DCIT, DEHRADUN vs. MS. REENA VERMA MITTAL, DEHRADUN

We will first take up the appeal for the assessment year 2011- 12. The brief facts qua the issue of levy of penalty are that assessee is an Indian born and was having citizenship of USA up till assessment year 2010-11. From the assessment year 2011-12, assessee had shifted to Delhi. She filed her return of income for the assessment year 2011-12 on 30th July, 2011 in India in the status of resident but not ordinary resident, declaring income from salary and other sources (bank interest). For the year under consideration, the assessee received salary income from two different employers namely:- i. Credit Sights International Management: USD 4,12,466 ii. Credit Sights Asia Research Pvt. Ltd.: Rs. 58,42,800

The salary income was subjected to TDS both in India as well as in USA as per the prevailing law of the respective countries. The said return was prepared by professional Chartered Accountants in Delhi wherein relief of salary income on taxes paid in USA was claimed at Rs. 63,28,940/- u/s 90 of the Act and accordingly, total income was declared at Rs. 2,69,63,960/-. Later on the assessee was served with notice u/s 143(2), dated 7.8.2012 by the AO for scrutinising the return of income. In order to represent her case before the A.O. she engaged another professional firm of Chartered Accounts at Dehradun as she was residing in Dehradun. The new consultants after verifying the information and documents furnished by the assessee, realised that there were certain calculation errors which had occurred while computing total income and advised the assessee to file revised return of income. Accordingly, the revised return was filed on 30.12.2012, whereby the claim of relief u/s 90 was reduced to Rs. 55,05,227/-; and again the second revised return was filed on 22.3.2013 by further 2 ,5727/Del/2015 DCIT vs. Reena Verma Mittal reducing the relief u/s 90 to Rs. 47,27,799/-. The assessment was completed u/s 143(3) vide order dated 31.12.2013, whereby the second revised return was accepted by the AO and only addition of Rs. 1,23,100/- was made on account of unexplained credit entries in the bank account of the assessee.

The A.O. however initiated the penalty proceedings u/s 271(1)(c) on the excess relief claimed in the original return of income, on the ground that assessee has not revised the return voluntarily or has not corrected her mistake by herself but only when notice u/s 143(2) was issued by the department that the assessee came to know that excess relief u/s 90 has been claimed which has been deducted by the department. The assessee’s case was selected for scrutiny under CASS only for examining the genuineness of the relief u/s 90 claimed by the assessee. Thus, A.O. was of the view that such a revised return has been filed only it was discovered by the department.

Before the A.O as well as before the Ld. CIT (Appeals) the assessee’s submission was that in the notice u/s 143(2), no query or questionnaire whatsoever was raised and only time the A.O. asked to justify the revised return was vide notice dated 18.12.2013 issued u/s 142(1) which was much after the assessee had filed her second revised return of income. It was submitted that the mistake was on account of foreign exchange rate taken for conversion of US dollar into Indian rupees and also by mistake the earlier Chartered Accountant had included the credit for social security tax and Medicare tax paid in USA while claiming relief u/s 90. The A.O. has duly accepted the said revised return in the order passed u/s 143(3) and therefore, it was not a case that assessee had filed revised return only after she was confronted or cornered by the A.O. The assessee’s detailed submission in this regard has been incorporated by the CIT (A) at pages 5 to 7 of 3 ,5727/Del/2015 DCIT vs. Reena Verma Mittal the appellate order. The Ld. CIT (A) after considering the assessee’s explanation and material on record, deleted the said penalty after observing and holding as under:- “The findings of Ld.AO and the averments of the Ld.AR have been considered. It is seen that the Tax Consultant at Delhi (his certificate has been filed now as it was also filed before the Ld.AO would have prepared the statement of income and filed the return electronically since the Appellant is now admittedly based in Delhi. Thereafter, it can be understood that on receiving notice for scrutiny of the case, another consultant was engaged at Dehradun who apparently pointed out the error and ensured revised computations of income being filed. While the Ld.AO has mentioned that as per CASS the case was selected for scrutiny for determining the claim u/s 90 of the Act, it is not in evidence that due to constant pressure from the Ld. AO at the assessment stage only that the Appellant revised her income. The facts and circumstances spelt out in this case would easily persuade one to believe that a genuine mistake occurred in computing income which was discovered unfortuna1ely, only after receipt of notice for scrutiny but nonetheless efforts are seen to have been made to set right the error. On this issue, the case of Price Waterhouse Coopers (P) Ltd (supra) is almost identical on facts and would come to this Appellant's rescue to the extent that relief is due on amounts attributable to the error in calculating relief u/s 90 of the Act and on account of foreign exchange conversion. However, the relief needs to be have reduced by Rs. 1,23,100 (undisclosed Credits in bank) for working out the leviable penalty. The Ld.AO is directed accordingly. 5.3 However, it may be reiterated that regarding the amount of Rs. 1,23,100 the penalty is upheld since this is a case of concealment of income which was discovered by the Ld. A.O. at the assessment stage. Here it is pertinent to mention that this amount was apparently not offered suo moto and thus a distinction needs to be made between a possible oversight and genuine concealment as in this case. Accordingly the penalty is upheld on Rs. 1,23,100/-. The Ld. A.O. is directed accordingly.” ,5727/Del/2015 DCIT vs. Reena Verma Mittal 6. After hearing both the parties and on perusal of the relevant finding given in the impugned order as well as material on record, we find that the A.O. has levied the penalty on the ground that the assessee had claimed excess relief u/s 90 in the original return of income and the said relief has been reduced in the revised return of income only when the assessee was confronted by the A.O. that she has deducted excess claim of relief u/s 90. As discussed in the foregoing paragraphs, the original return of income was filed on 30.7.2011 and the said return was selected for scrutiny by issuance of notice on 7.8.2012 u/s 143(2). Nowhere it has been stated or brought on record either in assessment order or in the penalty order that the AO after the issuance of said notice u/s 143(2) and before filing of revised returns or any time between this period, the assessee was confronted with any query on account of excess relief; or assessee was cornered on this issue during the assessment proceedings forcing the assessee to revised her return. The revised return of income filed by the assessee on 30.10.2012 and again on 22.3.2013 appears to be purely voluntary and by own volition, because nothing has been asked from the assessee regarding the relief computed u/s 90. It was new Consultants engaged by her who pointed that the mistake in calculation of relief. The assessee had explained that the mistake was due to; firstly, incorrect rate of exchange for conversion of USD to INR while calculating the salary; and secondly, relief was incorrectly sought for social security tax and Medicare taxes paid in USA by earlier CA, which later on was realised that such taxes paid in USA cannot be sought as relief u/s 90. The assessee at the time of original return had filed all these details and claimed the relief as per the professional advice given by a Chartered Accountant. Later on, after the receipt of scrutiny notices u/s 143(2) and without their being any query or detection by the AO, another consultant engaged for ,5727/Del/2015 DCIT vs. Reena Verma Mittal conducting the matters before the AO advised the assessee to file the revised return to correct mistakes. Such a filing of revised return is absolutely voluntarily and without any detection by the AO. At least nothing has been brought on record by the AO that prior to filing of the revised return of income, the assessee was confronted with the query for claiming excess relief. Thus, we do not find any infirmity in the order of CIT (A) and accordingly, we hold that Ld. CIT (A) has rightly deleted the said penalty.

Similarly in the assessment year 2012-13 also, the penalty has been levied on similar ground of excess relief u/s 90. Herein in this case the original return was filed on 11.12.2012 for the assessment year 2012-13 and the notice u/s 143(2) was issued on 12.08.2013 and after the receipt of such notice assessee had filed the revised return on 19.12.2013, whereby the original return of income declared at Rs. 1,86,50,987/- was revised to Rs. 2,21,34,392/- after reducing relief u/s 90. Herein this year also the return was revised by taking the correct rate of exchange for conversion of USD and the INR while calculating the salary relief u/s 90 and by excluding the credit of social security tax and Medicare tax paid in USA which was claimed as a relief u/s 90. Here again prior to filing of revised return of income on 19.12.2013, no query was raised to the assessee by the AO qua the relief sought u/s 90 and there is no material on record to indicate that the AO had detected or has confronted the assessee on this issue of relief u/s 90 prior to filing of revised return of income. In this year too, the Ld. CIT (A) has followed his finding given in his order for the AY 2011-12 as incorporated above. Thus, we hold that no penalty u/s ,5727/Del/2015 DCIT vs. Reena Verma Mittal 271(1)(c) is leviable in assessment year 2012-13 also. Order of the Ld. CIT (A) is thus, affirmed.

In the result both the appeals filed by the revenue are dismissed.