Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, ‘’ D’’ BENCH, AHMEDABAD
Before: MS. SUCHITRA KAMBLE & SHRI WASEEM AHMED
PER WASEEM AHMED, ACCOUNTANT MEMBER:
The captioned appeal has been filed at the instance of the Revenue against the order of the Ld. Commissioner of Income Tax (Appeals)-12, Ahmedabad order dated 11/02/2021 arising in the matter of penalty order passed under Section 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2013-14.
The Revenue has raised the following grounds of appeal: “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty u/s. 271(1)(c) of the Act of Rs.3,85,13,164/- on account of bogus claim of expenditure made by the assessee in the name of certain parties.
2. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty as explanation 5A to section 271(1)(c) of the Act states that the income disclosed in the return of income filed after date of search is liable for imposition of penalty u/s. 271(1)(c) of the Act.
3. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) has erred in deleting the penalty as the disclosure of income by assessee is covered under both expressions i.e. concealment of income and furnishing inaccurate particular of income as both expressions ultimately lead to under-reporting of income.
4. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) ought to have upheld the order of the A.O.
5. It is, therefore, prayed that the order of the Ld. CIT(A) be set aside and that of the A.O. be restored to the above extent.”
3. The only interconnected issue raised by the Revenue is that the Ld. CIT-A erred in deleting the penalty levied by the AO under the provisions of section 271(1)(c) of the Act on account of furnishing inaccurate particulars of income/concealment of the particulars of income.
The facts in brief are that assessee in the present case is a private limited company and engaged in the business of civil construction works and infrastructure development. There was a search and seizure operation at the premises of the assessee under the provisions of Section 132 of the Act. As a result of search, a statement under Section 132(4) of the Act was recorded wherein the assessee surrendered an income of Rs. 18 crores pertaining to different assessment years. The amount of surrendered income of Rs. 11,87,02,925/- representing the payment on account of bogus expenses, was pertaining to the year under consideration. The details of the payment for the bogus expenses stand as under:
“1. M/s. Honeymint Resources Rs. 4,12,89,816/- 2. M/s. Crimson Infratech Rs. 4,00,70,036/- 3. M/s. Signature Dynamics Rs. 3,73,43,073/- Total Rs. 11,87,02,925/-”
The impugned income was duly offered to tax as income from other sources in the return of income filed by the assessee in response to the notice issued under Section 153A of the Act. According to the AO the impugned amount of income should have been disclosed in the original return filed under Section 139(1) of the Act but the assessee had to disclose such income in the return filed under section 153A of the Act in consequence to the search operation carried out at its premises. As per the AO, had the assessee not been subject to the search and seizure operation under Section 132 of the Act, the assessee would not have surrendered the income as discussed above. Accordingly, it was deemed by the AO that the assessee has concealed the particulars of income or furnished the inaccurate particular of income. Thus, AO levied the penalty of Rs. 3,85,13,164/- being 100% of the amount of tax sought to be evaded under the provisions of section 271(1)(c)of the Act.
Aggrieved assessee preferred an appeal to the Ld. CIT-A.
The assessee before the Ld. CIT-A submitted that the return of income filed under section 153A of the Act is deemed to have been filed under the provisions of section 139(1) of the Act. Accordingly, the assessee has already disclosed the impugned amount of income of Rs. 11,87,02,925/- in response to the notice issued under Section 153-A of the Act. Therefore, on the same amount of income, there cannot be levied any penalty under the provisions of section 271(1)(c) of the Act. The assessee also contended that there was not found any material of incriminating nature suggesting the undisclosed income of the assessee. As such, the assessee suo-moto has surrendered the income in the statement furnished under Section 132(4) of the Act in a general/casual manner as a result of search.
7.1. The assessee further submitted that there was no specific charge mentioned by the AO whether the penalty has been levied on account of furnishing inaccurate particulars of income or concealment of the particulars of income. In the absence of any specific charge, it can be inferred that there was no satisfaction recorded by the AO and therefore the question of penalty does not arise.
The Ld. CIT-A after considering the submission of the assessee deleted the penalty levied by the AO by observing as under:
“5.6 Having considered the facts and submission of the assessee the AO observed that had there been no search the issue of unaccounted income would not have come to the notice and there would not have been any income offering by the assessee in the return filed. It has been noticed that no specific material was found during the course of search ascribing to the surrender of undisclosed income. During the course of search in the statement recorded u/s 132(4) of IT Act Shri Dineshchandra Agrawal, Managing Director of assessee company has made general statement of surrender of income of Rs.18 crore for A.Y. 2012-13, 2013-14 and 2017-18. In the penalty order the AO has not discussed the specific material to arrive at the conclusion for the levy of penalty on the additional income of Rs.11,87,02,925/-. 5.7 In absence of the specific mention of the relevant clause, the assessee was unable to make the specific submission on the applicability of the respective clauses. In this regard the assessee also submitted that in the penalty order there was no discussion of undisclosed income with reference to material seized, document seized during the course of search which are related to undisclosed income on which the assessee surrendered the income in the statement recorded u/s 132(4) of the IT Act. 5.8 The assessee objected the show cause notice by stating that the AO has simply initiated the penalty proceedings in a mechanical manner by issuing pre printed draft proforma of notice. Assessee also submitted that penalty was not mandatory because parliament in its wisdom has used the word "may" and not "shall". The assessee further submitted that mere disclosure of income u/s. 132(4) of IT Act and declaration of additional income in the return of income filed would not ipso facto partake the character of undisclosed income but the facts of each case are required to be analyzed in objective manner so as to attract the penalty provisions of IT Act. It has been held that "may" cannot be equated with "shall" specially in penalty proceedings. Using the word may give discretion to the AO to levy the penalty or not to levy even if the assessee has made default under the said provisions. 5.9 Having gone through the facts and submission as discussed in the preceding Paras, it is apparent that in the assessment order dated 31/12/2018 the AO has mentioned that the "penalty notice u/s 271(1)(c) of IT Act is being issued separately". Accordingly in the show cause notice dated 31/12/2018 issued for initiation of penalty the AO has mentioned as "have concealed the particulars of income or furnished inaccurate particulars of such income". However the penalty has not been initiated on specific charge i.e. either concealment of particulars of income or furnishing of inaccurate particulars of income. Even in the subsequent show cause notice issued by the AO on 08/05/2019 the AO has not mentioned specifically the charge i.e. concealment of particulars of income or furnishing of inaccurate particulars of income. Therefore the assessee has taken the objection by saying that no satisfaction has been recorded by the AO for levy of penalty and in support he is relied upon various judgments. 5.10 Even before levy of penalty the AO has not granted opportunity to the assessee specifically pointing out the default for which the penalty is leviable in order to enable the assessee to furnish in his defense. In absence of pin pointing of the specific charge it cannot be expected from the assessee to make the submission on the charge. Since the AO has failed in specifying such default, the initiation of penalty itself was vague and defective. 5.11 Having considered the facts and submission, It has been noticed that an objection has been taken by the appellant that in the assessment completed the AO has initiated the penalty for concealing the particulars of income or furnishing inaccurate particulars of such income. It means the penalty has not been initiated with the specific allegation or rather the AO was not sure about the charge for which penalty has to be initiated. Subsequently in the penalty order also vide para No.4, the AO has formed the opinion for levy of the penalty for "concealment of particulars of its income or furnishing of inaccurate particulars of such income," and subsequently in para No.5 it has recorded the satisfaction of the "concealment of particulars of income / furnishing of inaccurate particulars of income". Thus it transpires that in the penalty order also the AO was not sure about the allegation for which the penalty has to be levied. 5.12 In support of this, reliance is placed on the judgement of Hon'ble Gujarat High Court in the case of Manu Engineering [122 ITR 306]&New Sorathia Engineering Co. Vs. CIT [282 ITR 642]. This view has also been uphold by the Hon'ble ITAT, Ahmedabad in the following cases:- IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH "D" [CAMP AT BARODA] (Assessment Year:- 1997-98) The Deputy Commissioner of Income-tax, Circle-2(2), Baroda V/s Shri Nayan R Mongia, Mohit.. Radha Krishna Park Society, Nr. Akota Garden, Baroda dated 03/11/20O9. • IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH "D" DATED 21/10/2O09 IN ITA No. 1902/AHD/2006 Assessment Year : 2001-2002 National Transport, G-19, Fatehsagar Complex, Fatehgunj, Baroda. Vs. Income Tax Officer, Ward 2(4), Baroda. • IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH "C " DATED 08/12/2009 IN ITA No.2548/AHD/2006 Assessment Year : 2O01-2002 Shrichand Tirthdas Nainani Prop: S.T.Tyre House, Municipal Shop No. 12, O/s. Prem Gate, Ahmedabad. Vs. The Income Tax Officer, Ward 2(3), Ahmedabad. • IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH "D" Dated: 19/03/2009 in ITA No.2389/AHD/2006 Assessment Year : 2004-2005 in the case of Shri N. Suseelan 21, Vitthal Nagar Society, P.O . Navyug College, Rander Road, Surat. Vs. The ACIT, Circle-1, Surat. 5.13 In the printed show cause notice for the penalty issued by the AO dated 31/12/2018, the AO has not struck off the charge for initiation of the penalty. In other words, it has initiated the penalty for concealing the particulars of income or furnishing of inaccurate particulars of income meaning thereby no specific charge have been marked for initiating the penalty. On these facts, the Hon’ble Courts have deleted the levy of penalty. Some of such decisions / judgments are as under. Manjunath Cotton & Ginning Factory, Karnataka [359 ITR 565] Suvaprasanna Bhattacharya Vs. ACIT (ITAT, Kolkata) SanghviSavla Commodity Brokers Pvt. Ltd. Vs. ACIT, Circle in ITA No.l746/MUM/2011 dated 22/12/2015 (ITAT, Mumbai)
CIT Vs. SSA's Emerald Meadows [2016] 73 Taxmann.com 248 (SC) CIT - 11 Vs. Shri Samson Perinchery in of 2014 Honourable Bombay High Court 5.14 It has also been noticed that In the assessment order the AO has assessed the total income at Rs.61,31,37,861/- which consists of the returned income of Rs.33,59,86,450/- (inclusive of surrender of Rs.11,87,02,925/-) and additions of Rs.27,71,51,411/-. Further, in the assessment order, the AO has initiated the penalty proceedings stating issuing the notice u/s. 271(1)(c) of the I.T. Act separately. Further noticed that neither in the assessment order nor in the show cause notice to the penalty, the AO has mentioned about the initiation of the penalty on the additional income surrendered during the course of search which was offered in the return of income filed. Therefore, there was no satisfaction of the AO with regard to initiation of the penalty on the surrendered income either in the assessment order or in show cause notice issued for levy of the penalty. Thus, in absence of such specific satisfaction, levy of penalty in the penalty order is not justified. In other words, the penalty has been initiated by the AO on the additions made in the assessment order and not on the surrendered additional income offered in the return of income filed in pursuance to the notice u/s. 153A of the I.T. Act. Therefore, levy of penalty on the surrendered income is not justified. 5.15 In view of the aforesaid discussion, the penalty levied by the AO is cancelled considering the facts and law, in view of the various decisions and judgments of Hon’ble Courts referred above. Thus, the grounds of appeal at Sr. 1 to 3 are allowed. 5.16 With regard to ground No.4, the same has not been pressed by the appellant as per the written submission filed in the present appellant proceedings. Therefore, the same is dismissed.
6. The appeal is partly allowed.”
9. Being aggrieved by the order of the Ld. CIT-A, the Revenue is in appeal before us.
The Ld. DR before us vehemently supported the stand of the AO by reiterating the findings contained in the penalty order which we have already adverted to in the preceding paragraph. Therefore, we are not repeating the same for the sake of brevity and convenience.
On the other hand, the Ld. AR before us contended that there was no document of incriminating nature found in the course of search proceedings under the provisions of Section 132 of the Act. As such the assessee to buy the peace of mind has offered the payment to the impugned/alleged sundry creditors to tax. Thus, the question of levying the penalty under the provisions of Section 271(1)(c) of the Act does not arise.
It was also contended by the Ld. AR that there was no initiation of the penalty proceedings under the provisions of Section 271(1)(c) of the Act in the assessment order. Furthermore, the AO in the penalty proceedings has levied the penalty under both the charges i.e. concealment of the particulars of income and furnishing inaccurate particulars of income. The Ld. AR before us vehemently supported the order of the Ld. CIT-A.
We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the penalty has been imposed by the AO under section 271 (1)(c) without mentioning the specific charge in the penalty order dated 21/03/2018, whether, it was levied on account of concealment of income or furnishing inaccurate particulars of income. The relevant extract of the penalty order is reproduced as under:
5. In view of above facts and circumstances of the case, I am satisfied that the assessee has concealed the particulars of income/furnished inaccurate particulars of income and penalty u/s 271(1)(c) of the Act and liable for penalty under section271(1)(c) of the Act.
On perusal of above, it is clear that the AO has not levied the penalty on the specific charge as mandated under Section 271(1)(c) of the Act. In such facts and circumstances the Hon'ble Jurisdictional High Court in the case of Snita Transport Pvt. Ltd. Vs. Assistant Commissioner of Income Tax reported in 42 taxmann.com 54 has held that penalty cannot be imposed without mentioning the specific charge. The relevant extract of the order is reproduced below:
“9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penaltywas imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income." It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee.No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down."
The principles laid down by the Hon’ble Jurisdictional High Court in the above case are squarely applicable to the facts of the case on hand. The AO has not mentioned the specific charge in his penalty order whether it was levied for concealment of income or for furnishing inaccurate particulars of income. Therefore, in our considered view, the penalty levied by the AO and confirmed by the Ld. CIT (A) is not sustainable.
Without prejudice to the above, there is no dispute to the fact that the assessment in the present case was made under section 143(3) r.w.s. 153A of the Act in pursuance to the search carried out dated 21st October 2016. The year in dispute before us pertains to the Assessment Year 2013-14 and therefore the penalty proceedings has to be initiated under Explanation 5A to Section 271(1)(c) of the Act. The explanation 5A to section 271(1)(c) of the Act reads as under:
[Explanation 5A.— Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of— (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilising (wholly or in part) his income for any previous year; or (ii) any income based on any entry in any books of account or other documents or transactions and he claims that such entry in the books of account or other documents or transactions represents his income (wholly or in part) for any previous year, which has ended before the date of search and,— (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein; or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of a penalty under clause (c) of sub-section (1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.]
However, we have referred the penalty order and note that there was no reference to the Explanation 5A to Section 271(1)(c) of the Act. Likewise, we have also seen the assessment order and find that there was no initiation of the penalty proceedings with respect to the income offered to tax in the return of income which was accepted in the statement recorded under Section 132(4) of the Act.
Additionally, it is also seen that there was no documentary evidence found in the course of search suggesting that the assessee has either concealed the particulars of income or furnished inaccurate particular of income for the income offered to tax in the income tax return except the statement recorded under Section 132(4) of the Act. The issue arises whether the assessee has furnished inaccurate particulars of income by showing payment to the bogus creditors. The word ‘inaccurate particulars’ has not been defined under the provisions of the Act. Thus, we refer the dictionary meaning of inaccurate which denotes ‘not accurate’, something incorrect or wrong, not exact, in error. In the given case the creditors were arising out of the purchases which were not disputed. It is the payment to the creditors which have been held as bogus in the statement furnished under Section 132(4) of the Act. Thus, it can be concluded that the claim of the assessee was inaccurate. Accordingly, it appears that the penalty provisions under Section 271(1)(c) have to be invoked. Thus, if we apply this logic, then any addition made by the AO in the assessment would lead either to concealment of the particulars of income or furnishing inaccurate particulars of income. In other words, the assessee furnishes the particulars of income in his income tax return which is subsequently verified by the revenue. If in the process of verification of the income of the assessee, the AO calculates different total income than the income declared by the assessee, the difference between incomes declared by assesses and assessed by the AO would amount to furnishing of inaccurate particulars of income or concealment of income. However, we note that the Hon’ble Supreme Court in the case of Dilip N Shroff vs. JCIT reported in 161 taxman 218 has discussed the term inaccurate by observing that the word inaccurate signifies a deliberate act or omission on the part of the assessee. Thus, to arrive at the conclusion that, the assessee has furnished inaccurate particulars of income, it has to be tested whether it has been done so with the dishonest intent which cannot be regarded as an innocent act. In other words, the element of consciousness in furnishing inaccurate particulars of income coupled with circumstantial evidences should be present in the particular case. Unless, the characters of inaccurate particulars of income as discussed above are present in any particular case, the penalty provisions under Section 271(1)(c) of the Act cannot be attracted. Thus, to our considered view, the claim of the assessee at the most can be regarded as inaccurate claim which cannot be equated with the furnishing inaccurate particulars of income in the given facts and circumstances. It is for the reason that nothing has been brought on record by the AO suggesting that the assessee has furnished the particulars of income with dishonest intent. In view of the above and after considering the facts in totality, we do not find any reason to disturb the finding of the Ld. CIT-A. Hence, the ground of appeal of the revenue is hereby dismissed.
In the result, the appeal of the Revenue is dismissed.
Order pronounced in the Court on 21/10/2022 at Ahmedabad.