove the genuineness of the purchases. It may be acceptable to make addition in the return of income but when it comes to penalty, he has to establish that the purchases were made in order to conceal the income. Further we notice that assessee has accepted the addition in order to buy peace. We observe that the AO has not established that the above purchases are not genuine, the addition was made merely because assessee accepted the same as so. In the similar circumstances, the coordinate bench held as below: 4. We have considered rival contentions, carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by ld. DR & AR during the course of hearing before us. From the record we found that at the very first instance share application money was surrendered by assessee with a request not to initiate any penalty proceedings. The AO passed order u/s.143(3) adding surrendered amount u/s.69A (A.Y: 2012-13) Ms. Binna Nitin Parikh on the plea that assessee has surrendered amount only after issue of notice. It is not disputed by the department that sum which was added u/s.69A was one which was surrendered by the assessee itself. Neither there was any detection nor there was any information in the possession of the department except for the amount surrendered by the assessee and in these circumstances it cannot be said that there was any concealment. In case of CIT vs. Suresh Chandra Mittal 251 ITR 9 (SC), Hon’ble Supreme Court observed that if the assessee has offered the additional income to buy peace of mind and to avoid litigation penalty u/s.271(1)(c) of the Act cannot be levied. In the instant case, there was no malafide intention on the part of the assessee and the AO had not brought any evidence on record to prove that there was concealment of income. At the time of surrender itself contention of not initiating any proceedings was there. No additional matter was discovered to prove that there was concealment of income. The AO has included the amount of share capital in the total income of assessee merely on the basis of assessee’s declaration/surrender. The AO did not point out or refer any evidence or material to show that the amount of share capital received by the assessee was bogus. It is also not the case of the revenue that material was found at the assessee’s premises to indicate that share application money received was an arranged affair to accommodate assessee’s unaccounted money. Thus there was no detection by the AO that share capital was not genuine. The surrender of share capital after issue of the notice u/s.143(2) could not lead to any inference that it was not voluntary. Admittedly the assessee has offered the amount of share capital for taxation voluntarily and it was not the case of revenue that the same was done after its detection by the department. It is quite clear from the record that this entire transaction was not detection of the AO that the share capital was not genuine and that the assessee had offered the amount without any specific query. Even surrender of amount by the assessee after receipt of questionnaire could not be lead to any inference that it was not voluntary, in the absence of any material on record to suggest that it was bogus or untrue. The contention that in every case where surrender is made inference of concealment of income must be drawn under (A.Y: 2012-13) Ms. Binna Nitin Parikh S.58 of Evidence Act, cannot be accepted in view of the decision of Punjan & Haryana High Court in the case of Careers Education & Infotech (P) Ltd., (2011) 336 ITR 257 (P&H). Not an iota of evidence was narrated to support the addition made except the surrender made by the assessee itself. When no concealment was ever detected by the AO, no penalty was impossible. Recently, Hon’ble Punjab & Haryana High Court in the case of Siddharth Enterprises vide order dt. 14th July, 2009 held after considering the decision of Hon’ble Supreme Court in the case of Union of India & Ors. vs. Dharamendra Textile Processors & Ors. (2008) 306 ITR (SC) 277 that the judgment of Hon’ble Supreme Court in the case of Dharmendra Textiles (supra) cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under s. 276C and penalty under s. 271(1)(c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. It was categorically observed that penalty should be imposed only when there is some element of deliberate default and not a mere mistake. This being the position, the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax. Hon’ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal 251 ITR 9 (SC) observed that where assessee has surrendered the income after persistence queries by the AO and where revised return has been regularized by the Revenue, explanation of the assessee that he has declared additional income to buy peach of mind and to come out of waxed litigation could be treated as bona fide, accordingly levy of penalty under s. 271(1)(c) was held to be not justified.

14. Respectfully following the same and also relying on case law of Suresh Chandra Mittal (supra) and with regard to case law relied by Ld. DR, the facts are distinguishable to the facts of the present case, hence not considered. Therefore, we are deleting the penalty charged.”

(A.Y: 2012-13) Ms. Binna Nitin Parikh 8. Since the issue involved in this appeal is also similar and assessee has surrendered the bogus donation in order to buy peace and respectfully following the above said decision we dismiss the penalty levied by the Assessing Officer.

Order pronounced on 26.11.2021 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.