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Income Tax Appellate Tribunal, MUMBAI BENCH “G”, MUMBAI
Before: Shri Pawan Singh (JM) & Shri S Rifaur Rahman (A.M.)
O R D E R PER PAWAN SINGH, JM : 1. This appeal by assessee is directed against the order of CIT(A)-45, Mumbai dated 21-08-2018 for the assessment year 2014-15, which in turn, arises out of the penalty order levying penalty under section(u/s)
271(1)(c) of the I.T. Act, 1961. The following grounds have been raised by the assessee:-
“Being aggrieved by the order dated 10.09.2018 passed by the learned Commissioner of Income Tax (Appeals)-45, Mumbai [“Ld. CIT(A)"] u/s 250 of the Income-tax Act, 1961 ("Act"), your appellant prefers this appeal, among others, on the following grounds of appeal, each of which is without prejudice to, and independent of, the other:
1. Levy of Penalty u/s. 271(1)(c): Rs.6.62.230/- a. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in not appreciating that the show cause notice u/s. 274 r. w. s. 271(l)(c) of the Act dated 30.12.2016 issued by the Ld. AO was bad in law, having been issued without specifying the precise charge for imposition of penalty.
2 ITA 7274/Mum/2018 b. On the facts and in the circumstances of the case, and in law, the Ld. CIT(A) erred in not appreciating that the penalty order is bad in law inasmuch as the penalty was imposed by the Ld. AO for furnishing inaccurate particulars of income, whereas the charge made out against the appellant in the relevant assessment order was for furnishing inaccurate particulars of income and concealment of income. c. On the facts and in the circumstances of the case, and also in law, the Ld. CIT(A) erred in confirming the levy of penalty, without appreciating that the appellant had offered satisfactory explanation which was substantiated by the documentary evidence placed on record, and that therefore, there was no basis for imposition of the penalty under section 271(l)(c) of the Act. Your appellant, therefore, prays that the Ld. AO's order imposing the penalty of Rs.6,62,230/- u/s. 271(l)(c) of the Act be quashed and the penalty be cancelled.”
Brief facts of the case are that assessment for AY 2013-14 was completed on 30-12-2016 u/s 143(3) of the I.T. Act, 1961. The AO while passing the assessment order treated the long term capital gain as unexplained cash credit under section (u/s) 68 and initiated penalty for furnishing inaccurate particulars of income and concealment of income. The AO, vide order dated 27-02-2017 levied penalty @100% of tax sought to be evaded on the addition u/s 68. The AO worked out penalty of Rs.6,62,230/-. On appeal before CIT(A), the penalty was confirmed. Thus, further aggrieved, the assessee has filed present appeal before us.
At the outset of hearing, the Ld.AR of the assessee submits that similar penalty was levied by AO in case of assessee’s and was confirmed by Ld. CIT(A) vide order dated 21-08-2017, i.e. on the same day,
3 ITA 7274/Mum/2018 however, on further appeal, the Tribunal deleted the penalty in dated 20-02-2018. The Ld.AR further submits that while passing the assessment order, the AO initiated penalty for concealment of income and for furnishing inaccurate particulars of income. However, while levying the penalty, the AO discussed all ingredients of Explanation 1 to section 271(1)(c) of the Act, which relates to concealment the income. However, while levying the penalty, the AO levied the penalty for furnishing inaccurate particulars of income. The Ld.AR of the assessee submits that the AO levied penalty without application of mind. There was neither any concealment of income nor assessee furnished inaccurate particulars of income. Admittedly, the assessee has not filed any appeal against the quantum assessment that does not automatically lead to levy of penalty. The penalty proceedings are separate and independent. Mere disallowance of claim in the assessment order would not automatically lead to levy of penalty.
The Ld.AR further submits that while issuing show cause notice u/s 274, the AO has not struck down the inappropriate portion of the show cause notice. Thus, the assessee was not given opportunity to defend the charge. In support of his submission, the Ld.AR of the assessee has relied upon the following decisions:-
4 ITA 7274/Mum/2018 DCIT vs Nepa Ltd (2015 58 taxmann.com 137 (Indore-Trib) CIT vs Upendra V Mithani I.T.A (L) No.1860 of 2009 order Dated 5th August, 2009 5. On the other hand, the Ld. DR for the revenue supported the orders of lower authorities. The Ld. DR further submits that assessee filed inaccurate particulars of income by claiming bogus accommodation entry. The addition made in assessment was not challenged by assessee. The assessee was fully aware that even on filing appeal before higher forums, he was not entitled for any relief; therefore, no appeal was filed by the assessee. So far as non striking off of inappropriate portion in the show cause notice u/s 274 r.w.s. 271(1)(c), the Ld. DR submits that it is merely a clerical mistake which has been duly considered and explained by Ld.CIT(A) in the impugned order. The Ld. DR submits that assessee is not entitled for any relief.
We have considered the submission of both the parties and have gone through the orders of authorities below. We have also gone through the case law as have been relied on before us. During the assessment the assessing officer treated the long term capital gain (LTCG) and bogus made addition under section 68 as unexplained cash credit. The AO also made addition of Rs. 77,183/- on account of commission for converting the unaccounted money in LTCG. No further appeal was filed by the assessee. The assessing officer served notice under section 271(1)(c) rws
5 ITA 7274/Mum/2018 274 dated 301.12.2016. The assessee filed its reply and contended that the claim of LTCG was genuine; the assessee furnished all the documentary evidences to prove its claim. The assessee fully co-operated in the assessment and paid due tax. It was also contended that mere additions were made in the assessment would not by itself be termed as “furnishing inaccurate particulars” in absence of means rea. The assessee voluntrly offered LTCG on sale of share to buy peace. The reply of assessee was not accepted the the assessing officer. The assessing officer levied penalty @100% of tax sought to be evaded. The assessing officer levied penalty for furnishing inaccurate particular of Income. The action of assessing officer was affirmed by ld CIT(A).
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) ---
6 ITA 7274/Mum/2018
(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, be deemed to represent the income in respect of which particulars have been concealed."
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 7 ITA 7274/Mum/2018 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 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). However, 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
8 ITA 7274/Mum/2018 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 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), though he levied the penalty for inaccurate particulars of income . Therefore, in our opinion, the basis of levy of penalty itself is not correct.
We have further noted that similar penalty was levied in case of assessee’s wife ( Smt. Divya Shailesh Bhadaliya). And on appeal before ld CIT(A) the penalty was affirmed vide No. CIT(A)-45/ITO- 33)(1)(4)/ITA-13/2017-18 dated 21.08.2018. However, on further appeal before Tribunal the penalty was deleted vide IT No. 7273/Mum/2018 dated 20.02.2019. The penalty was deleted by coordinate bench by taking view that the penalty order was not passed after due application of mind.
We have further noted that Indore bench of Tribunal in DCIT Vs Nepa Ltd (supra) also took the view that where Assessing Officer levied penalty on assessee for furnishing inaccurate particulars of income by invoking Explanation 1 to section 271(1)(c), same could not be sustained as Explanation 1 is applicable in respect of particulars which have been 9 ITA 7274/Mum/2018