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Income Tax Appellate Tribunal, “D” BENCH, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI N.K. PRADHAN
Date of Hearing – 12.07.2019 Date of Order – 26.07.2019
O R D E R PER BENCH
Captioned appeals have been filed by the same assessee challenging three separate orders, all dated 22nd March 2018, passed by the learned Commissioner (Appeals)–55, Mumbai, confirming penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act") for the assessment years 2000–01, 2001–02 and 2002–03.
2 Shri Deepak C. Desai
Brief facts are, the assessee is an individual and resident of India. As stated, he derives income from rent and investments. On the basis of information received from the office of the DDIT (Inv.), Unit– IX(2), Mumbai, dated 21st January 2013 stating that the assessee is holding a bank account with erstwhile Republic National Bank of New York (Suisse) S.A., Geneva, now known as Hong Kong Shanghai Bank Corporation (HSBC, Geneva), re–opened the assessments for the impugned assessment years under section 147 of the Income Tax Act, 1961 (for short "the Act"). In response to the notices issued under section 148 of the Act, the assessee filed its return of income for the aforesaid assessment years declaring income as under:–
A.Y. 2000–01 ` 1,27,310 A.Y. 2001–02 ` 1,61,088 A.Y. 2002–03 ` 32,536
In the aforesaid returns of income, the assessee offered the interest income received on the amounts deposited in foreign bank account with HSBC. The Assessing Officer completed the assessment for A.Y. 2000–01 by determining the total income of ` 1,15,270, after allowing bank expenses. Similarly, for the assessment year 2001–02, the Assessing Officer determined the total income at ` 1,55,800, after allowing bank expenses. Insofar as the assessment year 2002–03 is 3 Shri Deepak C. Desai concerned, the Assessing Officer determined the total income at ` 30,730, after allowing bank expenses. Thus, the Assessing Officer determined the total income in the aforesaid assessment years at a figure lower than the total income declared by the assessee in the return of income. However, while determining the total income of the assessee, the Assessing Officer treated the interest income earned from foreign Bank account as unexplained cash credit under section 68 of the Act, since the assessee had not voluntarily offered such income. For the same reason, the Assessing Officer also initiated proceedings for imposition of penalty under section 271(1)(c) of the Act alleging furnishing of inaccurate particulars of income and concealing taxable income. In response to the show cause notices issued under section 274 r/w section 271(1)(c) of the Act of the Act, though, the assessee pleaded against imposition of penalty, however, the Assessing Officer rejecting the explanation of the assessee imposed penalty u/s 271(1)(c) of the Act in all the assessment years as detailed below:–
A.Y. 2000–01 ` 38,039 A.Y. 2001–02 ` 51,415 ` 9,403 A.Y. 2002–03
Though, the assessee challenged penalty imposed under section 271(1)(c) of the Act by filing appeals before learned Commissioner
4 Shri Deepak C. Desai (Appeals), however, learned Commissioner (Appeals) sustained the penalty imposed by the Assessing Officer.
The learned Authorised Representative submitted, there is no dispute that the deposits made in the foreign bank account were from explained source as the Departmental Authorities have not raised any issue with regard to the amounts deposited. He submitted, due to oversight the assessee did not offer the interest income earned from the foreign bank account to tax. He submitted, when the aforesaid mistake came to the notice of the assessee in the assessment year 2007–08, the assessee immediately filed a letter before the income tax Department expressing its intention to offer the interest income by filing the revised returns of income and ultimately the assessee paid tax on such income in the year 2011 and an affidavit to that effect was also filed before the income tax authorities. He submitted, the revised returns of income filed by the assessee in pursuance to the notice issued under section 148 of the Act were ultimately accepted. He submitted, though on identical reasoning, the Assessing Officer imposed penalty under section 271(1)(c) of the Act in the assessment year 2007–08, however, learned Commissioner (Appeals) being satisfied with assessee’s explanation that non–disclosure of interest income was due to a mistake/oversight and for bona fide reasons, deleted the penalty imposed under section 271(1)(c) of the Act. He
5 Shri Deepak C. Desai submitted, the reason for non–disclosure of interest income in the impugned assessment years remains the same as was the case in the assessment year 2007–08. He submitted, since for the assessment years 2000–01, 2001–02 and 2002–03 even the time for re–opening assessment as per existing statutory provisions had expired, the assessee had no scope to offer the interest income to tax. He submitted, subsequently clause (c) was introduced to section 149(1) of the Act by Finance Act, 2012, w.e.f. 1st July 2012, empowering the Assessing Officer to issue notice under section 148 of the Act within a period of 16 years to tax the income arising outside India. Thus, he submitted, when the Department issued notice under section 148 of the Act in pursuance to the aforesaid provision, the assessee got an opportunity to offer the interest income to tax. The learned Authorised Representative submitted, in these circumstances, assessee cannot be accused of concealing income or furnishing of inaccurate particulars of income. More so, when the quantum of interest income earned by the assessee is not much and the assessee has voluntarily paid the tax on such income while filing the return of income.
Further, he submitted, penalty orders passed under section 271(1)(c) of the Act are invalid, as in the show cause notice issued under section 274 r/w section 271(1)(c) of the Act, the Assessing Officer has not indicated whether the imposition of penalty is for 6 Shri Deepak C. Desai concealment of income or filing of inaccurate particulars of income. In this context, he sought the permission of the Bench to raise the following additional grounds in all these appeals.
“Without prejudice to the grounds of appeal raised, the learned A.O. & CIT(A) erred in levying penalty u/s 271(1)(c) when in the show cause the charge of concealment or filing of inaccurate particulars was not struck off by the A.O. & hence the A.O. & CIT(A) did not apply their mind before levying and confirming the concealment penalty, as under what charge the penalty was being initiated was not ascertained.”
7. However, he fairly submitted, the issue raised in the additional ground was not raised before the first appellate authority and requested for admission of the additional ground and restoration of the issue to the learned Commissioner (Appeals) for fresh adjudication.
The learned Departmental Representative, though, relied upon the observations of learned Commissioner (Appeals), however, he submitted that the legal issue raised by the assessee for the first time may be restored to the learned Commissioner (Appeals) for adjudication.
We have considered rival submissions and perused the material on record. From the facts on record it is clear that the assessee has a account in HSBC, Geneva. It is also evident, the assessee was regularly earning interest on the deposits standing in the said foreign
7 Shri Deepak C. Desai bank account. However, the interest income earned on such bank account was not offered to tax by the assessee. It is also evident, in pursuance to the notices issue under section 148 of the Act, the assessee filed revised return of income for the aforesaid assessment years and offered interest income to tax. The revised returns of income were also more or less accepted by the Assessing Officer, except the fact that, he further reduced the income declared by the assessee. One more crucial fact which needs to be mentioned is, the Departmental Authorities have not raised any doubt or dispute with regard to the source of deposits in the foreign bank account as the only income which is the subject matter of assessment in these years is the interest income earned. Therefore, it is necessary to examine whether non–disclosure of interest income by the assessee was for bona fide reasons. In this context, it is necessary to observe, under more or less similar facts penalty was imposed under section 271(1)(c) of the Act in the assessment year 2007–08. However, learned Commissioner (Appeals) deleted the penalty imposed being satisfied with assessee’s submissions that non–disclosure of interest income was due to bona fide reasons. The only difference in fact between assessment year 2007–08 and the impugned assessment years is, in these assessment years the assessee deposited the tax on interest income at the time of filing of returns of income in response to 8 Shri Deepak C. Desai the notices issued under section 148 of the Act. However, the explanation of the assessee for not depositing the tax earlier is, the time limit for re–opening the assessment even by the Department for these assessment years was not available, hence, the assessee could not have paid the tax for these assessment years. It is relevant to observe, the time limit to re–assess the income arising in foreign country by issuing notice under section 148 of the Act was extended to 16 years by virtue of introduction of section 149(1)(c) of the Act by Finance Act, 2012, w.e.f. 1st July 2012. Thus, with introduction of the aforesaid provision the Assessing Officer became empowered to re– open the assessment for the impugned assessment years. Keeping in view the aforesaid facts, the assessee’s explanation with regard to its inability to deposit the tax for the impugned assessment years earlier needs to be examined. Moreover, the assessee has filed additional ground challenging the validity of the penalty proceedings. Considering the fact that the issue raised in the additional ground is a purely legal issue going to the root of the matter, we are inclined to admit the additional ground in all these appeals. However, since, the issue raised in the additional ground is raised for the first time before us and the assessee had not raised it before learned Commissioner (Appeals). Therefore, in all fairness, the issue raised in the additional ground needs to be restored to the learned Commissioner (Appeals) for 9 Shri Deepak C. Desai adjudication. Even, in our view, the issue relating to merits of imposition of penalty also requires fresh adjudication in the light of the argument made by the learned Authorised Representative before us. Accordingly, all the issues arising in the present appeals are restored back to the file of the learned Commissioner (Appeals) for fresh adjudication after providing adequate opportunity of being heard to the assessee.
In the result, appeals are allowed for statistical purposes. Order pronounced in the open Court on 26.07.2019