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Income Tax Appellate Tribunal, MUMBAI BENCH “A”, MUMBAI
Before: SHRI SHAMIM YAHYA (A.M.) & SHRI PAWAN SINGH (JM)
O R D E R PER PAWAN SINGH, JM : 1. These three appeals filed by the assessee are directed against the common order of CIT(A)-3, Nasik (camp-office-Thane) for the assessment years 2010-11, 2011-12 & 2012-13 whereby he confirmed the penalty levied u/s 271(1)(c). The grounds of appeal raised by the assessee, which are common to all the years under appeal, are as under:-
“1) The Ld CIT(A) has erred in confirming the penalty levied by assessing officer without appreciating that penalty order passed by assessing officer in the eyes of law is unsustainable in law since penalty proceedings itself initiated by assessing officer is not accordance with provisions of law. / 2) Without prejudice to the above the appellant submits that no penalty u/s 271(l)(c) of I.T Act 1961 is leviable in the case of appellant
2 ITAs 4569,4570 & 45671/Mum/2018 a) Since the assessee had neither concealed the income nor furnished inaccurate particulars of income. b) Assessee has voluntarily offered the income and hence the said addition is out of the purview of penal provisions.” 2. For appreciation of facts appeal for AY 2010-11 is treated as lead case. 3. The brief facts of the case are that during the assessment, the AO on the basis of AIR information noted that assessee deposited cash in his bank account maintained with HDFC Bank Account Nos.1481000009325 & 1488100000013. The assessing officer noted that assessee has not disclosed the bank statement in the name of Krishna Enterprises, which was his proprietary concern, for taxation. The AO added the peak credit of both the bank accounts to the total income of assessee. The AO added Rs.12,48,390/- in assessment for AY 2010-11 while passing the assessment order u/s 143(3) r.w.s. 147 dated 19-05-2016.
The AO issued show cause notice u/s 274 r.w.s. 271(1)(c) dated 11-11- 2016. In response to the show cause notice, assessee filed his reply dated 25-11-2016 and contended that he has co-operated with the enquiry related to the assessment; he has paid tax along with interest in consequence of the assessment order passed by the AO. It was submitted that due to oversight the assessee has not disclosed the bank account of HDFC bank, the return of income submitted by the assessee since 2010-11 in which there are cash deposited and cash withdrawal entry. The contention of assessee was not accepted by AO. The AO
3 ITAs 4569,4570 & 45671/Mum/2018 concluded that assessee maintained two undisclosed bank accounts for undisclosed proprietary concern, viz. Krishna Enterprises. The assessee did not offer the income arising from said undisclosed proprietary concern. Since the assessee failed to disclose such income, the assessee has concealed his income. The assessing officer levied 100% of tax sought to be evaded. The AO levied penalty @100% and worked out penalty of Rs.3,85,920/-. On appeal before ld. CIT(A), the action of AO was confirmed. Thus, further aggrieved the assessee has filed the present appeal before us.
We have heard the submissions of Ld.AR of the assessee and the Ld. DR for the revenue and perused the material available on record. The Ld.AR of the assessee submits that the assessee accepted peak credit addition made by AO and paid tax on such addition. The Ld.AR of the assessee further submits that while passing the assessment order, the AO initiated penalty for concealing the particulars of income and furnishing inaccurate particulars of income. The AO failed to apply his mind at the time of passing assessment order. The AO levied penalty for concealment of income. The Ld.AR submits that the AO has not applied his mind while passing the assessment order as well as penalty order. In support of his submission, the Ld.AR of the assessee relied upon the following decisions:-.
4 ITAs 4569,4570 & 45671/Mum/2018 Armory International vs ACIT-21(3) ITA 3299, 3300 & 3301/Mum/2017 order dated 01-01-2019 Makcon vs ITO (ITA No.1940/Mum/2016 dated 28-02-2018 M/s Wadhwa Estate & Developers dated 24-02- 2017 PK Joshua vs ITO 26(2)(3) dated 7-06-2017 Jehangir HC Jehangir vs ACIT-12(3) dt 17-05-2017 6. On the other hand, the Ld. DR for the revenue supported the order of lower authorities. The Ld. DR submits that assessee clearly concealed his income from proprietary concern in which name the assessee has opened two bank accounts. The AO made addition on maximum peak credit in both the accounts. No appeal was filed by assessee against such addition. The Ld. DR submits that it is a fit case for confirming the penalty order.
We have considered the rival submissions of both the parties and have gone through the orders of authorities below. There is no dispute that the AO during the assessment on the basis of AIR information noted that the assessee was maintaining bank accounts with HDFC Bank Ltd in the name of proprietary concern Krishna Enterprises. The income from Krishna Enterprises was not disclosed by assessee in the income offered for taxation. The AO added peak credit of both the bank accounts. The AO while passing the assessment order initiated penalty for concealing the particulars of income and furnishing inaccurate
5 ITAs 4569,4570 & 45671/Mum/2018 particulars of income. However, while levying the penalty, the AO levied penalty only for concealment of income. 8. The provisions of section 271(1)(c) of the Income-tax Act, is read as under :
"271. Failure to furnish returns, comply with notices, concealment of income, etc. — (1) If the AO or the CIT(A) or the Principal CIT or CIT in the course of any proceedings under this Act, is satisfied that any person— (a)------ (b)------ (c) has concealed the particulars of his income or furnished inaccurate particulars of such income, (d)------- he may direct that such person shall pay by way of penalty, — (i) --- (ii) --- (iii) in the cases referred to in cl. (c) or cl. (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefits or the furnishing of inaccurate particulars of such income or fringe benefits. ** ** **
Explanation 1. — Where in respect of any facts material to the computation of the total income of any person under this Act, — (A) such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT(A) or the Principal CIT or CIT to be false, or (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, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of cl. (c) of this sub-section,
6 ITAs 4569,4570 & 45671/Mum/2018 be deemed to represent the income in respect of which particulars have been concealed." 9. A care full perusal of the aforesaid provision makes it clear that if the AO in the course of any proceedings is satisfied that any person has concealed the particulars of his income or furnished inaccurate particulars of such income, then he may levy the penalty on the assessee. Two different charges i.e., the concealment of particulars of income or furnishing of inaccurate particulars of income is prescribed under the provisions of section 271(1)(c). In our view the penalty can be imposed for a specific charge and not evasive observation while passing the assessment order.
Further, furnishing of inaccurate particulars means when the assessee has not disclosed the particulars correctly or the particulars disclosed by the assessee are incorrect. On the other hand concealment of particulars of income means when the assessee has concealed the income and has not shown the income in its return or in its books of account. Further, Explanation 1 is a deeming provision and it is applicable only when an amount is added or disallowed in computation of total income which is deemed to represent the income in respect of which particulars have been concealed. Explanation 1 is not applicable in this case for furnishing inaccurate particulars of income.
We noted that the AO has initiated penalty proceedings under both the limbs of section 271(1)(c) without specifying , if the assessee has 7 ITAs 4569,4570 & 45671/Mum/2018 concealed the particulars of income. The penalty ultimately was levied on the assessee for concealing the income by observing that the case of the assessee is covered by the Explanation 1 to section 271(1)(c). The relevant sentence/ concluding part the AO noted “Hence, penalty u/s 271(1)(c) r.w.e.1 of the I.T. Act”. The ld CIT(A) while affirming the action of assessing officer took the view that the assessee furnished inaccurate particulars of income.
We are of the view that in the case of furnishing inaccurate particulars of income, the onus is on the Revenue to, prove that the assessee had furnished the inaccurate particulars, while in the case of concealment of particulars of income, where the Explanation . 1 is applicable; the onus is on the assessee to prove that he has not concealed the particulars of income. It is apparent from the Explanation-1, this Explanation clearly states where in respect of any facts material to the computation of total income of any person such person fails to offer an explanation or offers explanation which is found by the AO to be false or such person offers an explanation which he is not able to substantiate or fails to prove that such explanation is bona fide and all the facts relating to the same and material to the computation of his total income have been disclosed by him.
We have noted that in reply to the show cause notice the assessee explained that due to oversight the assessee could not disclosed the bank
8 ITAs 4569,4570 & 45671/Mum/2018 account. However, the AO while levying penalty not accepted the explanation furnished by assessee. The AO recorded that the assessee has not disclosed the transaction in the bank statement of his proprietory concern. The AO nowhere recorded that the assessee was with some other name or running more than one proprietorship.
We noted that the AO, failed to discharge his onus as he was not sure at the initiation of penalty under section 271(1)(c) for which specific charge of penalty has been initiated by the AO. Even while levying the penalty also, the AO simply relied on the Explanation 1to s. 271(1)(c). Therefore, in our opinion, the basis of levy of penalty itself is not correct.
The ld AR for the assessee strongly relied on the decision of Tribunal in Wadhwa Estate & Developers India Pvt Ltd Vs ACIT (supra), wherein on similar set of fact the coordinate bench passed the following order:–
“ 6. We have considered the submissions of the parties and perused the material available on record. Undisputedly, in the return of income assessee has failed to offer interest on fixed deposit amounting to Rs.5,92,186 and loss claimed on account of fixed asset written–off amounting to Rs. 1,82,242. It is also a fact on record that in the course of assessment proceedings, the assessee accepted the taxability of these items of income and offered them to tax. The assessee has explained that non–disclosure of aforesaid two items of income is due to oversight and due to the fact that neither in the tax audit nor in the statutory audit such omission was pointed out. We find merit in the aforesaid explanation of the assessee. In fact, in Para–4.3.2 of his order, the learned Commissioner (Appeals) has observed that the 9 ITAs 4569,4570 & 45671/Mum/2018 explanation offered by the assessee with regard to imposition of penalty has not been found to be false. On a perusal of the audit report, we have also noted that the auditors have not pointed out the omission. Thus, assessee’s explanation that non–disclosure of two items of income is on account of omission due to oversight is believable since the auditors have also failed to detect such omission in the audit report. Therefore, in our opinion, the ratio laid down by the Hon'ble Supreme Court in PricewaterhouseCoopers Pvt. Ltd. (supra), clearly applies to the facts of the present case as, in our opinion, it is a bonafide mistake committed by the assessee. The other decision relied upon by the learned Authorised Representative also support such view. That being the case, in our opinion, imposition of penalty under section 271(1)(c) in the present case is not justified. Even otherwise also, the penalty imposed under section 271(1)(c) is not sustainable due to the following reasons:– 7. Perusal of the assessment order clearly demonstrate that the Assessing Officer has not recorded any satisfaction whether the facts of the case necessitate initiation of proceeding for imposition of penalty under section 271(1)(c) either for concealing particulars of income or for furnishing inaccurate particulars of income or for both. The Assessing Officer has simply initiated the proceedings for penalty under section 271(1)(c) without mentioning the offence committed by the assessee with reference to the provisions contained under section 271(1)(c). Further, on a reference to the notice issued under section 274 r/w section 271, which is in a standard printed format, a copy of which is placed at Page–17 of the paper book, we have found that Assessing Officer has not specified which limb of the provision contained under section 271(1)(c) is attracted to the assessee. The Hon'ble Supreme Court in Dilip N. Shroff v/s JCIT, [2007] 291 ITR 519 (SC), has observed that while issuing the notice under section 274 r/w section 271, in the standard format, the Assessing Officer should
10 ITAs 4569,4570 & 45671/Mum/2018 delete the inappropriate words or paragraphs, otherwise, it may indicate that the Assessing Officer himself was not sure as to whether he had proceeded on the basis that the assessee had concealed his income or had furnished inaccurate particulars of income. This, according to the Hon'ble Supreme Court, deprives the assessee of a fair opportunity to explain its stand, thereby, violates the principles of natural justice. As held by the Hon'ble Supreme Court in CIT v/s Reliance Petroproducts Pvt. Ltd. [2010] 322 ITR 158 (SC), the aforesaid principle laid in Dilip N. Shroff (supra) still holds good in spite of the decision of the Hon'ble Supreme Court in UOI v/s Dharmendra Textile Processors (2008) 306 ITR 277 (SC). The Hon'ble Jurisdictional High Court in CIT v/s Smt. Kaushalya & Ors., [1995] 216 ITR 660 (Bom), observed that notice issued under section 274 must reveal application of mind by the Assessing Officer and the assessee must be made aware of the exact charge on which he had to file his explanation. The Court observed, vagueness and ambiguity in the notice deprives the assessee of reasonable opportunity as he is unaware of the exact charge he has to face. The Hon'ble Jurisdictional High Court in Samson Perinchery (supra), following the decision of Hon'ble Karnataka High Court in CIT v/s Manjunatha Cotton & Ginning Factory, [2013] 359 ITR 565 (Kar.), held, order imposing penalty has to be made only on the ground on which the penalty proceedings has been initiated. In the present case, neither the assessment order nor the notice issued under section 274 indicate the exact charge on the basis of which the Assessing Officer intends to impose penalty under section 271(1)(c). Therefore, viewed in the light of the principles laid down in the judicial precedents discussed herein above, we are of the opinion that the Assessing Officer having failed to record his satisfaction while initiating proceedings for imposition of penalty under section 271(1)(c) as to which limb of the provisions of section 271(1)(c) is attracted, the order imposing penalty is invalid. In 11 ITAs 4569,4570 & 45671/Mum/2018 view of the aforesaid, we hold that the imposition of penalty u/s 271(1)(c) in the present case is not justified. Accordingly, we delete the same.”
In view of the aforesaid discussions, in our opinion, the basis of levy of penalty itself is not correct. Thus, we direct the assessing officer to delete the penalty. In the result the appeal of the assessee is allowed. & 4571/Mum/2018 (AYs 2011-12 & 2012-13) 16. The facts and circumstances in these appeals are pari materia with the facts and circumstances in appeal in AY 2010-11, which we have already decided above. Therefore, the reasons and decision arrived at therein all apply mutatis mutandis to this appeal also. 17. In the result, all the appeals filed by the assessee are allowed. Order pronounced in the open court on 10-02-2020.