SWATI TOMAR,JAIPUR vs. DY. CIT, CENTRAL CIRCLE 1, JAIPUR, JAIPUR

Without prejudice to ground No. (1) Id. CIT(A) has erred in sustaining the penalty under section 271(1)(c) of Act for the value adopted by sub-Registrar on 14th March 2014 (A.Y. 2014-15) in registration after conversion of pre-owned unapproved society plot to urban plots without any allegation of any on-money payment.

3. Ld. CIT (A) has acted against the provisions of law by avoiding different and binding judicial pronouncements brought to his notice, including levy of penalty based on issuing a defective show-cause notice and placing reliance on unrelated and irrelevant facts/decisions.

2.1 The vide application dated 23.04.2025, the assessee raised the addition ground for adjudication which reads as under :

In the case of Swati Tomar Vs. Dy. CIT, C.C.-1, Jaipur (ITA 1345/JPR/2024 for the A.Y. 2023-24) MAY IT PLEASE YOUR HONOURS Ground No. (1) raised in memo of appeal (Form No. 36) could not be raised before Id. Commissioner of Income tax (Appeal) due to oversight: "Ld. CIT(A) was not justified in sustaining penalty of Rs.4,12,330/-under sec. 271(1)(c) of LT. Act as against levy of penalty under sec. 271AAB of I.T. Act in search case which based on higher value adopted by Sub-Registrar for registration of plots of land on conversion of pre-owned plots of land by assessee, already appearing in her Balance sheet when purchased as unapproved plots of land". Since above ground is a legal ground which goes to the root of matter and does not required further investigation, may we request you to kindly admit the ground No. (1) in memo of appeal as additional ground. stated in the application the ground and considering the judgment of the National Thermal Power Co Ltd. Vs. CIT 229 ITR 383 the additional ground raised by the assessee is admitted as no new facts are coming to decide this ground and therefore, the same is admitted.

24.12.2016 u/s. 143(3) r.w.s. 153A of the Act. In that order an addition of Rs. 13,73,372/- was confirmed by the ld. CIT(A). When the matter was carried to this tribunal the addition was sustained to the turn of Rs. 13,34,401/-.

3.2 Since the addition was confirmed in the quantum proceeding the show cause notice dated 07.02.2020 was issued and served to the assessee-appellant. The assessee submitted that the value suggested by JDA for registration in the office of sub-registrar for re-allotment of both the plots after conversion of the plots by JDA which were already owned by the assessee herself. The re-allotment of plots were made through the office of the sub-registrar after charging nominal registration charges for the plots already owned by the assessee and re-allotted after surrender to JDA after conversion into urban / residential plots. The assessee also contended that both the plots were sold at the price lower then what is fixed by JDA which proves that higher value fixed by JDA was just for the purpose of charging higher conversion and other charges. On sale, assessee had made payment of capital gain tax in the A. Y. 2017-18 after considering the following data:

Therefore, the assessee contended that value / sale of value of plots cannot be subjected to tax twice once when the assessee after payment of conversion and other charges was re-alloted the same plots of land and again when these plots were sold in the period relevant to A. Y. 2017-18.

The assessee also contended before the ld. AO that the limb for which the penalty proposed was not specified. The ld. AO did not considered the explanation of the assessee and held that the assessee furnished inaccurate particulars of her income to the extent of Rs. 13,34,701/- and thereby order for levy of penalty u/s. 271(1)(c) of the Act for an amount of Rs. 4,12,330/-.

Decision:- In the present case the appellant initially claimed that the two plots of land were purchased by her in the year 1997, however when the investigation had already started in the issue the appellant accepted during the assessment proceedings that the plots were actually purchased by her during the financial year 2012-13.

Swati Tomar vs. DCIT Thus the appellant made deliberate false claim to mislead the taxation proceedings and to evade the taxes and made the false claim of the date of purchase to be actually minimum 15 years older than the actual date of purchase of the plots. This is another implication that had the documents not being found during the course of search and seizure action and had the issue not been investigated the appellant would have claimed the cost of acquisition from the year 1997 and would have been able to hide the investment of unaccounted cash.

During the investigation it was proved that the party which gave the pattas gave the backdated pattas. This is not possible without the active knowledge, request and connivance of the appellant. Coming to the purpose of the same as to why the backdated pattas were obtained by the appellant, the appellant has maintained the silence. Obviously the only possible reason is to invest the unaccounted cash in hand by making the payment of the land at the current market price to the lessor and further to escape the scrutiny and taxation by the Income Tax Department by the getting the transaction back dated by more than 15 years. The back dating was done by such a long period and shown in the form of cash payment, also for the purpose of arriving at a very less valuation considering the year claimed initially. The appellant has also claimed that the valuation of each plot during the financial year 2016-17 was Rs. 3,75,000 as it has been claimed that the plots were sold during this year. Firstly, this claim that the valuation during this year was lesser than the valuation arrived at by the learned AO in the year under appeal is not a bona fide claim as the plots were sold by the appellant after the assessment proceedings for the year under appeal had started already. And apparently these plots were sold to create a false evidence of the lesser valuation. At the same time, the appellant never furnished the stamp duty valuation rates applicable during the AY 2013-14. The onus in this regard was on the appellant as it is the appellant who had manipulated the records regarding the date of purchase and the pricing of the purchase.

Now to challenge the valuation arrived at by the learned AO during the assessment proceedings which has already been upheld by the learned CIT Appeal and by the honourable Tribunal on the ground that the same is not exactly correct tantamounts to "claiming the benefit of self wrong".

Nullus commodum capere potest de injuria sua propria - meaning no person can take advantage of his own wrong - is a maxim of law, recognized and established.

Firstly the appellant many manipulated the records and carried out the transactions in secrecy without bringing the true particulars of the records and on the other hand the appellant has claimed that the figures arrived at by the learned AO are not exactly correct. When the appellant himself considered the correct facts and has not furnished the correct facts and supportings regarding the payments made to the lessor for obtaining the lands at the backdated dates, the Hon'ble Supreme Court of India in the case of CIT Vs British Paints India Ltd (1991) 188 ITR 44 (SC) has held that it is the duty of the assessing officer to determine the taxable income by making such computation as he considers appropriate in the given situation.

It is held by the Hon'ble Supreme Court in the case of Commissioner of Sales Tax v. H.M. Esufali H.M. Abdulali [1973] 90 ITR 271 as under:-

"In estimating any escaped turnover, it is inevitable that there is some guesswork. The assessing authority while making the best judgment assessment, no doubt, should arrive at his conclusion without any bias and on a rational basis. That authority should not be vindictive or capricious. If the estimate made by the assessing authority is a bona fide estimate and is based on a rational basis, the fact that there is no good proof in support of that estimate is immaterial. Prima facie, the assessing authority is the best judge of the situation. It is his best judgment and not anyone else's. The High Court cannot substitute its best judgment for that of the assessing authority."

The Hon'ble Punjab and Haryana High Court in case of Tara Singh V ITO [2017] 81 taxmann.com 293 (Punjab & Haryana) held that the assessing officer in a best judgment assessment can resort to a bona fide estimate based on a rational basis.

The Hon'ble Andhra Pradesh High Court in the case of Rajnik & Co. v. Assistant Commissioner of Income-tax [2001] 117 Taxman 675 (Andhra Pradesh) held as under-

Swati Tomar vs. DCIT The documentation created by the appellant was backdated and artificial and bogus. In view of the above factual and legal position the onus was on the appellant to furnish a potent and cogent explanation along with the supporting documents regarding the correct valuation. However the appellant still claim that the correct or actual purchase cost of the plots was only Rs. 20 thousand (roundly) and Rs. 19 thousand (roundly) in total respectively for the two plots. As per the submission and claim of the appellant the value of each of these plots during the financial year 2016-17 was Rs. 3,75,000 and in such a scenario the claim of the appellant that the value of the each plot during the financial year 2012-13 was in the range of 19-20 thousand implies and means that there was an increase of 18 to 20 times (1800% to 2000%) in the value of these lands within four years which again is against all human probabilities and against the facts of the case. The appellant even did not furnish the stamp duty valuation rates of the financial year 2012-13,

In the present case the learned AO used the basis of valuation arrived at by the specialised government agency the Jaipur Development Authority which is the competent authority and which authority carried out the conversion of the lease of the appellant. In the appeal the appellant is claiming the benefit of her own wrong which is not allowable as per the settled legal principles.

The legal ground raised by the appellant that there was no incriminating search material for making the addition, this legal ground has already been rejected at the stage of learned CIT Appeal and at the stage of honourable Tribunal in the case of the appellant herself in the quantum appeal proceedings.

(i) In the case of the judgement of Hon'ble Rajasthan High Court in the case of M/S. Shiv Lal Tak vs Commissioner Of Income-Tax, Jodhpur dated 5 February, 2001 (https://indiankanoon.org/doc/949060/) [2002] 121 Taxman 99 (Rajasthan)/[2001] 251 ITR 373 (Rajasthan)/[2001] 166 CTR 534 (Rajasthan) [05- 02-2001], as per the ratio of the judgement, the penalty under section 271(1)(c) of t is leviable even when the assessed income is estimated. The extract of para from judgement are respectfully stated as under:-

(12). The fact of hiring of these two trucks during the period in question has not been doubled. The explanation furnished by the assessee in respect of difference in rate of hiring of the two trucks has been that Truck No. RJJ 1114 was much smaller in size than Truck No. RRQ 6065 and, therefore, less rental was paid in respect of smaller truck. This fact has not also been found to be incorrect. However, solely on the basis of fact that Truck No. RRQ 6065 belong to one of partners of the assessee firm, the Assessing Authority has assumed that hiring charges in respect thereof have been inflated. In respect of Truck No. RJJ 1114, it has been found that some diesel expenses in respect of said truck, which belong to sister concern of the assessee, have been debited in the Books of Accounts even during the period when the truck was not hired with the assessee and on that basis, the Assessing Officer has not found the explanation, furnished by the Swati Tomar vs. DCIT assessee in respect of particular expenses in respect of which explanation was sought from the assessee, to have been substantiated by the assessee. It has also been stated in the order of learned Tribunal that the explanation furnished by the assessee can not also be considered to be bona fide in terms of second proviso to Explanation I read with Clause (B). The findings of the Assessing Officer has been affirmed by the appellate authorities, namely, CIT (Appeals) as well as the Tribunal.

(13). Having considered the facts and circumstances as emanating from the statement of case and contentions raised before us, we are of the opinion that learned Tribunal has misdirected itself in considering the ambit and scope of the said Explanation and also in dealing with the case-where additions have been made not on any specific count but by applying a gross profit rate while rejecting the result shown in the Books of Accounts, that is to say, not on the basis of entries made in the Books of Accounts. Once Books of Accounts were rejected and income was assessed by applying gross profit rate which resulted in addition of income, through the provisions of Explanation I to sec. 271(1)(c) of the Act may be attracted for the purpose, of initiating penalty proceedings by raising presumption under the Explanation I but the same by itself could not take place of conclusive proof so as to discard the evidence and attending circumstances on that basis alone.

(14). It is not the case in the present context that the assessee has offered explanation which has been found by the Assessing Officer or the assessing authority to be false. It is a case, and findings are also to that effect, that the explanation was offered by the assessee but he has not been able to substantiate the same. To us, it appear that the authorities below have ignored that it was precisely for non-availability of necessary material to verify the expenses incurred and so entered in the Books of Accounts that the assessee has agreed for assessment at a flat profit rate on gross receipts resulting in addition of income. Thereafter, to put the assessee at the alter to satisfy the very same entries which during the assessment proceedings could not be verified for want of necessary material to be proved to hilt, when admittedly no evidence existed even at the time of assessment. Obviously in such circumstances, if enquiry was to be held for verification of expenses entered in the Books of Accounts, it would result in reaching a dead-end where explanation furnished by the assessee shall not be substantiated but that alone could not have been the reason to draw any inference of lack of bona fides on the part of the assessee. No deliberate, false entry has been found to have been made in the Books of Accounts, which could detract from the bona fide, failure on the part of the assessee to substantiate his explanation in respect of two of the entries of expenditure, entered in the Books of Accounts because of lack of verifying material with him. As would turn out from the petty nature of expenses referred to in the order of Rs. 40/-, Rs. 80/-, Rs. 1480/- etc., we are of the opinion that the findings of the learned Tribunal, that the explanation furnished-by the assessee is not bona fide in the facts and circumstances of the present case, is not based on any material and is an Swati Tomar vs. DCIT inference which no reasonable person instructed in law would draw, particularly in cases where assessee-has agreed for applying of gross profit rate, precisely for the reason that he was not in position to vouch each and every detail of the expenses entered in the Books of Accounts, to substantiate the result shown by him. (15). It may be noticed that in the Explanation I to sec. 271(1)(c), as recast, while the expression "failure to return the total assessed income as not arising on account of any fraud or wilful negligence on the part of assessee does not find place but clause (b) read with proviso (ii) makes it abundantly clear that where difference in the assessed income and returned income is not arising on account of any gross or wilful negligence on the part of assessee' still no penalty is leviable. The statute has clearly drawn distinction between furnishing a deliberate, false explanation by the assessee and an explanation, which may not be false but is not accepted because assessee was not able to substantiate it. While there is no relaxation in the rigour of Explanation in raising presumption against the assessee in the former case, in the latter class of cases, the statute itself relaxes its rigour by directing that where in respect of any amount, added or disallowed and any explanation is offered by such person (assessee) which is not accepted because the assessee has failed to substantiate the same, but such explanation is bona fide and all the facts relating to same and material to the computation of total income has been disclosed by him, the Explanation shall not apply In other words, the cases under clause (A) of the Explanation I are those where explanation furnished by the assessee falls in the category of a fact 'disproved' whereas cases where an explanation so furnished falls in the category of fact 'not proved.' The expressions 'proved' disproved' and 'not proved' has well known, distinct connotation in legal terminology, as may be apparent from the provisions of Indian Evidence Act. As per interpretation clause, a fact is said to be 'disproved' when after considering the matter before it, the court either believes that it does not exist or considers its non-existence so probable that a prudent man ought under the circumstances of the particular case, to act upon the supposition that it does not exist. In contrast, a fact is said to be 'proved' when after considering the mailer before it, the court either believes it to exist or considers its existence so probable that a prudent man ought under the circumstances in particular case, to act upon the supposition that it exists. In juxta position, the expression 'not proved denotes a fact is said to be 'not proved' when it is neither proved nor disproved.

(16). With this, it is of significance that while with the addition of income or disallowance of expenses is attached, the presumption about non-disclosure or concealment of particulars of such additions or expenses, no such presumption about existence of lack of bona fide' of the assessee is raised in a case falling under clause (B) of the Explanation. On the contrary, on finding an explanation as was existent or disproved, a reasonable inference of lack of bona fide can be drawn, mere failure to substantiate the explanation as a fact not proved, can not raise a presumption about deliberate concealment and lack of bona fide. In such (17). In the first place, we find in the present case that even during course of assessment, it was not a case of rejecting the explanation furnished by the assessee, before making any additions in its income. Once no explanation was said to be tested and rejected by the Assessing Officer before converting, the question Of invoking Explanation I itself would not have arisen however. Explanation I was attracted for the purpose of giving jurisdiction to Assessing Officer for initiating the proceedings. It could not have further taken place of conclusive proof so as to discard the explanation furnished by the assessee, for the very same reason for which result shown by him in the Books of Accounts has been rejected, not by rejecting the explanation furnished by the assessee but by accepting the explanation furnished by the assessee that he does not have necessary material to verify each and every detail of the expenses and therefore, gross profit rate on the receipts has been taken by the assessee. Once the plea of the assessee has been accepted during the course of assessment and additions have been made at his behest, the question of making additions by rejecting explanation, which was not sustainable or could not be substantiated, would not arise and in that event, the question of bona fides of the assessee could not be doubted.

(18). We are not able to comprehend as to on what basis learned Tribunal has repeated the provisions of the Act ad verbatim that explanation furnished by the assessee can not be accepted as bona fide because additions were made at the behest of the assessee, by accepting his inability to furnish details of expenses during the assessment proceedings itself.

(19). Apart from the aforesaid, the order of learned Tribunal shows another error of law in perceiving provisions of 271 Explanation I to Sec.

(20). In this connection, the language of the statute suggests that recourse to Explanation can be had on specific addition of income of any-particular sum or disallowance of any particular deduction on account of expenses claimed against gross income. The language of Explanation uses two expressions as independent- any amount 'added' or disallowed'. It postulates addition of specific amount in the income as income not disclosed or a specific amount claimed as deductions has been disallowed. In making computation of total income where Swati Tomar vs. DCIT income returned has been rejected by rejecting the trading results, finding some discrepancy in the Books of Accounts and substituting the same by estimated figure, in strict sense, can neither be said to be addition of any amount in the returned income or disallowance of any amount as deductions claimed. The word 'amount', of which additions made or deductions disallowed also denotes reference to specific item of amount added or disallowed as deduction in contrast of substitution of altogether a new estimated sum in place of income returned. It is a case neither of addition or disallowance but a case of substitution.

(emphasis supplied)

(ii) From the case of judgement in the case of Shiv Lal Tak (supra), the following facts and findings are respectfully noted:-

(a) The books of accounts were rejected and addition was done on the basis of the acceptance of the explanation of the assessee during the assessment proceedings and not on the basis of rejection of the explanation of the assessee.

(b) The issue pertained to expenses of diesel pertaining to the trucks. The explanation of the assessee was not found to be false but the assessee accepted that he was not able to substantiate the running of truck with the documents.

".... it was not a case of rejecting the explanation furnished by the assessee, before making any additions in its income. Once no explanation was said to be tested and rejected by the Assessing Officer before converting, the question Of invoking Explanation I itself would not have arisen.....".

"Books of Accounts has been rejected, not by rejecting the explanation furnished by the assessee but by accepting the explanation furnished by the assessee that he does not have necessary material to verify each and every detail of the expenses and therefore, gross profit rate on the receipts has been taken by the assessee."

(c) It is held by the Honourable High Court that "Once Books of Accounts were rejected and income was assessed by applying gross profit rate which resulted in addition of income, through the provisions of Explanation I to sec. 271(1)(c) of the Act may be attracted for the purpose, of initiating penalty proceedings by raising presumption under the Explanation I but the same by itself could not take place of conclusive proof so as to discard the evidence and attending circumstances on that basis alone.". Thus there is no bar per se on the levy of the penalty when the addition has been done by rejecting the books of accounts otherwise in such a scenario even the initiation of the penalty proceedings was not required and not allowed and secondly that the penalty could be levied in such a scenario "but the same by itself could not take place of conclusive proof so as to discard the evidence and attending circumstances on that basis alone".

Swati Tomar vs. DCIT (d) The penalty can be levied even when the addition is made to the gross profit by rejection of the books of accounts. Some of the scenarios are as under (some further are discussed in next paras):-

"inference of lack of bona fides on the part of the assesseo"

"deliberate, false entry has been found to have been made in the Books of Accounts, which could detract from the bona fide"

(e) The above judgement is with reference to the specific facts of the case as it is held by the Honourable High Court that ".............we are of the opinion that the findings of the learned Tribunal, that the explanation furnished-by the assessee is not bona fide in the facts and circumstances of the present case, is not based on any material and is an inference which no reasonable person instructed in law would draw, particularly in cases where assessee-has agreed for applying of gross profit

Thus the crucial aspect is that whether the "explanation furnished-by the assessee is not bona fide in the facts and circumstances of the... case". If the explanation of the assessee is found to be not bona fide then the levy of penalty is justified even in the case of estimation of income by rejection of books of accounts.

(f) Where the "difference in the assessed income and returned income is not arising on account of any gross or wilful negligence on the part of assessee' still no penalty is leviable". Thus in the scenario where there is gross or wilful negligence on part of the assessee that the penalty is leviable.

(g) Where "any explanation is offered by such person (assessee) which is not accepted because the assessee has failed to substantiate the same, but such explanation is bona fide and all the facts relating to same and material to the computation of total income has been disclosed by him, the Explanation shall not apply". In such a scenario the penalty is not leviable. The assessee is required to show that the explanation is bona fide.

(h) Penalty is leviable "where explanation furnished by the assessee falls in the category of a fact 'disproved" and not where the "explanation so furnished falls in the category of fact 'not proved.

As per interpretation clause, a fact is said to be 'disproved' when after considering the tis matter before it, the court either believes that it does not exist or considers its non-existence so probable that a prudent man ought under the circumstances of the particular case, to act upon the supposition that it does not exist. In contrast, a fact is said to be 'proved when after considering the mailer before it, the court either believes it to exist or considers its existence so probable that a prudent man ought under the circumstances in particular case, to act upon the Swati Tomar vs. DCIT supposition that it exists. In juxta position, the expression 'not proved' denotes a fact is said to be 'not proved" when it is neither proved nor disproved.

(iii) Applicability of judgement in the case of Shiv Lal Tak (supra) to the facts of the case:-

In the present case firstly the backdated record was created by the appellant and the actual transaction value was concealed by the appellant and the correct details have not been disclosed given till date. During the investigation the appellant accepted that the back dating of the patta was done. However the appellant maintained the claim of the purchase value that the substantially and abnormally low value in comparison to the valuation stated by the Jaipur Development Authority on the lease papers and also in comparison to the valuation claimed by the appellant herself after a period of four years in the financial year 2016-17. The appellant indulged into investment of unaccounted money into the plots by backdating the documents to escape the scrutiny of the income tax. The explanation of the appellant was found to be hollow and false and was disproved. The factual contentions of the appellant were summarily rejected at the stage of learned CIT Appeal and at the stage of the appeal before the honourable Tribunal. Thus the case of the appellant falls in the scenario where the penalty is clearly leviable.

(iv) In the judgement of Commissioner of Income-tax v. Krishi Tyre Retreading & Rubber Industries [2014] 44 taxmann.com 9 (Rajasthan)/[2014] 360 ITR 580 (Rajasthan) [19-09-2013] it is held by the Hon'ble Rajasthan High Court as under:-

"9. On a perusal of the facts stated hereinbefore, it transpired that the addition has been sustained purely on estimate basis and, in our view, no positive fact or finding has been found so as to even make the said addition. It is, according to us, a pure guess work and, in our view, on such guess work or estimation, no penalty under section 271(1)(c) of the Act can be said to be leviable. For imposing penalty under section 271(1)(c) of the Act, the Assessing Officer has to clearly prove the conduct of the assessee, which in this case, has not been proved. Merely because the books of account of the assessee were rejected or estimated addition was made, in our view, no penalty is leviable. The assessee offered an explanation, which could not be termed as not bona fide. In the absence of any corroborative evidence to prove the charge of concealment, in our view, the penalty could not be imposed."

(v) From the case of judgement in the case of Krishi Tyre Retreading (supra), the following facts and findings are respectfully noted as under :-

(a) No positive fact or finding was found so as to even make the (said) addition.

(c) The assessee offered an explanation, which could not be termed as not bona fide. (d) Absence of any corroborative evidence to prove the charge of concealment.

The case of the appellant false in the scenario where the penalty is clearly leviable as per the facts of the case discussed in the earlier paragraphs.

(vi) Impact of judgement of Hon'ble Supreme Court in the case of Union of India v. Dharmendra Textiles Processors [2008] 306 ITR 277/174 Taxman 571 (SC):-

(below is quoted from the para 38 of the judgement in the case of Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka)/[2013] 218 Taxman 423 (Karnataka)/[2013] 359 ITR 565 (Karnataka)/[2013] 263 CTR 153 (Karnataka) [13-12-2012])

The Supreme Court in the case of Gujarat Travancore Agency v. CIT [1989] 44 Taxman 278, at page 55, paragraph 4 held as under:

"....It is sufficient for us to refer to section 271(1)(a), which provides that a penalty may be imposed if the Income-tax Officer is satisfied that any person has without reasonable cause failed to furnish the return of total income, and to section 276C which provides that if a person wilfully fails to furnish in due time the return of income required under section 139(1), he shall be punishable with rigorous imprisonment for a term which may extend to one year or with fine. It is clear that in the former case what is intended is a civil obligation while in the latter what is imposed is a criminal sentence. There can be no dispute that having regard to the provisions of section 276C, which speaks of wilful failure on the part of the defaulter and taking into consideration the nature of the penalty, which is punitive, no sentence can be Imposed under that provision unless the element of mens rea is established. In most cases of criminal liability, the intention of the Legislature is that the penalty should serve as a deterrent. The creation of an offence by statute proceeds on the assumption that society suffers injury by the act or omission of the defaulter and that a deterrent must be imposed to discourage the repetition of the offence. In the case of proceeding under Section 27(1)(a), however, it seems that the intention of the legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. In this connection the terms in which the penalty falls to be measured is significant. Unless there is something in the language of the statute indicating the need to establish the element of mens rea it is generally sufficient to prove that a default in complying with the statute has occurred. In our opinion, there is nothing in section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision......”

Swati Tomar vs. DCIT (below is quoted from the para 46 of the judgement in the case of Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka)/[2013] 218 Taxman 423 (Karnataka)/[2013] 359 ITR 565 (Karnataka)/[2013] 263 CTR 153 (Karnataka) [13-12-2012])

In a recent judgment the Supreme Court after referring to the aforesaid Judgments in the case of Reliance Petroproducts (P.) Ltd. (supra) held as under:

“9. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that it is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. Joint CIT [2007] 6 SCC 329, this Court explained the terms "concealment of income" and "furnishing inaccurate particulars". The court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as according to the Court, the word "inaccurate" signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (ii) of section 271(1)(c) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term "inaccurate particulars" was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the Assessing Officer must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff v. Joint CIT was upset in Union of India v. Dharmendra Textile Processors', after quoting from section 271 extensively and also considering section 271(1)(c), the court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was no necessity of mens rea. The court went on to hold that the objective behind the enactment of section 271(1)(c) read with Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under section 276C of the Act. The basic reason why decision in Dilip N. Shroff v. Joint CIT was overruled by this Court in Union of India v. Dharmendra Textile Processors, was that according to this Court the effect and difference between section 271(1)(c) and section 276C of the Act was lost sight of in the case of Dilip N. Sharoff v. Joint CIT However, it must be pointed out that in Union Swati Tomar vs. DCIT of India v. Dharmendra Textile Processors, no fault was found with the reasoning in the decision in Dilip N. Shroff v. Joint CIT, where the Court explained the meaning of the terms "conceal" and "inaccurate". It was only the ultimate inference in Dilip N. Shroff v. Joint CIT to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff v. Joint CIT was overruled.

10. We are not concerned in the present case with the mens rea. However, we have to only see as to whether in this case, as a matter of fact, the assessee has given inaccurate particulars. In Webster's Dictionary, the word "inaccurate" has been defined as:

"not accurate, not exact or correct; nor according to truth; erroneous; as an inaccurate statement, copy or transcript".

(below is quoted from the para 47 of the judgement in the case of Commissioner of Income-tax v. Manjunatha Cotton & Ginning Factory [2013] 35 taxmann.com 250 (Karnataka)/[2013] 218 Taxman 423 (Karnataka)/[2013] 359 ITR 565 (Karnataka)/[2013] 263 CTR 153 (Karnataka) [13-12-2012])

The object behind the enactment of section 271(1)(c) read with the Explanations indicates that the said section has been enacted to provide for a remedy for loss of revenue. The penalty under that provision is a civil liability. Wilful concealment is not an essential ingredient for attracting civil liability as is the case in the matter of prosecution under Section 276C of the Income-Tax Act. The word 'penalty' by its nature will not be determinative to conclude the nature of proceedings being criminal or quasi-criminal. That the intention of the legislature is to emphasise the fact of loss of revenue and to provide a remedy for such loss, although no doubt an element of coercion is present in the penalty. There is nothing in section 271(1)(a) which requires that mens rea must be proved before penalty can be levied under that provision. Mens rea is an essential or sine qua non for criminal offence. Mens rea is not essential element for imposing penalty for breach of civil obligations or liabilities. It was only on the point of mens rea that the judgment in Dilip N. Shroff (supra) was upset in Dharmendra Textile Processors (supra). It was only the ultimate inference in Dilip N. Shroff (supra) to the effect that mens rea was an essential ingredient for the penalty under section 271(1)(c) that the decision in Dilip N. Shroff (supra) was overruled. For the applicability of Section 271(1)(c) conditions stated therein must exist. Therefore, it is obvious that it must be shown that the conditions under section 271(1)(c) exist before the penalty is imposed.

Swati Tomar vs. DCIT (vii) In view of the judgement of honourable Supreme Court in the case of Dharmendra Textiles Processors (supra), the requirement of "mens rea" is no longer there and the judgement in the case of Dilip N. Shroff (supra) stands overruled in this regard.

Some of the definitions of 'mens-rea' are as under:-

The intention or knowledge of wrongdoing that constitutes part of a crime, as opposed to the action or conduct of the accused.

Mens rea is the state of mind statutorily required in order to convict a particular defendant of a particular crime.

Crimes require a culpable mental state called "mens rea," which is Latin for a "guilty mind." "Mens rea" refers to the defendant's state of mind and criminal intent when they commit a criminal act.

Mens rea, in Anglo-American law, criminal intent or evil mind. In general, the definition of a criminal offense involves not only an act or omission and its consequences but also the accompanying mental state of the actor. All criminal systems require an element of criminal intent for most crimes.

The intent to commit a crime is officially known as "mens rea," which is Latin for "guilty mind."

Mens rea is a legal term that generally refers to the guilty mental state, the lack of which negates the crime situation on any given occasion. It's one of the most important aspects of criminal liability. Only when an act is done intentionally that is prohibited by law is it considered a criminal offence. The intent, which is the driving force behind the illegal conduct, is referred to as mens rea. Only when an act is committed with a guilty conscience does it become criminal. In most cases, a crime is not committed if the individual committing the act has an innocent mind, Before a person can be held criminally accountable, they must be in a blameworthy state of mind.

In view of the above legal position, even if the assessee furnishes the inaccurate particulars of income or concealed the particulars of income without deliberate intention in his mind, the penalty under section 271(1)(c) of the Act is leviable if the other conditions of this provision are met. THUS THE STATE OF MIND OF THE ASSESSEE WHETHER THE ACT WAS INTENTIONAL OR NOT IS NOT RELEVANT AND WHAT IS RELEVANT IS THE ACTUAL CONDUCT/ACTION ONLY.

Thus some of the the ratio and principles of the judgement of Shiv Lal Tak (supra) stands altered in view of the judgement of honourable Supreme Court in the case of Dharmendra Textiles Processors (supra) whereby the judgement in the case of (viii) IMPACT OF "REASONABLE CLAUSE" PROVISIONS IN SECTION 273B OF THE ACT:-

In full bench judgment of the Hon'ble Patna High Court in AIR 1996 Patna 58 (Commissioner of Wealth-tax v. Jagdish Prasad Choudhary), in Paragraph 31, it was inter alia held as under:

"Therefore, in the context of penalty provision, the word, 'reasonable cause would mean a cause which beyond the control of the as-sessee. 'Reasonable cause' obviously means a cause which prevents a reasonable man of an ordinary prudence acting under normal circumstances, without negligence or inaction or want of bona fide from furnishing the return in time."

In [2002] 255 ITR 258 (SC) Assistant Director of Inspection v. Kum. A.B. Shanthi, the Hon'ble Supreme Court has held as under:-

In [1989] 47 TAXMAN 290 (MAD.) K.R.M.V. Ponnuswamy Nadar Sons (Firm) v. Union of India, Hon'ble Madras High Court observed as under:-

…………….reasonable cause should be shown by the assessee before imposing punishment for violations under section 269SS and proceeding to punish him under section 276DD. In other words, the assessee will have to show that there was a reasonable cause for such failure……..

In view of the above judgements w.r.t. The phrase pertaining to "reasonable clause" in section 273B of the Act, the onus to prove that the reasonable cause existed and because of that the penalty should not be levied - is solely on the assessee.

(ix) In the case of Income-tax Officer, Ward 2(1) v. Bhansali Trading Corporation [2016] 69 taxmann.com 60 (Jaipur - Trib.)/[2015] 42 ITR(T) 254 (Jaipur - Trib.) [05-06-2015], the honourable Tribunal after considering the judgement of honourable High Court in the case of Shiv Lal Tak (supra) upheld the levy of the penalty. The relevant para is as under as under:-

"6. We have heard the rival contentions of both the parties and perused the material available on the record. The addition made by the Assessing Officer was specific on account of unverifiable purchases on which G.P. @ @ 25% was applied and added in the income. However, the same was reduced by the Id CIT (A) and applied different G.P. rate. However, the additions were specific. The assessee has not been able to produce these parties for verification and also summons were returned back to the officer unserved. This Bench recently decided this issue in detail in the case of Anju Kumar Varshney v. ITO [IT Appeal No. 87/JP/2012, order dated 22/10/2014] and gave detail findings on unverifiable purchases in number of cases. The department has been able to prove that in gems and jewellery business, some of the parties were giving accommodation entry and some of them accepting the accommodation bill to reduce the profit. The parties names figured in this case also were similar to those cases, therefore, we hold that the addition made by the Assessing Officer was specific and assessee had concealed the income and furnished inaccurate particulars of income. Further the assessee's explanation is not bonafide. The case laws referred by the assessee are not squarely applicable. In this case, the addition was specific with reference to unverifiable purchases. Therefore, we reverse the order of the Id CIT (A)". In view of the above discussion is a fit case for the levy of the penalty as has been levied in the penalty order under appeal and accordingly this ground of appeal of the appellant is hereby dismissed.

5. As the assessee did not find any favour, from the appeal filed before the ld. CIT(A), the assessee has preferred the present appeal before this Tribunal on the ground as reproduced hereinabove. To support the various grounds raised by the ld. AR of the assessee, ld. AR of the assessee filed the written submissions which is reproduced herein below:

Two unapproved society plots of land (plot No. B-142 and B-143) purchased by assessee in the F.Y. 2012-13, which, after conversion in urban plots through Jaipur Development Authority (JDA) were got registered in the office of Sub- registrar, who, for the purpose of charging stamp duty, evaluated them at Rs.6,86,686/- each (though sold at Rs.3,75,000 each on 06.10.2016 - evaluated value on sale was Rs.3,18,825/- each plot). Search a seizure operation took place in this case with others of group on 30th October 2014 in which registered Swati Tomar vs. DCIT deeds of both the plots were found. Ld. AO treated the evaluated price of both the plots as assessee’s undisclosed investments. Whereas both the plots were pre-owned and appearing balance sheet as on 31.03.2013 (P.B. page 3 & 4). Return of income was submitted before search on 4th June 2014 (P.B. page 5).Quantum appeal before both the Appellate authorities was dismissed but was admitted under sec. 260A of I.T. Act by the Hon’ble Rajasthan High Court. GROUNDS OF APPEAL: Ground No. (1). Ld. CIT(A) was not justified in sustaining penalty of Rs.4,12,330/- under sec. 271(1)(c) of I.T. Act as against levy of penalty under sec. 271AAB of I.T. Act in search case which is based on higher value adopted by Sub-Registrar for registration of plots of land on conversion of pre-owned plots of land by assessee, already appearing in her Balance sheet when purchased as unapproved plots of land. As per law applicable for search initiated under section 132 of I.T. Act during period from 1st July 2012 but before 15th Dec. 2016, the penalty could only be levied under section 271AAB of Income tax Act and not under section 271(1)(c) of Act. In Assessee’s case, search was conducted on 30th October 2014, whereas penalty was initiated and levied under sec. 271(1)(c)of I.T. Act but not under sec. 271AAB of Act, applicable for search case in above referred period (Pr. CIT Vs. Jai Maa Jagdamba Flour (P) Ltd. (2023) 333 CTR (Jharkhand)317 (P.B. page 6 to 13 ). Ground No. (2): Without prejudice to ground No. (1) ld. CIT(A) has erred in sustaining the penalty under section 271(1)(c) of Act for the value adopted by sub-Registrar on 14th March 2014 (A.Y. 2014-15) in registration after conversion of pre-owned unapproved society plot to urban plots without any allegation of any on-money payment. Penalty u/s. 271(1)(c)was levied on pre-owned plots of land in name of assessee, which, after conversion through JDA were got registered in the office of Sub- registrar in her name (P.B. page No.14 & 15 ) who had fixed up higher circle rates of Rs.6,86,686/- each for charging stamp duty, though sold at lower circle rates in 2016. No evidence for any money or on-money payment was found or noticed for the same plots of land. Ground No. (3) Ld. CIT (A) has acted against the provisions of law by avoiding different and binding judicial pronouncements brought to his notice, including levy of penalty based on issuing a defective show-cause notice and placing reliance on unrelated and irrelevant facts/decisions.

Without prejudice to both the grounds of appeal referred hereinabove, ld. AO issued a show-cause notice for penalty u/s. 271(1)(c) of Act with order under section 143(3) r.w.s. 153A of I.T. Act which reads as under (P.B. page No16): You are liable for penalty for concealment of particulars of income/furnished inaccurate particulars of income.” Non-striking of irrelevant clause in the penalty notice shows that charge made against the assessee under section 271(1)(c)) is not firm and shows non- application of mind of the Assessing Officer. There was thus ambiguity in the mind of the ld. AO for the nature of default committed by the Assessee for the proposed penalty u/s. 271(1)(c) of I.T. Act. It is settled law that where Assessing Officer himself was not sure about nature of default committed by the assessee, no penalty under section 271(1) of IT Act could be levied. Hon’ble Supreme Court in recent case of Pr.CIT Vs. Unitech Reliable Projects Pvt. Ltd (2024) 469 ITR 394 (SC) (P.B. Page No. 17), on identical issue, had dismissed SLP of Department. The surprising part of this appeal is that ld. CIT(A) did not agree to any of the decisions referred to by assessee (P.B. page 18 to 31) but based his decision on different and/or unrelated cases.

6. To support the contention so raised in the written submission reliance was placed on the following evidence / records / decisions:

S. No. Particulars/Short description P. B. Page 1 Written synopsis in support of grounds of appeal 1 & 2 2. Balance sheet as on 31.03.2023 (disclosing both plots) 3 &4 3. Acknowledgement for return of income for A.Y 2013-14 5 4. Decision in case of Jai Maa Jagdamba Flour (P.) Ltd. 6 to 13 5. Allotment of pre-owned converted plots to assessee 14 & 15 7. Show-cause notice dated 14.12.2016 u/s 271(1)(c) 16. Decision of Hon’ble Supreme Court-(2024) 469 ITR 394 (SC) 17 8. Submission dated 25.11.2022 to ld. CIT(A)-decisions ignored 18 to 31 Case laws relied upon:

S.No. Particulars/Short description P.B. Page 1. Sale deed of plot registered with Sub-registrar (on 10.10.2016) 1 to 5 Sale price 3,75,000/- Evaluated price 3,18,825/- 2. Order dt 20.08.2019 of this Hon’ble ITAT in assessee’s case 6 & 26 3. Hon’ble Rajasthan High Court – admitting assessee’s appeal 27 to 29 4. Jaipur Bench of ITAT in case of Chand Mal Kumawat Vs.ITO 30 to 42 5. Jaipur Bench of ITAT in case of Gulam Farooq Ansari Vs.ITO 43 to 53 6. Madras H.C. in case of Babuji Jacob Vs. ITO 54 to 67 7. Jaipur Bench of ITAT in case of Tinku Kumar Mittal Vs. ITO 68 to 70 8. Karnataka H.C. in case of Kshems Geo Holdings P. Ltd. 71 to 76 9. Delhi H.C. in case of Ansal Properties And Infrastructure 77 to 81 10. Supreme Court in case of Unitech Reliable Projects Pvt. Ltd 82 & 83

So far as the merits of the dispute he relied upon the written submission so filed. and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A).

9. We have heard the rival contentions and perused the material placed on record. First we take up the additional ground raised by the assessee wherein the assessee contended that ld. CIT(A) was not justified in sustaining penalty of Rs.4,12,330/- under sec. 271(1)(c) of the Act as against levy of penalty under sec. 271AAB of I.T. Act in search case which based on higher value adopted by Sub-Registrar for registration of plots of land on conversion of pre-owned plots of land by assessee, already appearing in her Balance sheet when purchased as unapproved plots of land. Record reveals that in this case search was conducted on 30.10.2014 and the law has been amended w.e.f. 01.07.2012 that when there has been a search the penalty is leviable as per provision of section 271AAB of the Act which read as under:

Penalty where search has been initiated. 271AAB. (1) The Assessing Officer or the Commissioner (Appeals) may, not with standing anything contained in any other provisions of this Act, direct that, in a case where search has been initiated under section 132 on or after the 1st day of July, 2012 but before the date on which the Taxation Laws (Second Amendment) Bill, 2016 receives the assent of the President, the assessee shall pay by way of penalty, in addition to tax, if any, payable by him,— (a) a sum computed at the rate of ten per cent of the undisclosed income of the specified previous year, if such assessee— (i) in the course of the search, in a statement under sub- section (4) of section 132, admits the undisclosed income and specifies the manner in which such income has been derived; (ii) substantiates the manner in which the undisclosed income was derived; and (iii) on or before the specified date— (A) pays the tax, together with interest, if any, in respect of the undisclosed income; and (B) furnishes the return of income for the specified previous year declaring such undisclosed income therein; (b) a sum computed at the rate of twenty per cent of the undisclosed income of the specified previous year, if such assessee— (i) in the course of the search, in a statement under sub-section (4) of section 132, does not admit the undisclosed income; and (ii) on or before the specified date— (A) declares such income in the return of income furnished for the specified previous year; and (B) pays the tax, together with interest, if any, in respect of the undisclosed income; (c) a sum computed at the rate of sixty per cent of the undisclosed income of the specified previous year, if it is not covered by the provisions of clauses (a) and (b).

Thus, when the assessment has completed pursuant to search u/s. 153A of the Act penalty cannot be levied u/s. 271(1)(c) of the Act. We get strength of this view from the decision of Hon’ble Jharkhand High Court in the case of PCIT Vs. Jai Maa Jagdamba Flour (P) Ltd. [ 150 taxmann.com 26 (Jharkhand) ] wherein the Hon’ble High Court held as under :

10. In view of the aforesaid discussions, both the questions of law are decided against the revenue. Consequently, the instant appeal is dismissed being devoid of merit.

Respectfully following the above decision and the provision of the law we considered the additional ground raised by the assessee. Since we have allowed the appeal of the assessee on technical ground, the grounds raised on the merits of the disputed becomes academic.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 30/06/2025.

Swati Tomar vs. DCIT Sd/- Sd/- ¼ Mk0 ,l- lhrky{eh ½ ¼ jkBksM deys'k t;UrHkkbZ ½ (Dr. S. Seethalakshmi) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 30/06/2025 *Ganesh Kumar, Sr. PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant- Swati Tomar, Jaipur izR;FkhZ@ The Respondent- DCIT, Central Circle-01, Jaipur 2. vk;dj vk;qDr@ The ld CIT 3. 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत xkMZ QkbZy@ Guard File (ITA No. 1345/JP/2024) 6. vkns'kkuqlkj@ By order,

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