HONEY NANDKUMAR BADLANI,MUMBAI vs. ACIT - 32 (1), MUMBAI

This appeal has been filed by the assessee against the order dated 13.06.2018 passed by the Commissioner of Income Tax (Appeals)-44 (for short ‘the CIT(A), Mumbai, pertaining to the assessment year 2013-14, whereby the Ld. CIT(A) has dismissed the appeal filed by the assessee against the penalty order passed by the AO u/s 271 (1) (c) of the Income Tax Act, 1961 (for short the ‘Act’) and confirmed the penalty levied.

The assessee having income from house property, capital gains, business and profession and income from other sources, filed its return of income for the assessment year under consideration declaring the total income of Rs. 32,33,920/-. Since, the case was selected for scrutiny, the AO issued notice u/s 143 (2) and 142 (1) of the Act. In response to the said notices, the authorized representative (AR) of the assessee filed various details and discussed the case during the course of assessment, the assessee was asked to furnish 26AS along with reconciliation. During the assessment proceedings, the assessee submitted that it has not added the interest received on fixed Assessment Year: 2013-14 deposit with Karnataka Bank Ltd. amounting to Rs. 37,370/- due to oversight at the time of filing of return and further asked the AO to add the same to its income. Accordingly, the AO made addition of the said amount to the income of the assessee. The AO initiated proceedings u/s 271 (1) (c) of the Act on the basis of the said addition and imposed penalty of Rs. 11,550/-. In the first appeal, the Ld. CIT (A) confirmed the penalty levied by the AO. Against the said order, the assessee is in appeal before the Tribunal. 3. The assessee has challenged the impugned order passed by the Ld. CIT (A) on the following effective grounds:- 1) (a) “On the facts and in the circumstances of the case and in law, the learned Commissioner of Income Tax (Appeals) erred in confirming penalty of Rs. 11,550/- u/s 271 (1) (c) of the Income Tax Act, 1961 (the Act) by holding that the appellant had furnished inaccurate particulars of income and concealed particulars of income amounting to Rs. 37,370/- which is wrong and contrary to the facts and circumstances of the case, the provisions of Income Tax Act, 1961 and the Rules made there under. (b) The learned Commissioner of Income Tax (Appeals) erred in confirming penalty without appreciating the following that: i. the computation error in the original return of income was bonafide human error. ii. the appellant has suo moto requested the Ld. AO to add the said income while passing the assessment order. iii. the appellant has already paid taxes of Rs. 8,54,236/- by way of Advance tax, Tax deducted at Source (TDS) and Self Assessment tax. iv. the said interest income from fixed deposits was reflecting in 26AS, on which tax upto Rs. 3737 (10%) was already deducted. v. the said interest income was left to be added due to over-sight while filing the return of income.”

This case was fixed for hearing on 11.12.2019. However, on the said date, when the case was called out for hearing, none appeared on behalf of the Assessment Year: 2013-14 assessee. Keeping in view, the issue raised by the assessee, we decided to dispose of the appeal on the basis of material on record after hearing the Departmental Representative (DR).

The assessee has filed the present appeal along with an application for condonation of delay in filing the appeal, as there is a delay of 58 days. The assessee has submitted in its application that the delay was neither due to negligence nor inaction on its part but was caused due to mistake of the accountant. Sub-section 5 of section 253 of the Income Tax Act provides that the Tribunal may admit appeal or permit filing of memorandum of cross- objection of respondent after expiry of relevant period of limitation referred to in sub-section 3 and 4 section 253, if it is satisfied that there was sufficient cause for not presenting the appeal within limitation period. The expression “sufficient cause” has come for consideration before the Hon’ble High Courts as well as before the Hon’ble Supreme Court, and the Hon’ble Courts are unanimous in observing that whenever such issue comes for consideration before adjudicating authority, it should be considered with justice oriented approach. In the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353 The Hon’ble Supreme Court has held that When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. Hence, following the ratio laid down by the Hon’ble Supreme Court in the aforesaid case, we condone the delay in filing the present appeal in the interest of justice and asked the Ld. DR to argue the case on behalf of the revenue. 6. The Ld. DR submitted before us that since the assessee has concealed the income amounting to Rs. 37,370/- in its return, the Ld. CIT (A) has rightly confirmed the penalty levied by the AO u/s 271 (1) (c) of the Act. The Ld. DR further submitted that since there is infirmity in the order passed by the Ld. CIT(A), the appeal of the assessee may be dismissed. Assessment Year: 2013-14 6.1. We have perused the material on record. The only grievance of the assessee is that, since the bona fide mistake was brought to the notice of the AO during the assessment proceedings, the Ld. CIT(A) ought to have deleted the penalty wrongly levied by the AO. The assessee has further contended that the assessee has already paid tax amounting to Rs. 8,54,236/-by way of advance tax, tax deducted at source and self assessment tax. 7. Under section 271(1)(c) of the Act, AO has power to impose penalty on an assessee for concealing its particulars of income or furnishing inaccurate particulars of such income. As per the settled law, proceeding for imposition of penalty and assessment are two separate and distinct proceedings and the findings recorded by the authorities below or the appellate authorities including the ITAT in quantum appeal cannot be said to be the conclusive factor in the penalty proceeding. In other words, addition of certain amount in quantum appeal does not ipso facto make an assessee liable for penalty u/s 271(1)(c) of the Act. Admittedly, in the present case, the AO has made addition on estimation basis for the reason that the assessee has failed to prove the genuineness of transaction by adducing cogent and convincing evidence. Since, the addition is on ad-hoc basis, it cannot be concluded that the assessee has furnished inaccurate particulars of such income within the meaning of section 271 (1) (c) of the Act. 8. In the present case, the assessee has pleaded bona fide human error before the authorities below, however, the authorities below have rejected the contention of the assessee and levied/confirmed penalty. The bona fide action of the assessee is apparent from the fact that the assessee had paid advance tax, self-assessment tax and deducted the tax at source. Moreover, during the course of assessment proceedings, the assessee himself has requested the AO to add the amount in question to its income. Hence, we are of the considered view that the assessee could not mention the income in question in its return of income due to bona fide mistake. We accordingly held that the assessee has neither concealed its income nor furnished inaccurate particulars thereof, therefore the Ld. CIT (A) has wrongly confirmed the penalty imposed by the Assessment Year: 2013-14 AO u/s 271 (1) (c) of the Act. Hence, we allow the appeal of the assessee and set aside the impugned order passed by the Ld. CIT (A) and further direct the AO to delete the penalty. In the result, appeal filed by the assessee for assessment year 2013- 2014 is allowed. Order pronounced in the open court on 31st.December, 2019. (PRAMOD KUMAR) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 31/12/2019