BITTHAL DAS PARWAL,JAIPUR vs. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-3 , JAIPUR

4. Aggrieved, from the said order of levying penalty assessee has filed an appeal before the ld. CIT(A). The ld. CIT(A) after hearing the contention of the assessee dismissed the appeal of the assessee by giving following findings on the issue:-

“5.2 I have considered the facts of the case and written submissions of the appellant as against the observations/findings of the AO in the penalty order for the year under consideration. The brief facts are submitted by the appellant are that in the assessment order following additions were made: - Addition u/s 68 on account of disallowance of Rs. exemption claimed u/s 10(38) of the IT Act, 5,95,91,797 1961/bogus LTCG Disallowance of brought forward long term Rs. 3,18,558/- capital loss against the long term capital gain In the income tax return u/s 153A of the Act, the appellant had declared additional income from long term capital gain of The assessee filed appeal against the assessment order before the Ld. CIT(A)-4, Jaipur who deleted addition of Rs.5,95,91,797. After appeal effect the only addition remain sustained is Rs.3,15,558 on account of disallowing of set of brought forward loss against income from long term capital gain declared in return filed u/s 153A of the IT Act, 1961 by allegedly holding that said income was not declared in original return of income filed u/s 139(1).

Appellant has further submitted that the assessee in the return of income filed u/s 153A of the IT Act, 1961 showing long term capital gain of Rs.6,19,338 and set off the loss of LTCG of Rs.3.18,558 brought forward from earlier years. The Ld. A.O. thereafter took up penalty proceedings and held that assessee has declared additional income from long term capital gain of Rs.6,19,338 and adjusted the BF loss of Rs.3,18,558 from said LTCG in return of income filed u/s 153A of the Act in comparison to return filed u/s 139 (1) and therefore invoking expl. 1 of section 271(1)(c) held that assessee has concealed particulars of its true income to the extent of Rs. 6,19,338 and so liable for penalty u/s 271 (1) (c) of the I. T. Act, 1961.

The appellant has made to the submission on the issue in the appeal and placed reliance on the judgements and contended that the above referred income of long term capital gain was offered by the appellant in the income tax return under section 153A of the Act on his own and that the income under section 153A of the Act is treated as income under section 139(1) of the Act and thus when the income has already been offered and declared in the income tax return, no penalty is leviable.

From the perusal of the judgements on the issue it is understood that the penalty under section 271(1)(c) is leviable on the income offered in the income tax return under section 153A if such income which is offered in the income tax return is related to or unearthed during the course of search and seizure action and in case the additional income offered in income tax return under section 153A is not related to or not unearthed during the course of search and seizure action and is offered by Sh. Bittal Das Parwal vs. ACIT the assessee on his own, in that case the penalty under section 271(1)(c) is not leviable. In other words the appellant is required to show that the reason of the return of income whereby the income was enhanced was on his own accord and was bona fide and was not due to any finding during or evidence gathered during the search and seizure action. From the perusal of the assessment order and from the perusal of the penalty order it is seen that the surrender was done during the course of search and seizure action on account of the bogus long term capital gain whereby the disallowance of the exemption under section 10(38) of the Act was made. The income which has been offered by the appellant in the ITR also pertains to the capital gain. Thus there was naturally apprehension in the mind of the appellant that there will be enquiry into the issue of capital gains and thus the capital gain which was neither disclosed in the original income tax return and which was nor surrendered during the course of search and seizure action, was to be detected during the course of assessment proceedings. Considering the factual and circumstantial background, the onus is on the appellant to prove that the non-disclosure of capital gain in the original income tax return was due to bona fide genuine omission reason. Considering the facts and circumstances, according to this reason only that bogus long term capital gain was detected during the course of search and seizure action and surrender was made during the course of statement recorded, the income on account of leftover / impugned capital gain was offered by the appellant in the income genuine omission or error.

Accordingly, the penalty levied in the impugned penalty order under challenge in the present appeal, is hereby upheld and this ground of appeal of the appellant is hereby dismissed.”

the ld. “Facts of the case The assessee is an individual deriving income from house property, business, capital gain and other sources. A search u/s 132 took place on 07-01-2016 in the case of Dilip Maihar Group in which assessee was also covered. The assessment u/s 143 (3) r.w.s. 153B (1) (b) of 1. T. Act, 1961 was completed on 29-12-2017. The assessee filed his return of income u/s 153A of the 1.T. Act, 1961 declaring total income of Rs.19,63,700/-. In the assessment order following additions were made:- a) Protective addition u/s 68 on account of disallowance of Deduction claimed u/s 10(38) of the IT Act, 1961 Rs.5,95,91,797/- b) Disallowance of brought forward long term capital loss Against the long term capital gain Rs.3,18,558/- The assessee filed appeal against the assessment order before the Ld. CIT(A)-4, Jaipur who deleted addition of Rs.5,95,91,797/-. After appeal effect the only addition remain sustained is Rs.3,15,558/- on account of disallowing of set of brought forward loss against income from long term capital gain declared in return filed u/s 153A of the I.T. Act, 1961 by allegedly holding that said income was not declared in original return of income filed u/s 139(1). The fact of the case is that assessee in the return of income filed u/s 153A of the I.T. Act, 1961 shown long term capital gain of Rs. 6,19,338/- and set off the loss of LTCG of Rs. 3,18,558/- brought forward from earlier years. Action of Ld. A.O. The Ld. A.O. thereafter took up penalty proceedings and held that assessee has declared additional income from long term capital gain of Rs.6.19,338/- and adjusted the BF loss of Rs.3,18,558/- from said LTCG in return of income filed u/s 153A of the Act in comparison to return filed u/s 139(1) and therefore invoking expl. 1 of section 271(1)(c) held that assessee has concealed particulars of its true income to the extent of Rs. 6,19,338/- and so liable for penalty u/s 271 (1) (c) of the L. T. Act, 1961 and vide impugned penalty order levied penalty of Rs. 1,91,375/- u/s 271 (1) (c) of the I.T. Act. The present appeal is against the said penalty of Rs. 1,91,375/- so levied by Ld. A.O. u/s 271 (1) (c). Order of CIT (A)

Sh. Bittal Das Parwal vs. ACIT The assessee filed appeal before CIT(A) against said penalty order and in course of hearing filed written submissions which reproduced in appeal order of CIT(A). The Ld. CIT(A)-IV in his order dated 13-09-2024 after considering reply filed by appellant confirmed the penalty levied by Ld. AO. In the result, the appeal of the appellant is dismissed. The ground wise submission of assessee are as under:- Ground No. (1) That on the facts and in the circumstances of the case the learned CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 1,91,375/- imposed by the learned AO u/s 271(1)(c) of the IT Act, 1961 after rejecting submission of the appellant that provisions of explanation 5A to Sec. 271(1)(c) are not applicable to additional income offered to tax on suo moto basis in return filed u/s 153A of the IT Act, 1961. The brief facts of the case are that in the return filed u/s 153A the assessee declared LTCG of Rs. 6,19,338/- which was inadvertently left to be included in original return. The assessee against this declared LTCG of Rs. 6,19,338/- claimed set off of b/f loss under the head LTCG amounting to Rs. 3,18,558/-. The Ld. A.O. has disallowed the claim of set off of said b/f loss under the head LTCG on the ground that the LTCG of Rs. 6,19,338/- was not disclosed in original return of income so deduction of Rs. 3,18,558/- set off of b/f loss is not allowable to assessee in return filed u/s 153A is not allowable. The above action of L.d. A.O. is wrong in law. In law the return filed u/s 153A is deemed to be return filed u/s 139(1) and therefore set off b/f losses of LTCG can be claimed against LTCG declared in return u/s 153A. Reliance is placed on the judgement ITAT, Chandigarh Bench in case of Sh. Tarminder Singh Vs. DCIT (ITA No. 732/Chd/2016 decided on 2-9-2017 and in case of ACIT Vs. SplenderLandbase Limited (ITAT- Delhi) decided on 06-06-2018. The Ld. AO in the penalty order levied penalty of Rs.1,91,375/- on the additional income from long term capital gain of Rs.6,19,338/- shown in return of income filed u/s 153A of the Act in comparison to return filed u/s 139 (1). Thus, it was not an income found in search u/s 132 but found due to suo moto disclosure in return filed u/s 153A by assessee. Thus explanation-1 to section 271 (1) (c) is not applicable and as the amount was included suo moto in return u/s 153A to correct the finding of assessee. The CIT (A) 4 exactly on similar facts in case of KGK Creations P. Ltd vide dated 30-11-2015 in it was held that when in the return filed in compliance to notice u/s 153A assessee suo moto corrected any mistake/wrong claim etc. in return filed u/s 139 (1) then explanation 5A Sh. Bittal Das Parwal vs. ACIT to section 271 (1) (c) are not applicable. Therefore when returned income u/s 153A is accepted there is no default u/s 271 (1) (c) and deleted the penalty u/s 271 (1) (c). The case is covered from this judgement. The appellant further relies on the following judicial pronouncements:  The Hon'ble Mumbai Tribunal in the case of Virendra M. Shanklesha, Mumbai v. Assessee (ITA No. 6431 to 6433/Mum/2010) held as under "5.3 It is clear from the record that the additional income admitted in the return filed ws 153A is not because of some bogus or an absolutely wrong claim; but because of some error or omission in the return of income and in respect of the claim u/s 80L/80D/80CC of the 1 T Act which is in the nature of voluntary offer of the income by the assessee and would nto amount to concealment of income or furnishing of inaccurate particulars of income. Further, the AO has not discussed or……….. .....given any finding that the addition was otherwise required to be made because of detection of income as found during the course of search and seizure action. Therefore, in the absence of any material or finding by the AO that the additional income admitted in the return of income filed u/s 153A is because of some incriminating material or information found during the course of search and seizure action. It can't be said that the case of the assessee would attract the provisions of sec. 271 (1) (c). Accordingly, the additional income offered by the assessee is voluntary and based on the books of account and not because of any new material or facts came to the light during the search and seizure action. 5.4 Therefore, in the facts and circumstances of the case, when the assessee has disclosed all the primary facts in the return of income filed 's 139, then the additional income offered in the return filed u/s 1534 because of some discrepancy and error would not amount to concealment of income or furnishing inaccurate particulars of income attracting levy of penalty u/s 271 (1) (c) of the 1 T. Act. In view of the above discussion, we are of the considered opinion that the levy of penalty is not warranted and accordingly, the same is deleted"  The Hon'ble Rajkot Tribunal in the case of Shabbir Allauddin Latiwala vs. DCIT [2011] 16 taxmann.com 177 (Rajkot) held as under: "when there was nothing placed on record which might even remotedly indicate about specific nature of additional income offered by assessee while furnishing returns in response to a notice issued under section 1534, and there was no direct or indirect linkage brought on record with reference to any of specific seized materials so as to establish charge for which penalty had been levied then penalty order should be set aside"

 The Hon'ble Nagpur Tribunal in the case of DCIT v. PurtiSakhar Karkhana [2013/35 Taxmann.com 594 (Nagpur-Trib) held as under "search assessments made under section 153A cannot be treated as continuance of normal assessment proceedings whether abated or not and, therefore, it will not be justified to refer to returned income under section 139 for purpose of imposition of penalty under section 271 (1) (c).…………………….. ….………..where returned income filed under section 153A is accepted by Assessing officer and there is no variation in assessed income and returned income, penalty under section 271 (1) (c) cannot be imposed" In view of above facts of the case penalty order is not sustainable in law and penalty of Rs. 1,91,375/- imposed by Ld. A.O. being wrong and bad in law which deserves to be deleted. Ground No.(2) That the appellant crave permission to add to or amend to any of grounds of appeal or to withdraw any of them.”

The brief facts related to the dispute is that the assessee filed the original return of income on 30.11.2011, declaring total income at Rs. 16,63,240/-. A search and seizure action u/s 132(1) of the Income-tax Act, 1961 was carried out on 07.01.2016 in the case of Dilip Manihar Group, Jaipur to which the assessee belongs. In the meanwhile on 05.11.2016 the assessee revised the return of income and offered the additional income on account of capital gain. The assessee filed return of income u/s 153A, declaring total income at Rs 19,63,700/- in which additional income from long term capital gain at Rs.6,19,338/- which was not included in the original return has been disclosed. Accordingly, the assessment u/s 143(3) r.w.s. 153A of the I.T. Act, 1961 was completed on 29.12.2017 and income was assessed at Rs.6.18,74,055/- by making the additions and also penalty proceedings u/s 271(1)(c) of the IT Act, 1961 were initiated. The addition made was of bogus LTCG of Sh. Bittal Das Parwal vs. ACIT Rs.5.95,91,797/-on protective basis and Addition on account of undisclosed capital gain of Rs.3,18,558/-. Against the above assessment order, the assessee filed appeal before the Ld. Commissioner of Income tax (Appeals)-4, Jaipur which was disposed of off vide order dated 26.03.2019 in which addition on account of bogus LTCG has been deleted. After giving effect, the income was assessed at Rs 22,82,260/-. Ld. AO thus noted that the assessee has shown income from long term capital gain of Rs.6,19,338/- and claimed set off of loss of LTCG of Rs.3,18,558/- of earlier year. Since the income from LTCG was not disclosed in the original return of income, therefore, deduction of Rs.3,18,558/- set off as loss of earlier year by the assessee in the return filed u/s 153A was not allowed and the same was added back to the total income of the assessee for the year under consideration. Accordingly, the penalty proceedings u/s 271(1)(c) of the Income tax Act, 1961 were initiated on concealment of income from LTCG which was not disclosed in original return of income and penalty proceedings u/s 271(1)(c) were initiated for furnishing inaccurate particulars of income. In the first appeal the additions of Rs.3,18,558/- on account of disallowances of set off losse was not challenged by the assessee before the Ld. CIT(A).

Sh. Bittal Das Parwal vs. ACIT Therefore, the same stands confirmed. Thereafter, fresh show cause notice dated 03.02.2020 were issued and the same were duly served upon the assessee and the assessee filed reply on 10.02.2020. Ld. AO considered that reply of the assessee as generic reply and without satisfying the AO as to why the same was not included even the disallowance of the loss was also not challenged in the appellate proceeding. Thus, it is an admitted fact that income from long-term capital gain was not disclosed in the original return of income although he was legally bound to do the same, similarly, no loss was claimed in original return of income against LTCG. Based on that fact ld. AO noted it a clear case of concealment of income and accordingly levied the penalty upon the assessee for Rs. 1,91,375/-. When that matter was challenged before the ld. CIT(A) confirmed that penalty on the ground that the return filed in response to notice u/s. 153A assessee declared additional income of Rs. 6,19,338/-. The assessee has not disputed that fact and that of disallowance of carried forward loss therefore he upheld the levy of the penalty.

Before us the ld. AR of the assessee submitted that in this case the assessee notice u/s. 153A of the Act was issued on Sh. Bittal Das Parwal vs. ACIT 10.01.2017, whereas offering of the additional income was made by revising the return was made on 05.11.2016 vide efilling acknowledgment no. 527217151051116 therefore, the disclosure was made by the assessee before issuance of notice u/s. 153A of the Act. The assessee has voluntarily paid the tax along with the interest which has not been disputed by the revenue. Thus, we have considered the case law relied upon by both the parties and came to the conclusion that the assessee revised the ITR before issuance of notice u/s. 153A. There is no evidence or discussion in the assessment order that the additional income declared by the assessee has any linkage to any specific seized materials so as to establish the charge of penalty to the assessee and that income being accepted as it is that has been offered in the revised return and the return in response to notice u/s. 153A of the Act. Therefore, there is no case of levy of penalty in this case. We get strength to support our view from the decision of the Hon’ble Delhi High Court in the case of PCIT-19 vs. Neeraj Jinal [ 79 taxmann.com 96 (Delhi) wherein the court held that the revised return filed under section 153A takes the place of the original return under section 139, for the purposes of all other provisions of the Act. Thus, when the A.O. has Sh. Bittal Das Parwal vs. ACIT accepted the revised return filed by the assessee under section 153A, no occasion arises to refer to the previous return filed under section 139 of the Act. The court also held that when an assessee has filed revised return after search has been conducted, and such revised return has been accepted by Assessing Officer, then merely by virtue of fact that such return showed a higher income, penalty under section 271(1)(c) cannot be automatically imposed.

Respectfully following that view of the matter and considering the fact of the matter that the assessee has filed the revised return and that was accepted there is no case to levy penalty u/s. 271(1)(c) of the Act.

In the result, the appeal filed by the assessee is allowed.

Order pronounced in the open Court on 29/04/2025.