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Income Tax Appellate Tribunal, “B” BENCH, CHENNAI
Before: SHRI N.R.S. GANESAN & SHRI, M. BALAGANESH
आदेश /O R D E R
PER M. BALAGANESH, ACCOUNTANT MEMBER:
This appeal of the assessee is directed against the order of the Commissioner of Income-tax (Appeals)-15, Chennai dated 22.11.2016 pertaining to assessment year 2011-12 confirming the penalty levied u/s 271(1)(c) of the Act.
The only issue to be decided as to whether the Ld.CIT(A) was justified in upholding the levy of penalty u/s 271(1)(c) of the Income
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Tax Act, 1961 (hereinafter referred as Act) in the facts and circumstances of the case.
The facts of the case is that the assessee is a salaried employee, working with Infosys Technologies Limited during the assessment year under consideration. The assessee submitted income tax return based on the “Form 16 received from his employer and paid all the tax due thereon. During the assessment year, the assessee had also received from his employer Infosys Technologies Limited towards gratuity `2,02,224/- and towards super-annuation `10,07,832/- on which the TDS was made during the year. The assessee being salaried person not being aware of non-inclusion of the same in the Form-16, in good faith, filed his IT Return based on the Form 16 issued by the employer. During the course of scrutiny, this was pointed out to assessee based on the 26AS by the ld. Assessing Officer. The assessee willingly agreed to pay the taxes due thereon with interest.
Hence, the assessee submits that there was no malafide intention or willful default warranting levy of penalty. During the course of assessment proceedings, the assessee had filed a revised statement of income including this sum of `12,09,344/- and claimed TDS relatable to such income in that revised computation. The assessment was completed by adding a sum of `12,09,344/- being the salary received by the assessee from Infosys Technologies Limited and raising demand
ITA No.365/Mds./2017 :- 3 -: thereon. The ld. Assessing Officer on completion of assessment, initiated the penalty proceedings u/s 271(1)(c) of the Act on the ground that assessee had concealed the particulars of his income received in the form of salary from his employer. In the opinion of the ld. Assessing Officer, but for this return being selected for scrutiny, the assessee would not have come forward to offer the gratuity and superannuation received in the sum of `12,09,344/- from Infosys Technologies Limited and paid taxes thereon. He further, stated that the return was selected for scrutiny only to address the mismatch between Form-16(TDS certificate) and Form-26AS. With these observations, the ld. Assessing Officer levied penalty u/s. 271(1)(c) of the Act on the ground of concealment of income to the tune of `3,80,000/-. Aggrieved by the action of ld. Assessing Officer, the assessee carried the appeal before the Ld.CIT(A). On appeal, the Ld.CIT(A) upheld the action of the ld. Assessing Officer. Aggrieved by the order of lower authorities, now the assessee is in appeal before this Tribunal raising following grounds for our adjudication:-
“1. The order of the CIT (A) is contrary to the law, fact and circumstances of the case. 2. The CIT (A) erred in confirming the order of the AO Passed under section 271 (1) (C) 3. The CIT (A) erred in confirming the penalty levied stating it as a fit case of levy of penalty for an amount of Rs.380000/-
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4. The CIT (A) failed to appreciate that the penalty levied is unjustified for reasons clearly explained in the grounds of appeal
filed before the CIT Appeals.
5. The CIT (A) should have appreciated the submissions made by the Authorised Representative at the time of personal hearing clearly explaining the reasons for non-inclusion of income at the time of original filing of return.
6. The CIT (A) has mentioned in his order Para 9 “More importantly the appellant never produced the relevant Form 16 before the undersigned for verification” It was not asked by the CIT (A) either during the course of hearing or by way of subsequent issue of notice. The hearing was concluded in one sitting. The copy of the Form 16 was very much available with the AR at the time of hearing.
7. The issue relates to the Assessment Year 2011-2012 where the viewing of 26 AS by the Assessee at the time of filing was not very common. Had the Appellant taken credit for the tax deducted amount without admitting the income then probably it could be a fit case for a levy of penalty. The Assessee did not have the two additional Form 16s at the time of original filing of return once after the Assessing officer pointed out during the course of scrutiny hearing he was able to approach the employer and obtain the Additional two form 16s and filed a revised statement of income and paid the entire tax due along with the interest due up to that date.”
We have heard both the parties and perused the material on record. At the outset, we find that the assessee is a salaried employee, working in Infosys Technologies Limited for a part of the assessment year under consideration and the assessee was also in receipt of gratuity fund and superannuation fund to the tune of `12,09,344/-, which was duly subjected to deduction of tax at source by the employer i.e Infosys Technologies Limited. The assessee filed
ITA No.365/Mds./2017 :- 5 -: his return of income based on Form -16 issued by M/s.Capgemini India Pvt Ltd., (i.e the second employer during assessment year 2011-12) and claimed TDS relatable to such salary income alone in the return of income. The assessee did not include the gratuity and superannuation received from Infosys Technologies Limited in his return of income.
The assessee did not claim the TDS relatable to such income also in the return of income. Once the assessee was made aware of the mistake committed by him, he came forward to collect the Form-16 from Infosys Technologies Limited for gratuity and superannuation fund payments made to him. From the perusal of the Form -16, he came to know that tax was also deducted by Infosys Technologies Limited on the same. Accordingly, the assessee offered the amount received from Infosys Technologies Limited towards gratuity and superannuation fund in the revised computation of income and also claimed TDS relatable to such income in the said revised computation as tax credit. Admittedly, the assessee had not bothered to verify Form 26AS while filing his return of income. Even though the return filed by the assessee might have been selected for scrutiny, to address the mis-match between form-16 and form 26AS as pointed out by the ld. Assessing Officer, we find that in the instant case, the assessee being a salary employee in a software company, cannot be expected to file his return of income after consideration of form-26AS, which requires
ITA No.365/Mds./2017 :- 6 -: assistance from a professional. In the instant case, both the Form-16 (TDS Certificate) as well as Form -26AS were very much available in the records of Revenue and hence there cannot not be any allegation of concealment of particulars of income on the part of the assessee.
Irrespective of the fact whether the assessee had offered this in the return of income or not, the Revenue having been in possession of all details before it could have completed the assessment even without furnishing of particulars by the assessee. Hence, there cannot be any allegation of concealment of income on the part of the assessee in the instant case.
4.1 Moreover, we find that the moment the assessee was made aware of not disclosing the income received from gratuity and superannuation fund, he came forward to clean his breast and offered the same in the revised computation of income, which was admittedly filed before the ld. Assessing Officer. The levy of penalty being penal in nature should be used in a discreet manner judiciously and not to be invoked as an automatical measure as held by the Hon’ble Supreme Court in the case of Hindustan Steel Ltd. Vs. State of Orissa reported in 83 ITR 26(SC). The argument of the Revenue that but for the case being selected for scrutiny, the assessee would not have come forward to offer the amount received from gratuity and superannuation fund, thereby warranting levy of penalty, cannot be accepted, as it would
ITA No.365/Mds./2017 :- 7 -: lead to an inference that the penalty is eligible automatically for every addition made in the assessment. In this regard, we would like to place reliance on the Third Member decision of Co-ordinate Bench of Delhi Tribunal in the case of ACIT vs. PREM CHAND GARG reported in [2009] 31 SOT 97 (ITAT[Del]) wherein it was held that:-
“19. The fact, whether there is concealment of income or whether inaccurate particulars thereof have been furnished is essentially a question of feet. To find out that or to decide which, all the attending circumstances have to be taken into account. The question is at what point of time this material fact is to be found out. Generally it is with reference to the return of income and at that time it is to be seen whether there was concealment of income from or furnishing of inaccurate particulars thereof in the return of income chargeable to tax. But there may be cases, where an income is not declared in the return or the particulars of income shown inaccurately in the return but assessee on realization of mistake, omission or misdeed rectifies that and correct himself and cleans his breast can he still be accused of concealment though in the return there has been the omission? By the time the Assessing Officer takes up the issue and comes across the information in his possession, if the assessee makes up the deficiency and offers the income or furnishes accurate particulars he, in our opinion, cannot be held guilty of concealment of income or furnishing of inaccurate particulars of his income. Any action rectified relates back to original act and to the date and time of filing the return. When the Assessing Officer starts scrutiny of the return and initiate assessment proceedings there is nothing concealed and the inaccuracy, if any, disappeared. Therefore the assessee cannot be held guilty of concealment. Section 271(1)(c) fixes the charge of concealment and it states : "271. (1) If the Assessing Officer or the Commissioner (Appeals) or the Commissioner in the course of any proceedings under this Act, is satisfied that any person— (a)and (b)******
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(c)has concealed the particulars of his income or furnished inaccurate particulars of such income, or .... he may direct that such person shall pay by way of penalty,— . . . (iii) in the cases referred to in clause (c) .... 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 the furnishing of inaccurate particulars of such income .... 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 Assessing Officer or the Commissioner (Appeals) or the Commissioner 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 clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed."
A perusal of this provision clearly show that it is in the course of any proceedings under the Act, assessment proceedings in this case, that the Assessing Officer is to be satisfied that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. It is thus to judged at this stage and if at this stage he has declared the correct income and/or furnished accurate particulars of his income then there is no scope, in our opinion, to arrive at the satisfaction by the Assessing Officer because at that stage there in no such concealment. It disappeared by an action of the Assessing Officer. In this case the assessee has no doubt did not show the amounts received as alleged gifts as his income, but no details of loans are given in the return nor any other particulars thereof given by the assessee at that stage, not to speak of inaccurate one. When the assessment was taken up and a general enquiry was made by the Assessing Officer requiring him to ITA No.365/Mds./2017 :- 9 -:
furnish details of any loans/gifts, if any, the assessee offered the amounts received as alleged gifts as his income and before it could be detection by the Assessing Officer. There was thus no concealment of the particulars of his income nor there remained furnishing of any inaccurate particulars of his income. It vanished before it could be detected.
The correct and accuraye disclosure may be by filing the revised return or by furnishing the particulars of such income before the detection by the Assessing Officer. The mere fact that the assessee had not revised returns or that the offer was by letter to avoid harassment to the assessee and the donors who were non-resident persons, it cannot convert an offer to tax as concealment of income. Therefore, in my opinion the assessee has not furnished inaccurate particulars of the income in the returns before detection by the revenue.
Therefore, mere omission of the surrendered income from the return of an item of receipt does neither amount to concealment nor furnishing of inaccurate particulars of income unless and until there is some evidence to show exist or some circumstances found from which it can be gathered that the omission was attributable to an intention or a desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. Apart from the surrender there was nothing more on record to hold the assessee guilty of offering the said amount on detection of the concealment. Even in assessment order there is nothing of that sort.In the assessment proceedings the Assessing Officer has raised some specific question not based upon information in the possession of the revenue. These are: "Sr. No. 4Bank Statement of all bank accounts maintained by you individually or jointly with any other person during the financial year along with narration of each debit/credit entry. Sr. No. 9Cash Flow statement for the financial year under consideration. Sr. No. 10Had you taken/given any loan/gift during the financial year under consideration? If yes, please furnish details."
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On a perusal of the questionnaire, it is evident, is general in nature without specifying the names of the donor or any other such details on the basis which it could be presumed that the Assessing Officer had information to call for specific information. The query "Had you taken/given any loan/gift during the financial year under consideration?" itself suggests that the revenue was not sure enough whether any gift was there, Mere asking of a question or simply raising of an enquiry without anything further does not tantamount to detection of concealment. There was neither any detection, nor any information in the possession of the revenue, nor the manner of its communication to the assessee which might lead to a detection of concealment.
There was no specific provocation or an apprehension of detection prevailing at the time when the offer was made and in the absence of any such imminent fear from the side of the revenue, if the assessee came forward and paid the tax thereon by adding the same in the returned income, it has to be taken as a voluntary offer to tax. On the face of the evidence in the shape of confirmation letters, bank accounts, passport etc. in the hands of the assessee, it might be valid gift that would have convinced a reasonably minded person, specially a person exercising a judicial function. The accepted position of law is that merely because an assessee had agreed to the assessment that cannot bring in automatic levy of penalty.
The facts and circumstances and the merits of the case and the cogent evidences placed on record are such as to exonerate the assessee from concealment penalty. The CIT(A) in my opinion is right in deleting the penalty, his order is affirmed and the appeals of the revenue are dismissed.” (Underlining provided by us)
4.2 We find that the Third Member decision of Delhi Tribunal has been considered and approved by the Hon’ble Calcutta High Court in ITA No.365/Mds./2017 :- 11 -: the case of CIT Vs. Ramesh Chand Goyal in G.A No.2347 of 2010 in ITAT No.181 of 2010 dated 11.08.2010. Moreover, in the instant case, it is not the case of the Revenue that the assessee had not offered any explanation on the receipt of gratuity and superannuation fund from Infosys Technologies Limited. It is also not the case of the Revenue that explanation given by the assessee was found to be false. In the instant case, that the assessee had indeed made bonafide error while filing the return of income by not considering the Form -16 properly, which was sought to be rectified by him during the course of assessment proceedings by filing the revised computation. The clinching evidences which go to prove the bonafide conduct of the assessee, in the instant case is that the assessee had also not claimed the TDS portion of ` 12,893/- and `2,98,721/- relatable to amounts received from gratuity and superannuation fund respectively in the return of income. This goes to prove the conduct of the assessee beyond doubt and also nullifies the failure of the act on the part of the assessee while filing the return of income. Hence, this bonafide mistake committed by the assessee when sought to be rectified by him during the course of assessment proceedings by filing the revised computation and making the payment of necessary taxes thereon with interest should not be invited with the levy of penalty.
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4.3 In view of aforesaid factual findings in the facts and circumstances of the case, and respectfully following the judicial precedents relied upon supra, we direct the ld. Assessing Officer to cancel the levy of penalty for an amount of ` 3,80,000/-. Accordingly, the grounds raised by the assessee in this appeal are allowed.
In the result, the appeal of the assessee is allowed. 5. Order pronounced on 18th January, 2018 at Chennai.