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Facts
The assessee filed an appeal against the order of the CIT(A) which had dismissed the appeal ex-parte. The assessee's appeal was delayed by 564 days due to personal hardship. The CIT(A) had confirmed the penalty imposed by the AO under Section 271(1)(c) for concealment or furnishing inaccurate particulars of income.
Held
The Tribunal held that the CIT(A) erred in dismissing the appeal ex-parte as notices were not properly served on the assessee. The Tribunal also found that the penalty was levied without specifying the exact charge, violating principles of natural justice. The revised return filed by the assessee was considered a valid disclosure.
Key Issues
Whether the penalty was validly imposed without clearly specifying the charge (concealment vs. inaccurate particulars) and whether the CIT(A) correctly dismissed the appeal ex-parte without proper service of notice.
Sections Cited
271(1)(c), 274, 143(3), 250(6), 139
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, JAIPUR BENCHES,’’SMC” JAIPUR
fu/kZkj.ko"kZ@AssessmentYear : 2014-15 Shri Rakesh Kumar Jain cuke The DCIT Vs. 4365, KGB Ka Rasta, Johri Bazar Circle-2 Jaipur Jaipur LFkk;hys[kk la-@thvkbZvkjla-@PAN/GIR No.: AANPJ 9249 D vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Shri C.L. Yadav, CA and Shri Vikas Yadav Advocate jktLo dh vksjls@Revenue by: Shri Gautam Singh Choudhary, Addl. CIT-DR lquokbZ dh rkjh[k@Date of Hearing : 09/07/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: : 23 /07/2025 vkns'k@ORDER PER: RATHOD KAMLESH JAYANTBHAI, AM The assessee has filed an appeal against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi dated 24-05-2023 [hereinafter referred as “(CIT(A)/NFAC” ] for the assessment years 2014-15 raising therein following grounds of appeal:- ‘’1. The ld. CIT(A) has erred on facts and in law in deciding the appeal ex- parte notwithstanding the fact that no notice for hearing was ever served on the assessee.
RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR 2. The ld. CIT(A) has erred on facts and in law in dismissing the appeal of the assessee for non-prosecution whereas in view of Section 250(6) of the Act, the ld. CIT(A) has no power to dismiss an appeal on account of non-proseuction as held by Hon’ble Bombay High Court in CIT vs Premkumar Arjundas Luthra, HUF (2017) 291 CTR 614 (Bom.) 3. The ld. CIT(A) has erred on facts and in law in confirming the penalty imposed by the AO and not considering the facts of the case in the proper perspective.
The Appellant craves leave to take additional grounds of appeal before or at the time of hearing of the appeal and / or modify any of the above grounds.
2.1 During the course of hearing, the Bench noticed that there is a delay of 564 days in filing the appeal for which the assessee has filed an application dated 05-05-2025 for condonation of delay giving therein following reasoning. ‘’As the delay occurred due to unavoidable and genuine personal hardship, I was mentally and financially disturbed owing to the deteriorating health of my younger brother who was in the last stage of cancer. My entire family was under immense emotional distress due to serious illness and during this period I was unable to concentrate of my financial or tax matters. Consequently, I could not make time to trace and retrieve the relevant assessment records or take steps to file the appeal within the prescribed time. My younger brother unfortunately passed away in December 2024. Soon thereafter, once I had regained some mental composure, I immediately proceeded to file the present appeal before this Hon’ble Tribunal. The delay in filing the appeal is neither deliberate nor due to negligence but arose solely due to the unavoidable and unfortunate personal circumstances described above.
RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR In view of the foregoing, I humbly pray that the Hon’ble Tribunal may be pleased to condone the delay in filing the appeal and admit it for hearing in the interest of justice.’’ To support the submission as to condonation of delay, the appellant has filed his affidavit deposing therein the above facts of the case.
2.2 On the other hand, the ld.DR did not controvert the facts stated in the application for condonation of delay. 2.3 We have heard both the parties and perused the materials available on record including the affidavit of assessee and the supporting the bill for the treatment of his brother. The reasons as advanced by the assessee was that he was engaged in the treatment of his brother who was fighting with Cancer and ultimately,he left heavenly abode and that process the present appeal was not filed on time. In this case, the Bench in nutshell noted that there is sufficient cause in not timely filing the appeal of the assessee and there is merit in the application of the assessee. Thus the delay is condoned. 3.1 Apropos grounds of appeal of the assessee, it is noticed that the ld. CIT(A)has passed an ex-parte order by dismissing the appeal of the assessee relating to Section 271(1)(c) of the Act for the reason that assessee has not pursued the appeal despite being granted several RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR opportunities and he also confirmed the action of the AO. The narration as made by the ld. CIT(A) in his order is reproduced as under:- ‘’7 The facts of the case as noted above are that the appellant has not pursued the appeal despite being granted several opportunities as elaborated supra. No details, documents or submissions have been provided to come to any conclusion other than those arrived at by the assessing officer in the order. The notices have been duly served upon the assessee via e-mail. Regrettably no response whatsoever was forthcoming on the appointed date. Thus, nothing has been placed on record to substantiate as to why the penalty imposed by the AO should not be sustained.
8. In view of the above, it has to be held that the appellant has failed miserably to make out a case against the levy of penalty u/s 271(1)(c) of the Act and, thus, I find no infirmity in the order of the A.O. passed u/s 271(1)(c) of the Act. The levy of penalty of Rs.26,00,000/- u/s 271(1)(c) is, accordingly, confirmed. Consequently, all the five grounds of appeal
raised by the appellant are dismissed.
9. In the result, the appeal of the appellant is Dismissed.’’ 3.2 During the course of hearing, the ld. AR of the assessee has raised the additional ground which is reproduced as under:- ‘’The ld. CIT(A) erred in confirming the penalty order passed by the AO, notwithstanding the fact that the SCN u/s 274 r.w.s. 271(c) was issued for concealing the particulars of income or furnishing particulars of income whereas the penalty was levied for furnishing inaccurate particulars of income.’’ Further, the ld. AR of the assessee has filed following detailed written submission as to the levy of penalty amounting to Rs.26.00 lacs u/s 271(1)(c) of the Act by the AO and then sustain the same by the ld.CIT(A). ‘’The appellant respectfully begs to submit following facts and details for your honor's kind consideration in support of grounds of appeal already submitted The Ld. AO levied penalty of Rs 26,00,000/- u/s 271(1)(c) of the Income Tax Act. 1961 On appeal against the penalty proceedings, the Ld.CIT(A) confirmed the penalty dismissing the appeal of the assessee stating that the assessee failed to comply to various notices issued by NFAC, whereas none of the notices was ever served on the assessee Brief facts of the case The assessee is partner in two concerns, viz. Mis Mukandgarh Resort and M/s R.K. Gem Impex, from where he derives business income He also enjoyed interest income during the year He had e-filed return of Income for AY 2014-15 on 23.07 2014 declaning NIL income. During the relevant year, the assessee had sold agricultural land situated at Murlipura in Sanganer tehsil of Jaipur The CBDT vide its notification no 9447 dated 6th January, 1994 for the purpose of Section 2(14)(iii)(b) of the Income Tax Act. 1961 has notified the municipality of Jaipur as the areas up to distance of 8. Kms from municipal limits in all directions. The reference to municipal limit or the limit of cantonment board in the schedule to this notification is to the limits as existing on the date on which the notification is published in the official Gazette Notification reported at (1994)116 CTR(St)13 The impugned land was about more than 15 kms from the municipal limits as existed on the date of notification. The assessee under a bonafide impression that the agricultural land is not exigible to capital gains tax, did not disclose the profits arising on its sale. The case was selected for scrutiny through CASS which was finalized u/s 143(3) of the IT Act. 1961 determining total income Rs. 1,14,75,790/- on 05.12.2016 An addition of Rs 1,14,75,791/-was made on account of LTCG on sale of the impugned land. Penalty Proceedings u/s 271(1)(c) were also initiated on 05.01.2017 for filing inaccurate particulars of Income and concealing the income. The assessee did not agitate the assessment order. The Ld.AO levied the penalty of Rs.26,00,000/- u/s 271(1)(c) Against the penalty order, the assessee had preferred an appeal to CIT(A)-1, Jaipur The appeal later migrated to CIT(A)/NFAC, which was dismissed by the Ld. CIT(A) Before embarking upon to file the submission on the ground of appeal as per Form-36 the assessee requests to raise the following additional grounds of appeal, which may kindly be admitted being legal ground and requiring no new evidence- The Ld. CIT(A) erred in confirming the penalty order passed by the AO. notwithstanding the fact that the SCN u/s 274 r.w.s. 271(1)(c) was issued for concealing the particulars of income or furnishing inaccurate particulars of income, where as penalty was levied for furnishing inaccurate particulars of income. The issue is purely legal and goes to the root of the matter and no new facts are required to be invoked, therefore, it is requested that the same may kindly be admitted for adjudication in view of the judgement of Hon'ble Supreme Court in the RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR case of National Thermal Power Corporation Ltd reported in 229 ITR 383. Being a legal issue which goes to the root of the matter, it is paramount to take up this ground for adjudication before addressing the other grounds of appeal
. Additional ground The Ld. CIT(A) erred in confirming the penalty order passed by the AO, notwithstanding the fact that the SCN u/s 274 r.w.s. 271(1)(c) was issued for concealing the particulars of income or furnishing inaccurate particulars of income, where as penalty was levied for furnishing inaccurate particulars of income.
1. At the time of passing the assessment order on 18.04.2017, the AD after discussing the addition made by him, stated Penalty proceedings u/s 271(1)(c) for filing of inaccurate particulars of income/concealment of income are initiated separately on this issue. The AO issued a Show Cause Notice (SCN for short) u/s 274 r.w.s. 271(1)(c) of the Income Tax Act, 1961 dated 05.01.2017, stating Whereas in the course of proceedings before me for Assessment Year 2014-15 it appears that you have concealed the particulars of income or furnished inaccurate particulars of such income you are hereby requested In the Penalty order passed by him. penalty has been levied for furnishing inaccurate particulars of income. The operative para of the order reads as follows - In view of the totality of the facts and keeping in view the provisions of section 271(1)(c) the assessee is found guilty of furnishing of inaccurate particulars of income to the extent of amount of Rs 1,14,75,790/- For that reason, I am satisfied that the assessee has committed default uls 271(1)(c) of the IT Act and therefore, penalty u/s 271(t)(c) is imposed on the furnishing of inaccurate particulars of income. (Para 5 Page no-3 of the Penalty order of the AO)
2. The AO is not clear in his mind as to what default has been committed by the assessee, for which penalty needs to be levied. There was no clarity in mind of Assessing Officer as to which limb of section 27^ dagger (1)(c) got attracted for imposition of penalty and therefore the impugned penalty needs to be deleted There is a failure on the part of the AO to put to the assessee a specific charge which is fatal to the penalty proceedings. Penalty proceedings entail civil consequences for the assessee The AO is required to apply his mind to the material particulars, and indicate clearly, as to what is being put against the assessee when triggering the penalty proceedings
3. Reliance is placed on the decision of Hon'ble Delhi High Court in the case of PCIT vs. Modi Rubber Ltd. [2023] 157 taxmann.com 588 (Delhi) the head note of which reads Section 271(1)(c) of the Income-tax Act, 1961 Penalty For concealment of income (Conditions Precedent) Assessment year 2003-04 Assessing Officer while framing assessment order mentioned that penalty proceedings under section 271(1)(c) initiated had furnished inaccurate particulars of its income. Subsequently, notice under section 274 was issued wherein Assessing Officer failed to indicate as to whether penalty was initiated for concealment of particulars or furnishing were to inaccurate be since the Further, RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR assessee while particulars passing penalty order under section 271(1)(c), he reiterated that 'assessee had furnished inaccurate particulars of income or had concealed income Whether since there was no clarity in mind of Assessing Officer as to which limb of section 271(1)(c) got attracted and whether penalty was Initiated for of concealment or furnishing inaccurate particulars, Tribunal was justified in deleting particulars Impugned penalty imposed upon assessee-Held, yes [Para 11] [In favour of assessee) 4 Moreover, in the penalty order, though the submission of the assesse has been reproduced verbatim by the AD, no discussion has been made on the same. No attempt has been made to show as to why the case laws cited by the assessee in his support are not applicable to the facts of the assessee's case. The penalty order has been passed simply stating that the mistake by the assessee can not be termed as a bonafide belief The AO has made a bald assertion that the assessee is guilty. There is obviously an internal inconsistency in the penalty order The AO in Para-3 begins by saying that the assessee deliberately concealed income to the tune of Rs. 1.14,75791/ The AO while computing the penalty that he imposed on the assessee, goes on to say that the assessee is found guilty of furnishing of inaccurate particulars of income 5 The Ld.CIT(A) has followed suit. The submission of the assessee before the AO as to why penalty could not be imposed was there in the penalty order itself The Ld. CIT(A) could have well considered it and decided the appeal on ments. particularly when the AO had passed the penalty order ignoring the same The Ld. CIT(A) overlooked all these vital aspects and blindly upheld the penalty imposed by the AO 6. In CIT vs. Kanpur Coal Syndicate (1964) 53 ITR 225 the Supreme Court held that the Appellate Assistant Commissioner has plenary powers in disposing of an appeal. The scope of his powers is co-terminus with that of the Income tax officer. He can do what the income tax officer can do and also directly to do what he is failed to do. This view was referated by Supreme Court in Jute Corporation of India Ltd. vs. CIT (1991) 187 ITR 688. The least that was expected from the Ld.CIT(A) was at least to give cognizance to the submission of the assessee reproduced by the AO in his penalty order and thereafter to adjudicate the issue 7. The case of the assessee is squarely covered by the decision of Hon'ble ITAT Ahmedabad in Multivision Infotech Pvt. Ltd. vs. DCIT, (2017) 88 taxmann.com 874 the head note of which reads Section 271(1) c) of the Income-tax Act, 1961- Penalty-For concealment of income (General) Where penalty proceedings under section 271(1)(c) were initiated for furnishing inaccurate particulars of income but, in penalty order u/s 271(1)(c) Assessing Officer alleged that assessee had concealed its income, orders imposing penalty were invalid and liable to be cancelled. [In favor of assessee] RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR 8 In view of the above facts and judicial decisions, the penalty imposed by the AO and confirmed by the CIT(A) may kindly be cancelled Submission on other grounds of appeal -
Ground 1. The Ld. CIT(A) erred in confirming the penalty order passed by the AO, notwithstanding the fact that none of the notices of hearing was ever served on the assessee. 1. 1 lt may be mentioned that all the notices of hearing were put up on the ITBA portal Further, the impugned notices were issued on the secondary email id provided in the portal ie on rameshcjainassociatesca@yahoo.co.in and not on the registered primary email id ie. nekiwala71@gmail.com In Form-35 filed by the assessee, it was specifically mentioned that the notices of hearing should not be sent on email and no email address was therefore made available in Form-35. It was clearly mentioned therein that notices to the appellant should be sent on the postal address viz 4365, KGB ka Rasta, Johari Bazar, Jaipur The communication regarding issue of hearing notices was not sent either on the postal address mentioned in Form-35 filed by the appellant, or on the primary email address given available on the ITBA profile. All the notices of hearing were sent to the secondary email id mentioned in ITBA profile, which happened to be of the CA whose job was only filing of ITRs of the assessee. As such, the appellant had no knowledge about the fixation of the case for hearings by NFAC. Consequently, compliance to the notices could not be made. 1.2 The ITAT, Pune Bench, in the case of York Transport Equipment (India) Pvt. Ltd. vs. ITO in has held that issue of notice on ITBA portal is not a valid method and manner of service of notice, as specified under the provisions of section 282(1) of the Act. Further, the Hon'ble Punjab & Haryana High Court in the case of Munjal BCU Centre of Innovation and Entrepreneurship vs. CIT (Exemptions) (2024) 463 ITR 560 (P&H), after making reference to provisions of 282(1) held that service of notice through ITBA portal is not valid service and remanded the matter to AO for denovo disposal of case. The relevant paragraphs of the judgment are reproduced below 7. We are afraid that we cannot subscribe to the submissions as advanced by the learned counsel for the Revenue-respondent. The provisions of section 282(1) of the Act of 1961 and rule 127(1) of the income-tax Rules 1962 provides for a method and manner of service of notice and orders which read as follows:- …….. …….. 8. in view of the above, it is essential that before any action is taken, communication of the notice must be done in terms of the provisions as enumerated herein above. The provisions do not mention communication to be RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR "presumed by placing notice on the e-portal. A pragmatic view has to be adopted always in these circumstances. An individual or a company is not expected to keep the e-portal of the Department open all the time so as to have knowledge of what the Department is supposed to be doing with regard to the submissions of forms etc. The principles of natural justice are inherent in the income-tax provisions and the same are required to be necessarily followed 1.3 Before the Hon'ble Bombay High Court in the case of Lok Developers vs. DCIT, the question for determination was Whether subsequent proceedings initiated by the revenue authorities for non-compliance of notice u/s 148 under the Income Tax Act would be vitiated on account of notice u/s 148 of the Act being served on the secondary email id registered with PAN instead of the registered primary email id or updated email id filed with the last Return of Income The Hon'ble Court held as under:- ‘’6. We heard both counsel and also perused the papers in the proceedings in the present case on 7th January 2021 the petitioner had filed its Return of Income for AY 2020-21 and the email id mentioned therein was loktax2016@rediffmail.com therefore the AO ought to have considered this email as provided u/r 127 (1) (b) (i) email address available in the income tax return furnished by the addressee to which the communication relates which would be the primary email id or (1) email address available in the last income tax return furnished by the addressee In our view the AO clearly erred in issuing a notice on the secondary email address when there was a primary email address given by the petitioner It is common knowledge that a secondary email address has to be used as an alternative or in such circumstances when the authority is unable to effect service of any communication on the primary address. There is no prudence in issuing an email on the secondary email address. In our view the AO ought to have sent the notice u/s 148 to both the primary address and the email address mentioned in the last Return of Income filed to preempt a jurisdictional error on account of valid service there was neither any cost to it or any prejudice to any party for sending it on more than one email in a given circumstance as in the present case We see no wrong with the petitioner's refusal to participate in a proceeding vitiated by valid service of notice. This Court in the case of Mrs. Chitra Supekar vs ITO in Writ Petition No 15580 of 2022 has held that it was imperative for the AO to have checked if there was a change of address before initiating a proceeding, and that a valid service of notice under section 148 is a condition precedent lest it would be a jurisdictional error 7. We accordingly quash and set aside the notice dated 28th March 2022, and all consequential proceedings including the show cause notice for proposed variation dated 25th March 2022 and assessment order u/s 1448 rws 144 However the respondent will be at liberty to proceed with the assessment after issuance of fresh notice in accordance with law.’’ RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR 1.4 In respect of service of notices, CBDT issued instructions, vide Notification No 2/2016 dated 03.02.2016, which reads as under- Clause 2. Accordingly, Board vide Income-tax (18th Amendment) Rules, 2015 has notified rule 127 for Service of notice, summons, requisition, order and other communication on 2nd December 2015. Sub-clause (b) of sub-rule (2) of rule 127 states that For communications delivered or transmitted electronically (1) email address available in the income-tax return furnished by the addressee to which the communication relates, or (ii) the email address available in the last income-tax retum furnished by the addressee, or (iii) in the case of addressee being a company, email address of the company as available on the website of Ministry of Corporate Affairs, or (iv) any email address made available by the addressee to the income tax authority or any person authorized by such income tax authority.
Clause 6(1) In case of non-delivery of email on the primary email address, the notices shall be sent to other email addresses of the assessee available with the department as mentioned in sub-rule (2) of rule 127 1.5 In view of the above instructions of CBDT, the hearing notices in respect of assessment are required to be sent on (i) email address available in the income- tax return furnished by the addressee to which the communication relates of (i) the email address available in the last income-tax return furnished by the addressee for the obvious reason that the AO has access to the ITRs filed by the assessee. But in case of appeals to the CIT(A), notices of hearing are invariably to be sent on the email address made available by the appellant which is the fourth case, te (iv) any email address available by the addressee to the income tax authority or any person authorized by such income tax authority email id mentioned in Form-35 As no email id was mentioned in Form-35 and it was specifically stated that the hearing notices should not be sent on email, it was incumbent upon the NFAC to have sent the notices on the postal address. But the impugned notices were not sent on the postal address given in Form-35, but was sent on the secondary email id mentioned in the ITBA profile The Hon'ble Bombay High Court in the case of Lok Developers vs. DCIT (2023) 455 ITR 399/149 taxmann.com 93 has held that a secondary email address has to be used as an alternative or in such circumstances when the authority is unable to effect service of any communication RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR on the primary address. There is no prudence in issuing an email on the secondary email address. The head note of the above case reads S. 148 Reassessment-Service of notice Primary email id - Notice issued on the secondary notice - Failure to participate in the proceedings - Service of the notice is not valid - Reassessment was quashed. [S. 144, 144B, 147, 282, Rule 127, Art. 226] 1.6 In the instant case also, the Notice for Enablement of Communication window. (notice intimating start of appellate proceedings by NFAC) was issued on 01 11 02022. On the said date, the Primary email id registered in the PAN database was nekiwala71@gmail.com, but the NFAC sent the hearing notices on secondary email id instead of the registered primary email id or the postal address given in Form-35 In view of the decision of Lok Developers vs. DCIT (supra) there was no valid service of notices of hearing u/s 250 by NFAC 1.7 In view of the above facts and judicial decisions, there being no valid service of notices issued u/s 250, the assessee was denied a fair opportunity to present his case, which is violation of the principles of natural justice. Reference in this regard may also be made to section 250(2)(a) of the Act, which guarantees the night to fair hearing, which was denied and therefore, the order passed by the CIT(A) is invalid and may kindly be set aside. Ground-2 The Ld CIT(A) has erred on facts and in law in dismissing the appeal of the assessee for non-prosecution, whereas in view of Section 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non- prosecution, as held by Hon'ble Bombay High Court in CIT vs. Premkumar Arjundas Luthra HUF, (2017) 291 CTR 614 (Bom.) 21 As already mentioned supra, the notices of hearing were never sent on the postal address provided by the assessee. They were sent on the secondary email id and on the income tax portal. So, the assessee had no knowledge of the same and therefore, the notices could not be complied The Ld CIT(A) being too anxious to dispose of the appeal, decided it exparte and dismissed the appeal for non- prosecution. It is clear that the assessee did not get proper opportunity to place his cards. The CIT(A) should have made efforts to decide the case on the basis of material available on record rather than to dismiss the same for want of prosecution 2.2 It is incumbent on the Ld. CIT(A) to make necessary enquiry either himself or through AO before passing the order Further, Learned CIT(A) is obliged to decide each of the points arising out of the appeal ie grounds on merits have to be discussed even in an ex parte order. In view of section 250(4) and 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non-prosecution, without discussing the merits of the case. In the case of Pawan Kumar Singhal v. ACIT, in Delhi ITAT held that Commissioner (Appeals) cannot dismiss assessee's appeal in limine for non-prosecution without deciding RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR same on merits through an order in writing, stating points of determination in appeal, decision thereon and reason for decision. 2.3 In this context, useful reference may also be made to Apex Court's decisions in the cases of CIT vs. Rai Bahadur Hardutroy Motilal Chamaria 66 ITR 443 and CIT vs. B.N. Bhattachargee 118 ITR 461 (SC) for the proposition that an assessee having once filed an appeal, cannot withdraw it and even if the assessee refuses to appear at the hearing the first appellate authority can proceed with the enquiry and if he finds that there has been an under-assessment, he can enhance the assessment. Just as, once the assessment proceedings are set in motion, it is not open to the Assessing Officer to not complete the Assessment Proceedings by allowing the assessee to withdraw Return of Income, it is similarly, by analogy, not open for Ld. CIT(A) to not pass order on merits on account of non-prosecution of appeal by the assessee or if the assessee seeks to withdraw the appeal or if the assessee does not press the appeal. When the Commissioner (Appeals) dismisses the appeal of assessee for non-prosecution of appeal by the assessee, in effect. indirectly it leads to same results as withdrawal of appeal by assessee. When the assessee is not permitted to withdraw the appeal filed before the first appellate authority, the first appellate authority is duty bound to not allow a situation to arise. through dismissal of appeal for non-prosecution of appeal before the first appellate authority, in which, in effect, indirectly the same results are obtained as arise from withdrawal of appeal by the assessee What cannot be permitted in law to be done directly, cannot be permitted to be done indirectly either, as is well settled 24 The Hon'ble Bombay High Court in the case of CIT vs. Premkumar Arjundas Luthra HUF (2017) 291 CTR 614 (Bom.) has observed We straightway refer to Section 250(6) of the Act which enjoins that the CIT(A) shall state the points for determination before it and the decision shall be rendered on such points along with reasons for the decision. Thus, it is incumbent upon the CIT(A) to deal with the grounds on merits even in ex parte order. In view of Section 250(6) of the Act, the CIT(A) has no power to dismiss an appeal on account of non-prosecution 2.5 A bare glance of the order of the CIT(A) shows that CIT(A) has not addressed itself on various points placed for its determination at all and dismissed the appeal of assessee for default in non appearance Needless to say, the CIT(A) plays role of both adjudicating authority as well as appellate authority Thus, the CIT(A) could not have shunned the appeal for noncompliance without addressing the issue on merits The Ld CIT(A) has erred in summarily dismissing the assessee's appeal, by passing a non-speaking order, without making any mention of the various grounds of appeal raised by the assessee in his appellate order and without discussing the merits of the case. In view of these facts, the order of CIT(A) may be set aside Ground 3. The Ld CIT(A) has erred on facts and in law in confirming the penalty imposed by the AO and not considering the facts of the case in the proper perspective.
RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR 3.1 In the ITR filed by the assessee, he had duly disclosed the transaction of sale of the agricultural land in Schedule El of ITR (Copy of ITR at Page No. of Paper Book) The CBDT vide its notification no. 9447 dated 6th January, 1994 for the purpose of Section 2(14)(iii) (b) of the Income Tax Act, 1961 has notified the municipality of Jaipur as the areas up to distance of 8 Kms from municipal limits in all directions. The reference to municipal limit or the limit of cantonment board in the schedule to this notification is to the limits as existing on the date on which the notification is published in the official Gazette Notification reported at (1994)116 CTR(St.)13. On the date of notification, the impugned land was about more than 15 kms from the municipal limits of Jaipur towards Tonk Road in Tehsil -Sanganer Under this bonafide belief, the assessee had claimed the profit from the transaction of the impugned property to be exempt from tax. 3.2 The assessee having shown the transaction in the ITR, he cannot be said to have concealed the particulars of income in this respect. It is all together a different issue that he was given to believe that no tax arises on sale of agricultural land However, during the course of assessment, when it was pointed out that the land being in the municipal limits comprised Capital asset, the assessee filed a revised computation of income, including the capital gain arising there from and paid Rs 1000000.00 on a/c of regular assessment, out of due tax even before the finalization of assessment. If the assessee has claimed any exemption after disclosing the relevant basic facts of the transaction of the income and under ignorance of the provisions of the Act has not offered that amount for tax, in such cases, penalty should not be imposed. In the instant case, the assessee had shown "long-term capital gain and claimed exemption, and the transaction had been disclosed in the retum. There was no concealment of income and penalty u/s 271(1)(c) could not be imposed. 3.2. In exactly identical circumstances, the Hon'ble Rajasthan High Court in the case of Chandrapal Bagga vs. Income-Tax Appellate Tribunal &Anr. (2003) 261 ITR 67 (Raj) has held- 11 When the assessee has disclosed the transaction which is the basis for capital gains tax and though wrongly claimed exemption from the capital gains tax. but that cannot be a case of penalty under Section 271(1)(c) of the Income-tax Act. 1961 If it has claimed any exemption after disclosing the relevant basic facts and under ignorance of the provisions of the Act of 1961, and not offered that amount for tax, in such cases, penalty should not be imposed. In such cases rather it is the duty of the Assessing Officer to ask for further details and tax the income if it is liable to tax and that has been done in this case. 3.3 The facts of the instant case are exactly identical to the above referred case Chandrapal Bagga had sold his immovable property on April 26, 1991 for Rs. 5 lakhs and purchased two flats, one on May 6,1991, and another on May 29, 1991, for a total sum of Rs. 5,56,000. The capital gain came to Rs. 1,40,000. In the RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR original return, the assessee claimed that as he has purchased the immovable property against the consideration received on the sale of house property on April 26, 1991, therefore, no capital gain tax is attracted. Thereafter, he filed the revised return claiming that the capital gain tax is not payable as it is long-term capital gain and the assessee has purchased the property within six months against the consideration received on the sale of his house property on April 26, 1991 The Assessing Officer did not accept this explanation and taxed this amount, ie difference of Rs. 1,40,000 as short-term capital gain. No appeal was preferred Therefore, that addition had become final. Thereafter, the Assessing Officer initiated the penalty proceedings under Section 271(1)(c) of the Income-tax Act, 1961, and levied the penalty of Rs 1,04,110. In appeal before the Commissioner ofIncome-tax (Appeals), the penalty amount was reduced to Rs. 63,974 and in appeal before the Tribunal, the Tribunal reduced the penalty amount to Rs 53,312 vide order dated November 23, 2000. The Hon'ble High Court observing - When the assessee has disclosed the transaction which is the basis for capital gains tax and though wrongly claimed exemption from the capital gains tax, but that cannot be a case of penalty under Section 271(1)(c) of the Income-tax Act, 1961. If it has claimed any exemption after disclosing the relevant basic facts and under ignorance of the provisions of the Act of 1961, and not offered that amount for tax, in such cases, penalty should not be imposed. In such cases rather it is the duty of the Assessing Officer to ask for further details and tax the income if it is liable to tax and that has been done in this case, set aside the order of the Tribunal and cancelled the penalty 3.4 So, in view of the binding decision of the jurisdictional High Court, it is prayed that the penalty levied by the AO and sustained by the Ld.CIT(A) may kindly be quashed.’’ 3.3 On the other hand, the ld. DR supported the orders of authorities below and relied upon following case laws.
Union of India & Ors M/s. Dharmendra Textile Processors (on 29-09-2008 SC Civil Appeal Nos. 10289-10303 [ 2008)306 ITR 277SC]- pages 1 to 22 2. M/s. K.P. Madhusudhanan vs CIT, Cochin ( on 21-08-2001 Appeal (Civil) 6465 of 2000 [(2001) 251 ITR 99]- pages 23 to 27. 3.4 We have heard both the parties and perused the materials available on record. Brief facts of the case are that the case of the assessee was selected for scrutiny through CASS which was finalized u/s 143(3) of the RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR Act, 1961 determining total income at Rs.1,14,75,900/- vide assessment order dated 5-12-2016. The relevant observations made by the AO in the assessment order is reproduced as under:- ‘’3.1 As mentioned in above para,the assessee filed a revised computation of total income during the course of assessment proceedings wherein Long Term Capital Gain of Rs.1,14,75,791/- was declared as against Nil declared in the original return of income filed on 23-07-2014. As such the assessee filed revised computation of total income after the case of the assessee has been selected for scrutiny u/s 143(3) of the Act. It is pertinent to mention here that if there were no assessment proceedings were initiated u/s 143(3) of the Act, the income so enhanced by Rs.1,14,75.791/- on account of long term capital gain remained to be taxed. Therefore, it is clearly established that the assessee deliberately concealed her income to the tune of Rs.1,14,75,791/- and it is only disclosed when the assessee’s case has been selected for scrutiny u/s 143(3) of the I.T.Act, 1961. Accordingly, penalty proceedings u/s 271(1)© for filing of inaccurate particular of income / concealment of income are initiated by way of issue of notice u/s 271(1)© of the Act.
4. Subject to above remarks total income of the assessee is recomputed as under:- Income as declared by the assessee as per original return. Income from business or profession Rs.61,103/- Income from other sources Rs.27,981/- Income from Minor Rs. 729/- Total Rs.28,710/- Less: exemption on a/c of Income of minor Rs. 729/- Rs.27,981/- Income from long term capital gain Rs.1,14,75,791/-, Gross Total Income Rs.1,15,64,875/- Less: Deduction under Chapter VI-A Rs. 89,084/- Restricted to Income other than LTCG –Total Income Rs. 1,14,75,791/-, R/o Rs.1,14,75,790/- Assessed u/s 143(3) of the I.T. Act at Rs.1,14,75,790/-. Issue demand notice and challan. Charged interest u/s 234B, 234C, 234D & Withdrawal of excess refund u/s 244A. ITNS 150 is part of this order. Notice u/s 274 read with Section 271(1)© of the Act is issued separately on the issue discussed in para 3.1 of this order for concealment of income/ furnishing inaccurate particulars of income.’’ RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR Thus it is noticed that at the time of passing of assessment order, the AO after discussing the addition made by him stated that ‘’Penalty proceedings u/s 271(1)© for filing of inaccurate particulars of income/ concealment of income are initiated separately on the issue. It is also noticed that the DCIT, Circle-2, Jaipur vide his order dated 5-12-2016 /05-01-2017 issued a show cause notice (for short SCN) whose details are as under:- Office of :Circle2, Jpr Notice under section274 read with section 271(1)© of the Income Tax Act, 1961 File No. T-343 Dated: 5-12-2016 PAN: AANPJ 9249 D To Shri Rakesh Kumar Jain 4365, KGB Ka Rasta, Johri Bazar Jaipur , Rajasthan 302 003 Sir/ Madam, Whereas in the course of proceedings before me for the assessment year2014- 15, it appears that you have concealed the particulars of your income or furnished inaccurate particulars of such income. You are hereby requested to appear before me on 5-01-2017 at 11.30 AM and show cause why an order imposing a penalty on you should not be made under section 271(1)© of the Income Tax Act. If no one attends this office on the said date of hearing, the case shall be decided on this basis of material available on records. Yours faithfully, Office of : Praveen Kumar Mittal, Date and time of attending: DCIT, Circle-2, Jaipur 05 JAN 17 AT 11.30AM RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR Thus the ld. DCIT, Circle-2, Jaipur (for short AO) passed the penalty order u/s 271(1)©r.w.s. 274 of the I.T. Act on 18-04-2017 by observing as under:- ‘’05. In view of the totality of the facts and keeping in view the provisions of section 271(1)(c), the assessee is found guilty of furnishing of inaccurate particulars of income to the extent of amount of Rs 1,14,75,790/- For that reason, I am satisfied that the assessee has committed default u/s 271(1)(c) of the IT Act and therefore, penalty u/s 271(1)(c) is imposed on the furnishing of inaccurate particulars of income.’’[Para 5 Page no-3 of the Penalty order of the AO] In first appeal, the ld.CIT(A) has confirmed the action of the AO mainly holding as under:- ‘’8. In view of the above, it has to be held that the appellant has failed miserably to make out a case against the levy of penalty u/s 271(1)(c) of the Act and, thus, I find no infirmity in the order of the A.O. passed u/s 271(1)(c) of the Act. The levy of penalty of Rs.26,00,000/- u/s 271(1)(c) is, accordingly, confirmed. Consequently, all the five grounds of appeal raised by the appellant are dismissed.’’ On perusal of the letter dated 5-12-2016 issued by the DCIT, Circle-2, Jaipur(for short AO), it is noted that neither the applicable clause has been ticked off nor the applicable link i.e. have concealed the particulars of your income and/ or furnished inaccurate particulars of such income have been specified/ mentioned. In other words, prima facie, there was failure on the part of the AO to frame a specific charge against the assessee for which the assessee was being penalized. It is apparent from the order of the assessment that penalty was initiated against the assessee in the quantum assessment on both the charges i.e. concealment of income as well furnishing the inaccurate particulars of income which shows that the AO RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR was not clear as to specific limb which was applicable to give factual matrix. This is fortified by the fact that exact charge has not been framed even while issuing notice u/s 274 r.w.s. 271 of Act which has been issued in printedletter without ticking / marking the applicable clause / without striking-off the irrelevant limb which reveals that the penalty was initiated as well as levied for both the charges. It is apparent that if AO, in the course of assessment proceedings, was satisfied that the assessee has concealed the particulars of income or furnished inaccurate particulars of such income, then he may levy penalty on the assessee. However, in the considered opinion of the Bench, concealment of particulars of income or furnishing of inaccurate particulars of income, are two different charges. These two expressions i.e. furnishing of inaccurate particulars and concealment of income, in terms of ratio of binding judicial precedents, carry different connotation / meaning and non-framing of specific charge against the assessee would vitiate the penalty proceedings. The penalty could be levied only for a specific charge. Furnishing of inaccurate particulars of income means, when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are found to be incorrect whereas, concealment of particulars of income would mean that the assessee has concealed the income and has not reflected certain RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR income in its return of income. For the said proposition, we straightway rely upon the decision rendered by Hon’ble Bombay High Court rendered in CIT Vs. Samson Perinchery [2017 88 taxmann.com 413] wherein Hon’ble Court has held as under: -
3. The impugned order of the Tribunal deleted the penalty imposed upon the Respondent-Assessee. This by holding that the initiation of penalty under Section 271 (1)(c) of the Act by Assessing Officer was for furnishing inaccurate particulars of income while the order imposing penalty is for concealment of income. The impugned order holds that the concealment of income and furnishing inaccurate particulars of income carry different connotations. Therefore, the Assessing Officer should be clear as to which of the two limbs under which penalty is imposable, has been contravened or indicate that both have been contravened while initiating penalty proceedings. It cannot be that the initiation would be only on one limb i.e. for furnishing inaccurate particulars of income while imposition of penalty on the other limb i.e. concealment of income. Further, the Tribunal also noted that notice issued under Section 274 of the Act is in a standard proforma, without having striked out irrelevant clauses therein. This indicates non-application of mind on the part of the Assessing Officer while issuing the penalty notice.
4. The impugned order relied upon the following extract of Karnataka High Court's decision in CIT v. Manjunatha Cotton & Ginning Factory[2013] 359 ITR 565/218 Taxman 423/35 taxmann.com 250 to delete the penalty:— "The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). Concealment, furnishing inaccurate particulars of income are different. Thus, the Assessing Officer while issuing notice has tocome to the conclusion that whetheris it a case of concealment of income or is it as case of furnishing of inaccurate particulars. The apex court in the case of Ashok Pai[2007] 292 ITR 11 (SC) at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of Manu Engineering reported in 122 ITR 306 and the Delhi High Court in the case of Virgo Marketing P. Ltd., reported in 171 Taxman 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."
RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR 5. The grievance of the Revenue before us is that there is no difference between furnishing of inaccurate particulars of income and concealment of income. Thus, distinction drawn by the impugned order is between Tweedledum and Tweedledee. In the above view, the deletion of the penalty, is unjustified.
6. The above submission on the part of the Revenue is in the face of the decision of the Supreme Court in T. Ashok Pai v. CIT[2007] 292 ITR 11/161 Taxman 340 [relied upon in Manjunath Cotton & Ginning Factory (supra)] - wherein it is observed that concealment of income and furnishing of inaccurate particulars of income in Section 271(1)(c) of the Act, carry different meanings/connotations. Therefore, the satisfaction of the Assessing Officer with regard to only one of the two breaches mentioned under Section 271(1)(c) of the Act, for initiation of penalty proceedings will not warrant/permit penalty being imposed for the other breach. This is more so, as an Assessee would respond to the ground on which the penalty has been initiated/notice issued. It must, therefore, follow that the order imposing penalty has to be made only on the groundof which the penalty proceedings has been initiated, and it cannot be on a fresh ground of which the Assessee has no notice.
7. Therefore, the issue herein stands concluded in favour of the Respondent Assessee by the decision of the Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra). Nothing has been shown to us in the present facts which would warrant our taking a view different from the Karnataka High Court in the case of Manjunatha Cotton and Ginning Factory (supra).
8. In view of the above, the question as framed do not give rise to any substantial question of law. Thus, not entertained.
9. Accordingly, all these Appeals are dismissed. No order as to costs.
It is evident that Hon’ble Court, in the above decisions, has confirmed the ratio laid down by Hon’ble Karnataka High Court in CIT V/s Manjunatha Cotton & Ginning Factory (359 ITR 565). This decision of Hon’ble Karnataka High Court was subsequently followed by the same court in the case of CIT V/s SSA’s Emerald Meadows (2016 73 Taxmann.com 241) which was agitated by the revenue before Hon’ble Supreme Court. However, Special Leave Petition, against the same, was dismissed by the RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR Hon’ble Court on 05/08/2016 reported at 73 Taxmann.com 248. This decision of Hon’ble Karnataka High Court rendered in Manjunatha Cotton &Ginning Factory has subsequently been followed extensively in catena of judicial pronouncements rendered by various Hon’ble High Courts as well as different benches of Tribunal. Following the same decision, Hon’ble Karnataka High Court, in its later decision titled as Muninaga Reddy V/s ACIT (88 Taxmann.Com 545 21/09/2016) observed as under: -
7. We may record that during the course of hearing the learned counsel for the appellant has tendered the copy of notice issued to the assessee under Section 271(1)(c) of the Act dated 15.12.2008 for imposition of penalty, which as per the learned counsel for appellant was a part of record in the proceedings before the Tribunal. Learned counsel for the respondent - revenue is unable to dispute that notice dated 15.12.2008 was issued by the Department for imposition of penalty under Section 271(1)(c) of the Act. Hence, said notice for the purpose of consideration is taken on record. Said notice disclose that it is a printed notice and further no specific ground is mentioned, which may show that the penalty could be imposed on the particular ground for which said notice was issued. If the decision of this Court in case of Manjunatha Cotton & Ginning Factory (supra) is considered, this Court in the said decision had observed at paragraph 63 as under: "63. In the light of what is stated above, what emerges is as under:-
(a) Penalty under Section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Willful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. (e) The existence of such conditions should be discernible from the Assessment Order or order of the Appellate Authority or Revisional Authority.
RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR (f) Ever if there is no specific finding regarding the existence of the conditions mentioned in Section 271(1)(c), at least the facts set out in Explanation 1(A) & 1(B) it should be discernible from the said order which would by a legal fiction constitute concealment because of deeming provision (g) Even if these conditions do not exist in the assessment order passed, at least, a direction to initiate proceedings under Section 271(l)(c) is a sine qua non for the Assessment Officer to initiate the proceedings because of the deeming provision contained in Section 1(B). (h) The said deeming provisions are not applicable to the orders passed by the Commissioner of Appeals and the Commissioner. (i) The imposition of penalty is not automatic. (j) Imposition of penalty even if the tax liability is admitted is not automatic. (k) Even if the assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities it has resulted in payment of such tax or such tax liability came to be admitted and if not it would have escaped from tax net and as opined by the assessing officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not bonafide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty proceedings, in appeal, if the appellate authority records satisfaction, then the penalty proceedings have to be initiated by the appellate authority and not the Assessing Authority. (p) Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1)(c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income. (q) Sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law. (r) The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings, no penalty could be imposed to the assessee. (s) Taking up of penalty proceedings on one limb and finding the assessee guilty RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR of another limb is bad in law. (t) The penalty proceedings are distinct from the assessment proceedings. The proceedings for imposition of penalty though emanate from proceedings of assessment, it is independent and separate aspect of the proceedings. (u) The findings recorded in the assessment proceedings in so far as "concealment of income" and "furnishing of incorrect particulars" would not operate as res judicata in the penalty proceedings. It is open to the assessee to contest the said proceedings on merits. However, the validity of the assessment or reassessment in pursuance of which penalty is levied, cannot be the subject matter of penalty proceedings. The assessment or reassessment cannot be declared as invalid in the penalty proceedings.”
8. We are not required to consider the other contingencies for examination of legality and validity of the penalty under Section 271(1)(c) of the Act, but clauses (p), (q) & (r) of the above referred observations are required to be considered.
As per the above referred decision of this Court, the notice would have to specifically state the ground mentioned in Section 271 (1)(c) of the Act namely as to whether it is for the concealment of income or furnishing incorrect particulars of the income said penalty proceedings is being initiated. Second aspect is that, as held by this Court, sending of printed form wherein the grounds mentioned in Section 271 of the Act would not satisfy the requirement of law. The third aspect for which the observations are made by this Court is that, the assessee should know the ground which he has to meet specifically otherwise the principles of natural justice would be violated and consequently, no penalty could be imposed on the assessee if there is no specific ground mentioned in the notice. No specific ground is mentioned in the subject notice and resultantly the principles of natural justice could be said as violated.
In our view, if the observations made by this Court in the above referred decision and more particularly clauses (p), (q) and (r) are considered, it was a case wherein the decision of this Court would apply and it cannot be said that the decision of this Court in the case of Manjunatha Cotton & Ginning Factory (supra) would not apply. 11. In view of the aforesaid discussion, if the decision of this Court in case of Manjunatha Cotton & Ginning Factory (supra) is considered, the resultant effect would be that the notice in question issued under Section 271(1)(c) for levy of penalty and consequently the penalty imposed, both would be unsustainable and cannot stand in the eye of law. ‘’ RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR It has been held by Hon’ble Court that the notice would have to specifically state the ground mentioned in Section 271 (1)(c) of the Act namely as to whether the penalty was for concealment of income or furnishing of incorrect particulars of the income. Further, issuing printed form/ paper would not satisfy the requirement of law since the assessee should know the ground which he has to meet specifically otherwise the principles of natural justice would be violated and consequently, no penalty could be imposed on the assessee if there is no specific ground mentioned in the notice. The Bench finds that similar is the case here since appropriate limb has not been specified in the subject notice and therefore, the principles of natural justice could be said to be have been violated. More or less, similar proposition has been laid in other binding judicial precedents as tabulated by us. In other words, failure to frame specific charge against the assessee during penalty proceedings would be fatal to penalty proceedings itself and the same could not be sustained in the eyes of law. The revenue is unable to demonstrate that specific charge was ever framed and confronted to the assessee during penalty proceedings. Therefore, respectfully following the binding judicial precedents favoring the assessee, on the issue, we find substantial force in legal grounds raised by Ld. AR, in this regard. In view of the above aforesaid discussion, the Bench holds that impugned penalty RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR was unsustainable in the eyes of law and therefore, the Bench directs for deletion of the same. Even otherwise the fact of the case is that during the assessment proceeding the assessee has filed the revised computation and paid the tax on the capital gain even though the claim is of the agricultural income, considering it as non-agricultural. Since the assessee has revised the claim and paid the tax due before the assessing officer, there cannot be providing inaccurate particulars of income by the assessee we get support of the view that the revised return should be considered as disclosure before the assessment. We get support of the view from the decision of Hon’ble Gujarat High Court in the case of PCIT Vs. Babubhai Ramanbhai Patel [ 84 taxmann.com32 ] where the court held that ;
We may notice that under sub-section (1) of Section 139, every person whose income for the previous year exceeds the maximum amount not chargeable to tax, is required to file a return before the due date. Sub-section (3) of Section 139 provides that any person who has sustained a loss and claims that the loss should be carried forward would file a return of loss within the time prescribed under sub- section (1) and thereupon all the provisions of the Act shall apply as if it was a return under sub-section (1) of Section 139 of the Act. Under sub-section 4 of Section 139, a person who has not furnished a return within the time allowed under sub-section (1) may still furnish a return at any time before the end of the relevant assessment year or before the completion of the assessment whichever is earlier. Sub-section (5) of Section 139 provides that any person having furnished a return under sub-section (1) or sub-section (4) discovers any omission or a wrong statement therein, he may furnish a revised return any time before the expiry of one year from the end of relevant assessment year or before the completion of the assessment whichever is earlier.
Sub-section (5) of Section 139, therefore, gives right to an assessee who has furnished a return under sub-section (1) or sub-section (4) to revise such return on discovery of any omission or a wrong statement. Such revised return, however, can be filed before the expiry of one year from the end of the relevant assessment RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR year or before the completion of the assessment, whichever is earlier. This is precisely what the assessee did while exercising the right to revise the return. Sub- section (5) of Section 139 does not envisage a situation whereupon revising the return if a case for loss arises which the assessee wishes to carry forward, the same would be impermissible. In terms, sub-section (5) of Section 139 allows the assessee to revise the return filed under sub- section (1) or sub-section (4) as long as the time frame provided therein is adhered to and the requirement of the revised return has arisen on discovery of any omission or a wrong statement in the return originally filed. Accepting the contention of the revenue would amount to limiting the scope of revising the return already filed by the assessee flowing from sub-section (5). No such language or intention flows from such provision. 6.1 The Allahabad High Court in case of Dhampur Sugar Mills Ltd. v. CIT [1973] 90 ITR 236, in the context of the Income Tax Act, 1922 held that the assessee is given a right to file a correct and complete return if he discovers an error or omission in the return filed earlier. The assessment can be completed only on the basis of the correct and complete return. The earlier return, after a revised return has been filed, cannot form the basis of assessment although it may be used to indicate the conduct of the assessee. There is a clear distinction between a revised return and a correction of return. Once a revised return is filed, the original return must be taken to have been withdrawn and substituted by a fresh return for the purpose of assessment.
The Madras High Court in the case of CIT v. Periyar District Co-operative Milk Producers Union Ltd. [2004] 266 ITR 705/137 Taxman 364 held that once the assessee had filed a return claiming carry forward loss under sub-section (3) of Section 139, a revised return could be filed in respect of such a return. We are conscious that we are not directly concerned with such a situation.
In view of the above discussion, we do not find any error in the view of the Appellate Tribunal. Tax appeal is, therefore, dismissed.
Thus, even on merits the assessee has before the completion of the assessee disclosed the income and thereby there cannot be levy penalty u/s. 271(1)(c) of the Act. In view of the above deliberations, the Bench does not concur with the findings of the ld. CIT(A) and the appeal of the assessee is allowed.
RAKESH KUMAR JAIN VS DCIT, CIRCLE-2, JAIPUR 4.0 In the result, the appeal filed by the assessee is allowed. Order pronounced in the open court 23/07/2025. Sd/- Sd/- ¼Mk0 ,l- lhrky{eh ½ ¼jkBksMdeys'kt;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;dlnL;@Judicial Member ys[kklnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 23 /07/2025 *Mishra आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Shri Rakesh Kumar Jain, Jaipur 2. izR;FkhZ@ The Respondent- The DCIT. Circle-2, Jaipur 3. vk;djvk;qDr@Theld CIT 4. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 5. xkMZQkbZy@ Guard File (ITA No.212/JP/2025) vkns'kkuqlkj@ By order,
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