DIESH KUMAR GOYAL,KOTA vs. ITO, WARD-1(1), KOTA, KOTA

fu/kZkj.k o"kZ@Assessment Years : 2010-11 cuke Dinesh Kumar Goyal The ITO, C-23, Deiwala Paper Industries, Vs. Ward 1(1), Chambal Industrial Area, Kota Kota. LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABYPG2672F vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksjls@Assesseeby : Sh. Rajendra Sisodia, Adv. jktLo dh vksjls@Revenue b : Sh. Gautam Singh Choudhary, JCIT lquokbZ dh rkjh[k@Date of Hearing : 03/04/2025 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 22/05/2025 vkns'k@ORDER PER: DR. S. SEETHALAKSHMI, J.M.

This appeal is filed by the assessee aggrieved from the order of the Ld. CIT(A), National Faceless Appeal Centre, Delhi dated 10.07.2024 [hereinafter referred as “CIT(A)/NFAC”] for the assessment year 2010- 11, which in turn arise from the order dated 20.03.2013 passed under section 143(3) of the Income Tax Act, [hereinafter referred as “Act” ] by the AO.

2. The assessee has raised following grounds:

– Sh. Dinesh Kumar Goyal, Kota

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.

2. 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 furnishing inaccurate particulars of income, where as penalty was levied for concealment of particulars of income.

3. The Ld. CIT(A) erred in confirming the penalty order passed by the AO, on trading additions of Rs. 2,06,328/- sustained in Quantum appeal. Thus penalty imposed to the extent is liable to be quashed.

4. The Ld. CIT(A) erred in confirming the penalty order passed by the AO, on deemed income u/s 68 of the Income Tax Act 1961 of Rs.4,37,000/- notwithstanding the fact that mere failure to substantiate the explanation is not enough to warrant penalty. Thus the penalty imposed to the extent is liable to be quashed.

5. The Ld. CIT(A) erred in confirming the penalty order passed by the AO, on addition of Electricity expenses Rs. 25,342/- u/s 69 C of the Income Tax Act 1961 .Thus the penalty imposed to the extent is liable to be quashed.

6. The appellant craves the liberty to raise additional ground and to modify, amend the ground of appeal at the time of hearing with the permission.”

3. That the AO thereafter, imposed penalty u/s 271(1)(c) on the additions sustained by the Ld.CIT(A).

4. The appeal against the penalty order was preferred by the assessee which was confirmed by the CIT(A) and the penalty order was received by the assessee on 28.08.2024.

7. After the completion of tax audit, the CA called me and I provided him a copy of penalty order and the appellate order.

9. I tried hard to trace my records but could not retrieve the same.

12. That soon thereafter, the appeal was filed.

(Dinesh Kumar Goyal) I, Dinesh Kumar Goyal, further declare that the above statement is true and correct to the best of my knowledge and belief and nothing material has been concealed or falsely stated. (Dinesh Kumar Goyal) Signed at Kota, this 08th day of February, 2025.”

5. Succinctly, the facts as culled out from the records is that return declaring an income of Rs. 2,80,750/- was e-filed by the assessee on 29.09.2010 and assessment u/s 143(3) of the I.T. Act was completed on 20.03.2013 assessing income of Rs. 22,51,930/- Penalty proceedings u/s 271(1)(c) of the I.T. Act were initiated along with the assessment order dated 29.09.2010, for filing inaccurate particulars of income and concealing the income. The assessee filed appeal against the assessment order and the ld.CIT(A) provided partial relief to the assessee. Consequent to the order passed by CIT(A) in the quantum proceedings, the AO levied penalty on the addition sustained by the ld.CIT(A).

6. Aggrieved from the order of Assessing Officer, the assessee preferred an appeal before the ld. CIT(A)/NFAC. Apropos to the grounds so raised the ld. CIT(A)/NFAC observed that in spite of as many as four notices issued to the assessee, he remained non-compliant and did not file any submission in support of the grounds of appeal

raised by him. The Ld.CIT(A) further held that AO has levied penalty taking strength from the Explanation 1 below section 271(1)(c). The Ld.CIT(A) finally referring to the decisions of Hon’ble Kerala High Court in the case of K.P.Madhusudan(2002)125 taxmann 265 and Hon’ble Calcutta High 4 Sh. Dinesh Kumar Goyal, Kota Court in the case of Bijay iron Stores [2001] 252 ITR 408, dismissed the appeal of the assessee.

7. Now the assessee is in appeal before the ITAT. While pleading on behalf of the assessee, the ld. AR has made the following ground wise submissions-  Ground-1The 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 It 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 as per PAN card i.e. on mdsonikota@gmail.com and not on the registered primary email id i.e.deiwalag04@gmail.com The communication regarding issue of hearing notices was not sent either on the email id mentioned in Form-35 filed by the appellant, i.e. deiwalag04@gmail.com or on the email address given in the ITR filed for the relevant year, i.e. carajendra@rediffmail.com Even in the ITBA profile, the primary email id given by the assessee is deiwalag04@gmail.com All the notices of hearing were sent to the secondary email id mentioned in ITBA profile, which happened to be of the person through whom the account of the assessee was got registered. 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 Reliance is placed on Notification No.2/2016 dated 03.02.2016, issued by CBDT for the above proposition- 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 – (i) 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 return 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.

Sh. Dinesh Kumar Goyal, Kota Clause 6(i) 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. 1.3 In view of the above instructions of CBDT, the hearing notices were required to be sent on (i) email address available in the income-tax return furnished by the addressee to which the communication relates - ITR of AY 2010-11, i.e.carajendra@rediffmail.com, or (ii) the email address available in the last income-tax return furnished by the addressee – ITR of AY 2022-23, i.e.deiwalag04@gmail.com, 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- Not applicable, or (iv) any email address made available by the addressee to the income tax authority or any person authorized by such income tax authority –email id mentioned in For-35, i.e.deiwalag04@gmail.com But the impugned notices were not sent on any of these email ids, 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 (Bom)(HC) 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 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] 1.4The 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 Sh. Dinesh Kumar Goyal, Kota communication to be "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 abforms etc. The principles of natural justice are inherent in the income-tax provisions and the same are required to be necessarily followed. 1.5 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 vitiatedon 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 (ii) i.e. 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.

1.7 In view of the above facts and judicial decisions, there being no valid service of notices issued u/s 250, the consequent order passed in appeal lacks jurisdiction and there being a jurisdictional error, the appellate order may kindly be quashed. Ground-2The 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 issuedfor furnishing inaccurate particulars of income, where as penalty was leviedfor concealment of particulars of income.

2.1 At the time of passing the assessment order, the AO after discussing the additions made by him, stated after each addition - Penalty proceedings u/s 271(1)(c) for concealing the income are initiated separately on this issue. After the decision of appeal in the Quantum proceedings, 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 15.01.2020, stating Whereas in the course of proceedings before me for Assessment Year 2010-11, it appears to me that you have furnished inaccurate particulars of income, you are hereby requested …………….. In the Penalty order passed by him, penalty has been levied for concealment of particulars of income. The operative para of the order reads as follows – In accordance with the above facts, the assessee is in default in the meaning of section 271(1)(c) of the I.T.Act, 1961 for concealment of particulars of income.

2.2 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 271(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. 2.3 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) were to be initiated since assessee had furnished inaccurate particulars of its income - Subsequently, notice under section 274 was issued wherein Assessing Officer failed to indicate as to 8 Sh. Dinesh Kumar Goyal, Kota whether penalty was initiated for concealment of particulars or furnishing inaccurate particulars -Further, while passing penalty order u/s 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 concealment of particulars or furnishing inaccurate particulars, Tribunal was justified in deleting impugned penalty imposed upon assessee - Held, yes [Para 11] [In favour of assessee] 2.4 Moreover, in the penalty order, though the submission of the assesse has been reproduced verbatim by the AO, 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 at the time of assessment, despite several opportunities, the assessee could not discharge the onus and explain his claim. The AO has made a bald assertion that the assessee is guilty. There is obviously an internal inconsistency in the penalty order. The AO begins by saying that on analysis of the facts of the case, it becomes crystal clear that it is a case of concealmentof income as well as furnishing of of inaccurate particulars of income. The AO while computing the penalty that he imposed on the assessee, goes on to say that the assessee is in default for concealment of particulars of income. 2.5 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 merits, 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, by observing – I have gone through the order of the Assessing officer, and the various legal references cited by both the Assessing officer and the appellant during the time of assessment proceedings. Asessing officer has levied penalty taking strength from Explanation 1 below section 271(1)(c). This shows that while confirming the penalty, the Ld.CIT(A) has neither taken note of the observations made in the appellate order in quantum proceedings, nor the default mentioned in the SCN issued for levy of penalty nor of the submission filed by the assessee during the penalty proceedings (which have also been reproduced by the AO in his penalty order). He has, thus, failed to consider the facts which were before him and were evident but was wise enough to read between the lines the penalty order passed by the AO, when out of thin air, he has deduced that penalty has been levied by the AO taking strength from Explanation 1 below section 271(1)(c), whereas the AO has made no such mention in the penalty order passed by him. 2.5 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 reiterated 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. 9 Sh. Dinesh Kumar Goyal, Kota 2.6 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 u/s 271(1)(c) were initiated for furnishing inaccurate particulars of income but, in penalty order u/s 271(1)(c) AO alleged that assessee had concealed its income, orders imposing penalty were invalid and liable to be cancelled [In favor of assessee] 2.7 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.  Ground-3The Ld. CIT(A) erred in confirming the penalty order passed by the AO, on trading additions of Rs. 2,06,328/- sustained in Quantum appeal. Thus, penalty imposed to the extent is liable to be quashed. 3.1 While completing the assessment, the AO found that the G.P.rate shown by the assessee for the year was lower as compared to the G.P.rate of the preceding two years. The AO asked the reasons for the same and the assessee attributed the reasons for the downfall in the rate of profits. But the Ld.AO dissatisfied by the reasons attributed by the assessee, rejected the book results and applied a G.P.rate of 23.86% thereby made a trading addition of Rs.9,85,984/- TheLd.CIT(A) reduced the trading addition to Rs.2,06,328/- 3.2 There is no doubt that the AO pointed out certain discrepancies in the course of assessment proceedings However, such discrepancies by itself ipso facto do not lead to the conclusion that the assessee has concealed the income. Ultimately, the Assessing Officer resorted to estimated addition only. He could not point out any specific item of any addition with any conclusive evidence. Even the addition made by the Assessing Officer on estimated basis was substantially reduced by the Commissioner of Income-tax (Appeals) after considering the various facts and figures and circumstances of the case. The said action of the CIT(A) has become final, as the assessee or the Department, did not prefer any further appeal. Resultantly, the income of Rs.2,06,328/- is on the basis of estimated profit ratio only. It is not on account of any specific item of addition or disallowance. Such an addition made on the basis of guess work cannot be subject matter of penalty for concealment of income. Penalty being a quasi-criminal proceeding there is a duty cast on the Assessing Officer to establish the guilt of the assessee in concealing the income or furnishing of inaccurate particulars of income. 3.3 In the case of Commissioner of Income-tax vs. Aero Traders (P.) Ltd., (2010) 322 ITR 316 (Delhi), the Hon’ble Delhi High Court heldthatWhere profit was estimated after rejection of books and in quantum appeal substantial relief was given by Commissioner (Appeals) and Tribunal, imposition of penalty for furnishing inaccurate particulars of income was not justified. In this case, the Assessing Officer, observing that the profit was estimated after rejection of the books of account due to certain discrepancies, imposed a penalty on the assessee, on the ground that it was a clear case of furnishing of inaccurate particulars of income. The Tribunal held that as substantial quantum relief was given by the Commissioner (Appeals) which had been confirmed by the Tribunal and the balance pertained to estimated rate of profit applied on the turnover of the Sh. Dinesh Kumar Goyal, Kota assessee, it did not amount to concealment or furnishing of inaccurate particulars. The Tribunal, therefore, deleted the penalty. Held that, the finding arrived at by the Tribunal did not warrant interference from this Court as it was purely a finding of fact. No perversity had been pointed in such a finding. Consequently, no substantial question of law arose for consideration. 3.4 In a similar case recently decided by ITAT, Pune in the case of Rajendra Bahusaheb Deshmukh vs. ITO, [2023] 157 taxmann.com 746 (Pune - Trib.) the Hon’ble Tribunal ruled that- An addition made on basis of estimation cannot provide foundation for under-reported income for purpose of imposition of penalty under section 270A, therefore, where addition was made on account of estimation of GP, penalty levied under section 270A was not maintainable. 3.5 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.  Ground-4 & 5 The Ld. CIT(A) erred in confirming the penalty order passed by the AO, on deemed income u/s 68 of the Income Tax Act 1961 of Rs.4,37,000/- notwithstanding the fact that mere failure to substantiate the explanation is not enough to warrant penalty. Thus the penalty imposed to the extent is liable to be quashed.The Ld. CIT(A) erred in confirming the penalty order passed by the AO, on addition of Electricity expenses Rs. 25,342/- u/s 69 C of the Income Tax Act 1961 .Thus the penalty imposed to the extent is liable to be quashed.

4.1 In the instant case, in response to the notice issued by the Income-tax Officer for addition of Rs. 9,32,500/- theassessee replied that he borrowed the same in cash from different creditors. When the assessee was asked to substantiate this claim, the assessee produced confirmations from 23 of these cash creditors. He was asked by the AO to secure those creditors for examination. Despite the best efforts of the assessee, he could not secure the creditors as witnesses to substantiate his claim before the Income-tax Officer. The AO issued summons to all such creditors, but no creditor made compliance of the summons. Accordingly, the AO made addition of Rs.9,32,500/- holding the same to be income from undisclosed sources u/s 68. Similarly, in respect of payment of electrical charges of Rs.25,342/- revealed from a certificate issued by AEN, HPSEB, the assessee clearly stated that the same did not pertain to him. But the AO made the addition of the impugned amount holding it to be unexplained expenditure u/s 69C. 4.2 On appeal, the Ld.CIT(A) held cash creditors to the extent of Rs.4,37,000/- as unsubstantiated, while in respect of the balance of Rs.4,95,500/-, he deleted the addition made by the AO. In respect of addition made by the AO u/s 69C, he confirmed the addition for want of supporting evidence. Under these circumstances it cannot be said that the explanation of the assessee for non- inclusion of an income of Rs.4,37,000/- and Rs.25,342/-in his return of income is not bona fide. The explanation offered by the assessee is available on record. Bona fide failure on the part of the assessee in not substantiating his claim is also available on record. The AO, while passing the order of penalty u/s 271(1)(c) of the Act, has not considered the available explanation of the assessee 11 Sh. Dinesh Kumar Goyal, Kota and whether the explanation so offered is bona fide or not. He has levied the penalty u/s 271(1)(c) of the Income Tax Act, 1961, simply on the strength that the AO had made the additions which the assessee failed to explain and which have been confirmed by CIT(A). 4.3 Section 271(1)(c) of the Act authorizes the AO or the Commissioner of Income- tax (Appeals) to levy penalty in case of concealment of particulars of income or for furnishing inaccurate particulars of income. Explanation 1 appended to section 271(1)(c) of the Act specifies as to when the assessee fails to offer an explanation or the explanation so offered is found to be false or the explanation is not proved and when the explanation is not bona fide to treat the same as deemed concealment of income. 4.4 Explanation 1(B) to section 271(1)(c) of the Act is relevant for the purpose of this case and the same reads as hereunder : "(B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him." 4.5 A reading of sections 271 and 271(1)(c) and the Explanation appended thereto manifestly makes it clear that every addition of income by the Income-tax Officer will not automatically attract levy of penalty. It is clear from Explanation 1(B) to section 271(1)(c) of the Act that while computing the total income of an assessee, if the assessee fails to prove that such explanation is bona fide then there will be a deemed concealment by the assessee. 4.6 The Karnataka High Court in the case of CIT vs.M.M.Gujamgadi[2007] 290 ITR 168 approved the order of the Tribunal in setting aside the penalty proceedings. The head note of the judgement reads as follows - Section 271(1)(c), read with section 68, of the Income-tax Act, 1961 - Penalty - For concealment of income - Assessing Officer found a sum of Rs. 2,01,000/- in books of account of assessee - Assessing Officer issued notice to assessee asking him to explain source of said amount - Assessee replied that he borrowed same from different creditors - However, despite best efforts, assessee could not secure creditors as witnesses to substantiate his claim - Having no other alternative, assessee voluntarily offered to treat said amount as cash credit - On basis of submission of assessee, Assessing Officer passed an assessment order adding said amount to total income and on that amount assessee paid taxes - Subsequently, Assessing Officer imposed penalty u/s 271(1)(c) treating aforesaid amount as concealed income of assessee - Tribunal, however, set aside penalty order - Whether it could be said that explanation of assessee for non-inclusion of amount in question in his return of income was bona fide - Held, yes - Whether, therefore, order passed by Tribunal setting aside penalty proceedings was just and proper – Held, yes. 4.7 The assessee relies on the decision of Hon’ble Gujarat High Court in the case of Commissioner of Income Tax vs. Baroda Tin Works [1996] 221 ITR 661(GUJ) wherein it has been held thatthe law is well settled that though the finding recorded in the assessment orders are relevant evidence to support the allegation of concealment, but these cannot be the foundation for holding the assessee guilty Sh. Dinesh Kumar Goyal, Kota of concealment. The fiction created u/ss 68, 69, 69A, 69B and 69C by itself cannot be extended to penalty proceedings to raise the presumption about concealment of such income. 4.8 The cash credit amounts and expenditure on electricity had been duly declared by the appellant in the books of account and hence, already disclosed and therefore, the Explanation 1 to Sec 271 will not apply to the appellant. The concealment must be deliberate and there being no proof of such deliberate concealment, the imposition of penalty was not warranted. There was no deliberate intention on the part of the appellant also to furnish inaccurate particulars of income. The AO in the penalty order has given no such finding. As a matter of fact, these are claims of expenditure which could not be sustained for whatsoever reasons. In the case of CIT vs. Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC) relied upon by the appellant, the hon'ble Supreme Court has held that section 271(1)(c) penalty cannot be imposed even for making unsustainable claims of expenses. Relying upon the said case law, I find the levy of penalty on this issue to be sustainable, hence the same is deleted. Therefore, the ground of appeal is allowed." Therefore, the imposition of penalty on these two issues is erroneous and uncalled for. 4.9 The ITAT, Mumbai Bench, in ACIT vs. Bhushan Kamalnayan Vora [2018] 99 taxmann.com 373 (Mumbai) placing reliance on the decision of the Hon'ble High Court of Gujarat in the case of CIT vs. Baroda Tin Works (supra) held that Penalty under section 271(1)(c) cannot be levied on deemed income under section 69. 4.10 In view of the above facts and case laws, the penalty imposed by the AO and confirmed by the Ld.CIT(A) may kindly be deleted.”

8. Per contra, ld. DR heavily relied on the contention so recorded in the orders of the lower authorities and argued that the levy of the penalty is fully justified and the order passed by CIT(A) needs no intervention.

10. As regards Ground No.1, we find that all the notices of hearing were sent on the email id mdsonikota@gmail.com , which happens to be the secondary email id provided by the assessee on the ITBA portal. In Sh. Dinesh Kumar Goyal, Kota Form-35 filed by the assessee, he had duly provided the email id deiwalag04@gmail.com, on which he intended to receive the notices of hearing, but the notices of hearing were not sent on the said email id. It is not in dispute that the notices were available on the ITBA portal. After the appeal having been filed in June, 2020, almost in every year starting from 2021 to 2024, hearing notices were issued. It is expected of the appellant to be watchful and vigilant as regards the status of the appeal filed by him. During this period of four years, the appellant undoubtedly would have logged in into the e-filing portal several times for filing the ITRs and audit reports. It was at least expected of him to check the pending e-proceedings, which he failed to do. Further, we find that the appeal of the assessee has not been dismissed by the CIT(A) in limine for non-prosecution, but has properly adjudicated upon as required u/s 250(6). We are not in agreement with the argument put forth by the appellant that the order passed by the Ld.CIT(A) lacked jurisdiction. The case laws cited by the appellant are with respect to assumption of jurisdiction u/s 147 on account of non-service of notices, which is not the case here. We may state that there has been violation of the Principles of natural justice as the appellant did not get proper opportunity to place his cards in the absence of communication of notices, but that, in itself, will not impinge upon the validity of the appellate order. Although, the Ld.AR, using his persuasive skills, sought 14 Sh. Dinesh Kumar Goyal, Kota to get the order of CIT(A) quashed on the jurisdictional issue, we are not inclined to entertain the appeal on this issue. Therefore, the above ground of appeal

by the assessee does not succeed.

11. Coming to Ground No.2, we find that in the assessment order dated 20.03.2013, after making addition on all the three issues, i.e. (i) addition on account of low G.P. (ii) addition u/s 68 and (iii) addition u/s 69C of the Income Tax Act, 1961, the AO has stated – “Penalty proceedings u/s 271(1)(c) for concealing the income are initiated separately on this issue”. At the conclusion of the assessment order, he has stated – “Penalty notice is issued for filing inaccurate particulars of income and concealing the income”. Then, after the decision by the CIT(A) in the quantum proceedings, the AO vide notice u/s 274 r.w.s. 271(1)(c) dated 15.01.2020 has stated –“Whereas in the course of proceedings before me for the Assessment year 2010-11, it appears to me that you have furnished inaccurate particulars of income”. Finally, in the penalty order dated 12.03.2020, he has held – “In accordance with the above facts, the assessee is in default within the meaning of section 271(1)(c) of the I.T. Act, 1961 for concealment of particulars of income”. We may note, that even the assessment order dated 20.03.2013, whereby penalty proceedings were initiated, did not indicate as to which limb of Section 271(1)(c) was being triggered qua the assessee. This is evident from the following observation made by the AO: "Penalty notice 15 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. In case the AO concludes, that a case is made out under section 271(1)(c) of the Act, he needs to indicate, clearly, as to which limb of the said provision is attracted. The reason we say so is, that apart from anything else, the pecuniary burden may vary, depending on the infraction committed by the assessee. In a given case, where concealment has taken place, a heavier burden may be imposed, than in a situation where an assessee is involved in furnishing inaccurate particulars. Therefore, it is necessary for the AO to indicate, broadly, as to the provision/limb under which penalty proceedings are triggered against the assessee. Clearly, this has not happened in the instant case.

There is obviously an internal inconsistency in the penalty order. The AO begins by saying that the assessee had furnished inaccurate particulars of income and concealed income on all disallowances and, then, while computing the penalty that he imposed on the assessee, he goes on to say that the assessee had concealed the particulars of income".There was obviously no clarity in the mind of the AO as to which limb of Section In the instant cases also, we have noticed that the Assessing Officer has initiated penalty proceedings under one default or limb of section 271(1)(c) of the Act, but levied for another default or limb of that section. Consistent with the view expressed by the Tribunal and the High Courts, we hold that the impugned penalty levied for the year under consideration is not sustainable. Accordingly we set aside the orders of the learned Commissioner of Income-tax (Appeals) and direct the Assessing Officer to delete the penalty levied under section 271 (1)(c) of the Act for the year under consideration.

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

Order pronounced in the open court on 22/05/2025.