LATE JAGDISH,JAIPUR vs. ITO WARD 7(1), JAIPUR

3. The assessee craves his rights to add, amend or alter any of the grounds on or before the hearing.

3. Succinctly, the fact as culled out from the records is that in this case in the quantum proceeding while passing the assessment order ld. AO made two additions, one was on account of unexplained cash deposits of Rs. 3,80,000 and another was for Long-Term Capital Gains (LTCG) of Rs.

14,62,758. Based on that set of facts a penalty order under Section 271(1)(c) was passed on 01.03.2017 ordering to pay penalty of Rs. 3,96,929. delete the penalty amount to the extent of an addition of Rs. 14,62,758/- and sustained the levy of penalty of on addition of Rs. 3,80,000/-. The relevant finding of the ld. CIT(A) is as under ;

5.1 The CIT(A) and ITAT sustained additions of Rs.3,80,000 on unexplained cash deposits. It is clear from case records that the appellant could not substantiate the source of such deposits in his bank account in assessment or appeal proceedings. The onus is entirely on the appellant to satisfactorily explain the source of cash deposits and the appellant has completely failed to do so. Hence, it is held that the appellant has concealed particulars of the income. So the penalty levied by AO on cash deposits of Rs.3,80,000 is hereby sustained.

5.2 Regarding immovable property, the Sub registrar valued this transaction at the face value of Rs. 14,88,000 for the purpose of levying Stamp Duty. The assessee argued that the land was agricultural property. There was a dispute whether certificate of Gram Panchayat take precedence over the report of the Tehsildar regarding location of land. This was a debatable issue which was laid to rest by the ITAT in favour of revenue. Rs.14,62,758 was added by the AO invoking provisions of section 50C. However this was a debatable issue. The Appellant claimed that the fair market value is less than the stamp duty value. The Late Jagdish tribunal stated that during the course of assessment proceedings, the assessee neither objected to the value determined by the sub-registrar nor had requested the AO for making reference to valuation officer. Section 50C(2) talks about an assessee making a claim before the Assessing officer that the valued adopted by the stamp valuation authority exceeds the fair market value of the property as on the date of transfer. There is no concealment involved as this was a difference of opinion. The failure of the assessee was in not requesting the AO during assessment proceedings to refer the valuation to DVO. This is not a charge that warrants penalty u/s 271(1)(c). As a result, the appeal is partly allowed.

5. Feeling dissatisfied with that order of the ld. CIT(A), the assessee challenged the levy of penalty to the extent it was sustained by the ld. CIT(A) before this tribunal. To support the various grounds so raised by the assessee, ld. AR of the assessee has filed the written submissions which reads as follows:

I. Ld. AO made additions on account of unexplained cash deposits of Rs. 3,80,000 and Long-Term Capital Gains (LTCG) of Rs. 14,62,758. Subsequently, ld. AO passed a penalty order under Section 271(1)(c) on 01.03.2017, levying a penalty of Rs. 3,96,929.

II. It is pertinent to state that the assessee, Shri Jagdish, passed away on 08.02.2018. His legal heir, Shri Chhaju Ram, was substituted during the appellate proceedings before the Ld. CIT(A).

III. In the first appeal, Ld. CIT(A) deleted the penalty levied on the LTCG addition but sustained the penalty with respect to the addition of unexplained cash deposits of Rs. 3,80,000.

IV. The present appeal is directed against the order of the Ld. Commissioner of Income Tax (Appeals)/National Faceless Appeal Centre, dated 30.09.2024, wherein the Ld. CIT(A) has partly sustained the penalty levied by the Ld. Assessing Officer (‘Ld. AO’) under Section 271(1)(c) of the Income Tax Act, 1961 (‘the Act’).

Ld. AO levied penalty amounting to Rs 81,342. Ld. NFAC upheld the order of ld. AO.

2.1. In the quantum proceedings, ld. AO made addition on account of deposits including cash deposits amounting to Rs 3,80,000, interest on savings account amounting to Rs 9,067 and long-term capital gains amounting to Rs 14,62,758.

2.2. During the quantum proceedings, out of the total deposits in bank amounting to Rs 15,50,000, deposits of Rs 13,20,000 were accepted and balance sum of Rs 3,80,000 was held to be unexplained. The fact that the deposits were against sales made to different persons and these sales transactions were done through a person Shri Jagdish Jain son of Shri Harinarayan Jain resident of Goner. He used to collect money on the behalf of the assessee. The cheques of Rs. 20,000, Rs. 30,000 and Rs. 1,80,000 were towards sale of land which was collected by him. However, the said deal could not be materialized and the total amount of Rs. 2,30,000 was returned on 31-12-2006 in cash to the said person.

2.3. With respect to cash deposits amounting to Rs 1,50,000, it was well explained before ld. AO that the cash deposits were out of the cash available with the assessee from sale of land in the A.Y. 2006-07 and other cash available with the assessee. Cash book was also submitted in this regard to establish the availability of the cash with the assessee.

2.4. The above explanations with respect to the deposits are bonafide explanations supported by adequate evidences and the same are not proved false by the department. Therefore, the onus of the assessee u/s 271(1)(c) stands fully discharged. Accordingly, penalty may please not be imposed.

2.5. It is submitted that the interest on savings bank is duly reflected in the bank statement and there cannot be any possibility of concealing the same. Assessee was not liable to file return of income u/s 139 for the reasons of her income being lower than the taxable limit. Therefore, assessee never filed his return of income and there was no occasion for the assessee to offer this interest income for tax. Looked at from this angle, no penalty deserves to be imposed.

2.6. The assessee had sold land, a fact clearly established on record. It is pertinent to emphasize that the department has not alleged that the assessee was in possession of unexplained money. Even assuming, without admitting, that the source of the funds is not attributable to the sale of agricultural land, such amount may nonetheless be reasonably explained by past income or accumulated savings. Furthermore, it is relevant to mention that during the demonetization period, the government itself had provided an exemption, clarifying that certain amounts representing household savings would not attract scrutiny or assessment proceedings. In view of these considerations, the assessee submits that the source of funds deposited in bank accounts may please be considered as past savings or agricultural income because they cannot be treated as unexplained.

2.7. PENALTY PROCEEDINGS ARE INDEPEPENDENT: Penalty proceedings are independent proceedings and for the same, the matter is to be considered afresh in the light of the law applicable to penalty. The same has been held by Hon’ble Supreme Court in the case of KhodayEswara& Sons v. CIT [1972] 83 ITR 369 (SC)

2.8. It is also stated that the assessee expired on 08.02.2018. The issue is not the validity of the penalty order but its recoverability from the estate. It is a settled principle that penalty under the Act is quasi-criminal in nature and is imposed for the personal, contumacious conduct of the assessee. It is a punishment for a personal default. Since the legal heir has not committed the default, they cannot be penalized for the actions of the deceased.

2.9. This principle is embedded in the statutory framework of Section 159 of the Act. A conjoint reading of Section 159(1) and Section 159(4) reveals a deliberate legislative distinction. • Section 159(1) creates a broad liability on the legal representative for "any sum" which the deceased would have been liable to pay.

• However, Section 159(4), which provides the enforcement and recovery mechanism, restricts the personal liability of the legal representative only to "any tax" payable.

2.10. The legislature's conscious choice to use the wider term "any sum" for creating liability but the narrower term "tax" for enabling recovery implies that the Act does not provide a machinery to recover a "penalty" from the legal

2.11. The appellant places reliance on the decision of the Hon’ble ITAT, Nagpur Bench in Beantkaur Avtarsingh Juneja Versus Income Tax Officer [ITA No. 018/NAG/2023] [PB] In a factually identical case where the penalty was imposed during the assessee's lifetime and the assessee died during the appeal, the Hon'ble Tribunal held that the penalty amount is not recoverable from the legal representatives. The Tribunal reasoned that recovering the penalty from legal representatives would amount to punishing them, and a crime dies with the man.

2.12. It specifically noted the restrictive language of Section 159(4) to conclude that penalty proceedings abate on the death of the assessee.

2.13. It is further submitted that confirmation of addition per se cannot lead to imposition of penalty by the ld. AO. Merely because there is provision for the imposition of penalty, it is not mandatory that the taxing officer must levy a penalty in every case.

2.14. Hon’ble Supreme Court in Hindustan Steel Ltd. vs. State Of Orissa (1972) 83 ITR 26 in the context of Orissa Sales Tax Act,1947 has held that penalty will not merely be imposed because it is lawful to do so, but will be levied only in cases where there is deliberate defiance of law or contumacious or dishonest conduct or conscious disregard of a statutory obligation and although the statue may prescribe a minimum penalty the authority would be justified in refusing to saddle the assessee with penalty where there is technical or venial breach of the provisions of law or where the breach follows from the bonafide, honest and genuine belief and in the premises, the discretion to exact penalty on the assessee must be exercised judicially and on a consideration of all relevant factors.

In view of the above, penalty levied by the ld. AO, u/s 271(1)(c), deserves to be quashed GROUND NO. 2: PENALTY IMPOSED U/S 271(1)(C) WITHOUT SPECIFYING LIMB

2.1. It is inevitable that the authority levying penalty should apply mind and come to a conclusion that whether the penalty is being levied for concealment of particulars of income OR furnishing inaccurate particulars of income. In the 2.2. Notice u/s 274 was issued wherein penalty was initiated for concealment of particulars of income OR furnishing inaccurate particulars of income is not mentioned.

2.3. In the above background, it is submitted that ld. AO has not applied his mind at all. It is pertinent to note that in the notice u/s 274, ld. AO has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. Ld. AO has simply issued a pre-printed notice without striking off the unnecessary portions of the notice. If the ld. AO was of the view that the assessee has concealed particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e., furnishing of inaccurate Late Jagdish particulars of income. The above act of the ld. AO clearly shows that the entire exercise of initiation of penalty proceedings has been done without application of mind.

2.4. Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) after referring to the decision of Hon’ble Supreme Court in the case of T. Ashok Pai (Supra) held as under:- “…. Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 Taxmn 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without striking of the relevant clauses will lead to an inference as to non-application of mind….”

2.5. In the case of Jyoti Ltd. [2013] 34 taxmann.com 65 (HC-Guj), the assessing officer in his penalty order noted as under: - "In view of the above facts, it is clear that the assessee concealed income/furnished inaccurate particulars of income. I, therefore, consider it a fit case for levy of penalty under Section 271(1)(c)" Hon'ble Gujrat High Court in the above case held that, where the Assessing Officer in order of penalty did not come to a clear finding regarding the penalty being imposed on concealment of income or on furnishing inaccurate particulars of income, the Tribunal was justified in setting aside the impugned penalty order. Hon’ble Gujarat High Court followed the ratio laid down in the case of New SorathiaEngg. Co. [2006] 282 ITR 642 (Guj-HC).

2.6. The above ratio laid down in the case of Manjunatha Cotton & Ginning Factory(Supra) has been followed by various High courts in the below mentioned cases:- 1.6.i Shri Samson Perinchery, ITA 1154,953,1097,1226 OF 2014 (Order date – 5.01.2017) (Bombay High Court)

2.7. SLP filed by the department against the said ratio was dismissed by the Hon’ble Supreme Court in the case of SSA'S Emerald Meadows [2016] 73 taxmann.com 248 (SC). Hon’ble Apex Court in the above-mentioned case held that “we do not find any merit in this petition”. The special leave petition is, accordingly, dismissed” (Emphasis Supplied). Thus, the matter has stamp of approval of the Hon’ble Apex Court.

2.8. Attention is drawn towards the recent judgment of the Hon’ble Jurisdictional High Court in the case of Sheveta Construction Co. Pvt. Ltd, wherein the Hon’ble High Court at Para 9 of the its order held as under: - “…Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observations made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing Officer in the assessment order it is held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order….”(Emphasis Supplied)

2.9. Hon’ble ITAT Jaipur Bench, in the following cases, pronounced, followed the ratio laid down by the Hon’ble Jurisdictional High Court in the above- mentioned case and deleted the penalty levied on the assessee under section 271(1)(c) 1.9.i Mohd. Sharif Khan vs. DCIT, in 1.9.ii Jai Ambey Associates vs ITO in ITA No. 801/JP/2016

2.10. Ld. CIT(A) dismissed this ground by observing that penalty was proposed for both charges. This is an erroneous view, as the notice initiating the proceedings must be specific. The AO cannot be ambiguous at the initiation stage and leave the assessee to guess the charge against him

In view of the above, the penalty imposed may please be quashed and the appeal of the assessee may please be allowed.” submission so filed vehemently argued that since the assessee left heavenly abode there cannot be levy of penalty and the legal heirs cannot be hold responsible for the levy of penalty. For that arguments he relied upon the provisions of section 159 of the Act and also serviced the copy of the decision of the co-ordinate bench of ITAT Nagpur benches in ITA no.

18/Nag/2023 in the case of Beantkaur Avtarsingh Juneja.

Legal representatives. 159. (1) Where a person dies, his legal representative shall be liable to pay any sum which the deceased would have been liable to pay if he had not died, in the like manner and to the same extent as the deceased. (2) For the purpose of making an assessment (including an assessment, reassessment or recomputation under section 147) of the income of the deceased and for the purpose of levying any sum in the hands of the legal representative in accordance with the provisions of sub-section (1),— (a) any proceeding taken against the deceased before his death shall be deemed to have been taken against the legal representative and may be continued against the legal representative from the stage at which it stood on the date of the death of the deceased; (b) any proceeding which could have been taken against the deceased if he had survived, may be taken against the legal representative; and (c) all the provisions of this Act shall apply accordingly. (3) The legal representative of the deceased shall, for the purposes of this Act, be deemed to be an assessee. (4) Every legal representative shall be personally liable for any tax payable by him in his capacity as legal representative if, while his liability for tax remains undischarged, he creates a charge on or disposes of or parts with any assets of the estate of the deceased, which are in, or may come into, his possession, but such liability shall be limited to the value of the asset so charged, disposed of or parted with. (5) The provisions of sub-section (2) of section 161, section 162, and section 167, shall, so far as may be and to the extent to which they are not inconsistent with the provisions of this section, apply in relation to a legal representative. (6) The liability of a legal representative under this section shall, subject to the provisions of sub-section (4) and sub-section (5), be limited to the extent to which the estate is capable of meeting the liability.

As is evident from the provisions of section 159(1) of the Act which talks about the liability of legal representative [‘LR’ hereinafter of deceased assessee] wherein the word ‘any sum’ referred has been substituted in place of word ‘any tax’ which occurred in old section 24B of the Income Tax Act, 1922 so as to cover not only tax payable but also any penalty or liable to pay penalty on behalf of the deceased assessee pursuant to the provisions of Section 159(1) of the Act. This finds support in the ratio of Hon’ble Allahabad High Court in case of ‘Kalawati Devi Vs ITO’ [1981, 6 Taxman 252] wherein their Hon’ble Lordships have held that, section 159(1) clearly makes the legal representatives liable not only for the tax payable by the deceased-assessee but also for all sums which the deceased would have been liable to pay had he not died. Hence, penalty proceedings for a default committed by a deceased could be started or continued against the legal representatives, too. Similarly, the Hon’ble Kolkata High Court in ‘Smt. Tapati Pal Vs CIT’ [2002, 124 Taxman 123 Cal.] held that penalty proceedings for a default committed by deceased can be started or continued against the legal representative as against its earlier decision in ‘Taraknath Gayen and others Vs CEGAT’ [1987, 31 ELT 631 (Cal)]. Thus, the decision of the Nagpur bench, which is based on the decision of Taraknath Gayen and others Vs CEGAT’ [1987, 31 ELT 631 (Cal) having already been reversed, does not help the appellant here.

Considering the other decisions discussed herein above, we find that the contention of the ld. AR is against the legal proposition. As a result, the penalty imposed on the assessee is sustained. On being asked, ld. AR was so its extent”. In the interest of justice, the matter deserves to be restored to the files of the ld. AO to decide only said issue of the extent of estate if any capable of meeting the liability upheld. We order accordingly.

In the result, appeal of the assessee is disposed of on the above observations.

Order pronounced in the open court on 07/10/2025. Sd/- Sd/- ¼ujsUnz dqekj½ ¼jkBkSM+ deys'k t;UrHkkbZ½ (NARINDER KUMAR) (RATHOD KAMLESH JAYANTBHAI) U;kf;d lnL;@Judicial Member ys[kk lnL; @Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 07/10/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Jagdish, Jaipur 2. izR;FkhZ@ The Respondent- ITO, Ward 7(1), Jaipur 3. vk;dj vk;qDr@ The ld CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZ QkbZy@ Guard File (ITA No. 1437/JP/2024) 6. vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत