MAHESH KUMAR AGRAWAL,JAIPUR vs. ACIT CIRCLE 7 JAIPUR, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR MkWa- ,l-lhrky{eh] U;kf;d lnL; ,oa Jh jkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: DR. S. SEETHALAKSHMI, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA. No. 194/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2012-13 ACIT, cuke Mahesh Kumar Agrawal 23/82 Jamuna Kunj, Swaran Path, Vs. Circle-7, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAUPA 8214 E vihykFkhZ@Appellant izR;FkhZ@Respondent

fu/kZkfjrh dh vksj ls@ Assessee by : Shri Manish Agarwal (C.A.) jktLo dh vksj ls@ Revenue by : Shri A.S. Nehara (Addl.CIT) a lquokbZ dh rkjh[k@ Date of Hearing : 21/07/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 29/08/2022

vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M. This appeal by the assessee is directed against the order of the National Faceless Appeal Centre [hereinafter referred to as (NFAC], Delhi dated 25.08.2021 for the AY 2012-13.

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1.2 That, ld. CIT(A) has further erred in confirming the penalty by grossly ignoring the settled judicial position that penalty proceedings are separate and distinct proceedings and conclusion drawn in assessment proceedings, though relevant could not be solely relied upon for imposing penalty. 1.3 That, Ld. CIT(A) has further erred in confirming the penalty by not considering the fact that assessee suo moto offered the sum of Rs. 21,00,000/- (special allowance claimed as exempt in return of income, on which penalty is imposed) for taxation during the course of assessment proceedings. Appellant prays that exemption was claimed in good faith on the advice of erstwhile counsel, however during re-assessment proceedings, assessee was informed by his present counsel that exemption was not allowable and thus claim was withdrawn and due taxes were paid. Therefore, there is neither concealment not any inaccurate particulars of income were furnished and penalty of Rs. 6,48,900/- deserves to be deleted. 2. That the appellant craves the right to add, delete, amend or abandon any of the grounds of appeal either before or at the time of hearing of appeal.”

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Income, tax consultant of the assessee was of the view that sum of Rs.21,00,000/- was a capital receipt and thus was not liable for taxation. On the basis of such advice, in good faith, assessee filed the return of Income, wherein such receipt was claimed as capital receipt not chargeable to tax.

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the notice and thus, there was no concealment of income or furnishing inaccurate particulars of income. The assessee has submitted that there was no show cause issued by the AO. It has been further contended that where the assessee himself withdraws wrong claim or offer additional income before assessment was made, then penalty provisions of Section 271(1)(c) did not apply. The contention of the assessee was not correct in the factual matrix of the case. The assessee filed his return of income on 28.07.2012 declaring total income of Rs. 38,43,989/-. From filing its return on 28.07.2012 to the date of notice u/s 148 i.e. 13.10.2014, there was sufficient period with the assessee to filed a revised return to meet out the said mistake of wrongly filed income. But the assessee did not file any revised return. In response to the notice u/s 148 of the Act, the assessee filed his submission on 30.09.2015 stating that the return filed u/s 139(1) of the Act may be considered his return of income in response to notice u/s 148 of the Act. Thus, the assessee made no changes in return of income even after issuing of notice u/s 148 of the Act. It is only the query raised by the AO when the assessee accepted his mistake and offered the same for taxation. The appellant surrendered the income for tax vide his letter dated 04.12.2015 before the AO with request to please not to initiated any penal action or proceedings and also produced various case in law support of his mistake. Hence, the finding of the AO that the assessee has concealed particulars of his income and furnished inaccurate particulars of his income to the extent of income of Rs. 21,00,000/- is found to be correct. The AO also relied upon the following case laws: 271(1)(c) KAMAL CHAND JAIN v ITO (2005) 277 ITR 429 (DEL) When there is no proper explanation from the assessee except surrendering certain amount for taxation to buy peace and avoid further litigation, it was held that levy of penalty u/s 271 (1)(c) was justified. 271(1)(c) SHANTI SWARUP BHATNAGAR VS. CIT [2005] 279 ITR 451 (ALL.) Penalty — Concealment of income — Returned income less than 80 per cent of assessed income — Amount surrendered after search operations and initiation of reassessment proceedings — Presumption of concealment of income not rebutted —Levy of penalty valid — Income Tax Act, 1961, s. 271(1)(c).

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271(1)(c) COMMISSIONER OF INCOME-TAX v. MAHABIR PRASAD BAJAJ, [2008]298 ITR 109 (JHARKHAND) Penalty—Concealment of Income—Incriminating documents found during search—Contention by assessee that —Revised return accepted —Revised return filed not voluntarily but owing to search and seizure— Levy of penalty proper Income tax Act, 1961, .271(1)(c). 271(1)(c) CIT V. HANDLOOM EMPORIUM [2006]282 ITR 431 (ALL.) Penalty u/s. 271(1)(c) is applicable even when concealment of income is admitted by filing a revised return after detection of concealment. During the appellate stage the appellant given explanation about the claim of exemption of Rs. 21,00,000/- and subsequent withdrawing the claim of exemption which was simultaneously supported by the payment of tax along with due interest, has been accepted by the AO during reassessment proceedings. In support of the above explanation the appellant relied upon the various judicial decisions, which is found not relevant in this case. In view of the above facts and circumstances the observation of the AO that the particulars of income in the return filed by the assessee were inaccurate particulars of income and leading to concealment of income is correct. Hence, the appeal of the assessee is dismissed and the order of the AO imposing penalty u/s 271(1)(c) amount to Rs. 6,48,900/- is hereby confirmed. In the result, the appeal of the assessee is dismissed.”

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“Ground of Appeal Nos. 1 to 1.3:

In all these grounds of appeal, the assessee has collectively challenged the validity of notice issued u/s 271(1)(c) , whereby penalty proceedings were initiated and further challenged the action of the Id. CIT(A) in confirming the imposition of penalty on other grounds. As all the grounds of appeal are interrelated, the same are canvassed together for the sake of convenience.

At the outset it is submitted that the notice dt. 31.03.2016 issued for initiating the penalty under Section 271(1)(c) of the Act is defective, copy enclosed, wherein it can be observed that the show cause notices issued to the assessee u/s 274 r.w.s 271 of the Act, Id. AO has not spelt out as to whether assessee has concealed the particulars of his income or furnished inaccurate particulars of his income. It is further submitted that ld. AO had stated that "have concealed particulars of your income or furnished inaccurate particulars of such income" but has not struck off the inapplicable words and phrases out of these two limbs, which he is required to do. Thus the said show cause notice issued under Section 274 r.w.s 271(1)(c) does not spell out the charge against the assessee; i.e. as to whether the assessee is guilty of having concealed particulars of income or of having furnished inaccurate particulars of income. It is very necessary to clearly specify in the notice of section 274 as to for what reason the penalty u/s 271(1)(c) is being proposed to be imposed. In the absence of such specification, the assessee is not in a position to give proper explanation in his defense. Again, at the cost of repetition it is mentioned that, concealment of income is quite different from furnishing inaccurate particulars of income.

Hon'ble Karnataka High Court in the case of Commissioner of Income Tax vs. Manjunatha Cotton And Ginning Factory (2013) 359 ITR 565, has held that the notice issued by the Assessing Officer under section 274

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r.w.s. 271(1)(c) of the Act as bad in law as it does not specify as to under which limb of section 271(1)(c) of the Act the penalty has been initiated. Similar view is pressed in following case laws:

In CIT Vs. SSA'S Emerald Meadows ITA No. 380/2015 decided by hon'ble Karnataka H/C, SLP of the department was also dismissed by Hon'ble Supreme Court, as reported in [2016] 73 taxmann.com 248 (SC). − 396 ITR 398 Muninaga Reddy Vs. ACIT (Karnatka) S. Chandra Shekhar Vs. ACIT 396 ITR 538 (Karn.) M/s. Sai Venkata Construction Vs. Addl. CIT (ITA Nos. 994 & 995/2013, order dated 11.03.2016) (Pune ITAT) Sanjog Tarachand Lodha Vs. ITO (ITA Nos. 688 and 689/PN/2014 order dated 31-082015 ) (Pune ITAT) − Sanghavi Savla Commodity Brokers P. Ltd. Vs. ACIT (ITA No.1746/Mum/2011, order dated 22.12.2015) (ITAT Mumbai) − Shri Deepak Kumar Patwari Vs. ACIT (ITA Nos. 616 to 618/Kol/2013 order dated 03.02.2016) Kolkatta ITAT DCIT, Faridabad vs M/s Sucon India Ltd, Faridabad in ITA No. 4418/Del/2016 (ITAT Delhi) In view of the facts of the cases and considering the decisions referred above it is submitted that the proceedings initiated u/s 271(1)(c) by issue of defective notice, deserves to be hold bad in law and consequent levy of penalty be deleted.

On merits, it is submitted that no belief was formed by Id. AO regarding escapement of income of Rs.21,00,000/- being exemption of special allowance claimed by assessee. AT this juncture, kind attention of your honours is invited to the reasons recorded for reopening the assessment (copy enclosed), from perusal of which, it is clear that reasons were recorded in a casual manner and ld.AO himself was not clear as to

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which income has escaped and has stated that case was reopened to examine the income declared in the return of income at Rs.44,53,415/- (though it is settled law that case cannot be reopened to merely examine/ verify any fact/income rather there has to be belief regarding escapement). Going further, Id.AO has stated that "I have reasons to believe that the income of the assessee of Rs.44,53,415/-shown by him in his return of income filed by him for the assessment year 2012-13 has escaped assessment" Thus, ld.AO has stated that income shown by assessee in return of Income has escaped assessment, which observation itself is contradictory for the very simple reason that how could income declared escaped assessment. It is thus clear that no belief whatsoever was formed by ld.AO regarding escapement of income of Rs.21,00,000/- on which penalty is levied. In fact, no query was raised by id. AO regarding claiming of exemption of special allowance of Rs.21,00,000/- by the assessee and it was the assessee who suo moto withdrew the exemption on the advice of his counsel. Moreover, no addition was made of the sum for which reasons were recorded. It is also submitted that reasons have been recorded on 13.10.2014, which mention that approval for initiating re-assessment proceedings was accorded vide office letter no. F.No. DIT(S)-II/CASS/2014-15/2045 dated 30.09.2014. Your honours would appreciate that approval can be granted by the specified authority only after recording of reasons and not before that. In the scenario, your honours would appreciate that re-assessment proceedings itself initiated by ld.AO is not in accordance with law, therefore penalty proceedings initiated vide re assessment order deserves to be deleted in toto.

It is further submitted that exemption of Rs.21,00,000/- was claimed by assessee on the basis of expert advice of tax professional on the issue, which eventually turned out to be not in accordance with law. In fact, no sooner it came to the knowledge of assessee that exemption was claimed

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incorrectly, assessee suo-moto withdrew the claim and paid due taxes along with interest amount. Your goodself would appreciate that assessee is not well versed with complicated provisions of taxation and acted in good faith on the advice of Tax Consultant, therefore assessee should not be penalized.

In this regard reliance is placed on the judgement of Hon'ble Apex Court in the case of M/s Price Waterhouse Coopers Pvt. Ltd. v/s Commissioner of Income Tax, Kolkata-I reported in 348 ITR 306 dated 25.09.2012, wherein it has been held as under:

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add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.

Similarly in the case of CIT Vs. Reliance Petrochemicals Pvt. Ltd (2010) 322 ITR 158(SC), Hon'ble Supreme Court held that "A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee". Thus on perusal of aforesaid judgement it is evident that if the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will not invite penalty u/s 271(1)(c).

Recently, Hon'ble Pune Bench of ITAT in its decision dated 13.06.2022 in the case of M/s Rane Industries Pvt. Ltd. in ITA No. 555/PUN/2020, relying upon the decision of Hon'ble Apex Court in case of Price Water house coopers (supra) has held as under (copy enclosed) :

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" 3. We have heard the rival contentions and gone through the relevant material on record. It is apparent from the assessment order itself that the assessee, when pointed out by the AO, admitted its inadvertent mistake in not adding back the above amounts totaling to Rs. 78.26 lacs in the computation of total income, which were debited to the Profit & Loss account. It is clear from the nature of the amounts and the way of their depiction thereof in the Profit & Loss account that the assessee inadvertently committed a mistake in not adding back the amount of income tax, etc. paid by it in the accepted the disallowance and paid due tax thereon. It is not a case where the assessee tried to mislead the Revenue by intentionally claiming higher amount of deduction. Rather it is a case of inadvertent mistake in the computation of income. The Hon 'ble Supreme Court in Price Waterhouse Coopers Pvt. Ltd. Vs. CIT (2012) 348 ITR 306 (SC) has held that no penalty u/s 271(1)(c) can be imposed in respect of inadvertent and bonafide mistake committed by the assessee. The Hon'ble jurisdictional High Court in CIT vs Somany Evergreen Knits (2013) 352 ITR 592 also deleted the penalty which occurred due to bonafide and inadvertent mistake of chartered accountant while filing the return. Since the facts and circumstances of the instant case amply show that the excess claim of deduction was due to bobafide and unintentional mistake, respectfully following the precedents, we order to deleted the penalty."

Your honours would appreciate that assessee's case is on a far better footing as assessee withdrew claim of special allowance suo moto and before any explanation was sought by ld.AO in this regard, therefore penalty imposed deserves to be deleted.

Hon'ble Rajasthan High Court in the case of J.P. Sharma 86 Sons v. Commissioner of Income-tax (1985) reported in 151 ITR 333 (Raj) held that filing of revised return (revised computation in the assessee's case)

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by assessee voluntarily was bona fide and honest act and, therefore, assessee could not be held guilty of deliberate concealment of income so as to levy penalty under section 271 (1)(c).

Similarly, Hon'ble ITAT, Jaipur Bench in the case of Dinesh Kumar Vijay, Jaipur v. ITO in ITA No. 58/JP/2016 for AY 2011-12 vide order dated 04.10.2017 held that "In the peculiar facts and circumstances of the case where return was filed which was subsequently revised by way of filing revised computation of income along with payment of taxes during the course of assessment proceedings, it shows the bonafide of the assessee and accordingly, cannot be made subject to levy of penalty u/s 271(1)(c) of the Act. In the result, the assessee's appeal is allowed"

Further reliance is placed on following judicial pronouncements—

CIT vs. Hans Christian Gass in ITA 2209/2010 Bombay HC reported in (2013) TaxPub (DT) 1975

− 359 ITR 101, CIT Vs. DCM Ltd. (Delhi High Court) 322 ITR 73, CIT Vs. Shahabad Co-operative Sugar Mills Ltd. (P&H) − HCL Technologies vs DCIT in ITA No. 3702/JP/2017 (ITAT Delhi)

Swati Pearls & Jewellers Vs. DCIT in ITA No.1401/HYD/2014 (Hyderabad ITAT) − - CIT Vs Ms. Sania Mirza in I.T.T.A. No. 526 of 2011reported in All High Courts (5353) Andhra Pradesh HC (84) It is further submitted that ld. CIT (A) has brushed aside the submission and case laws relied upon without assigning any reason. In fact, case CIT(A) placed reliance on the judgments referred by Id. AO without

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appreciating that facts of the same are on different facts than that of assessee's case which is summarized as under:

Facts of Judgment Referred Facts of Assessee Case S.No Judgement Referred 1. Kamal Chand Jain Assessee was unable to offer v. ITO (2005) 277 explanation of Source of ITR 429 (Del) amount and surrendered the amount submitting a letter stating that he was not aware of tax affairs.

Assessee not only 2. Shanti Swamp Assessee surrendered the said provided the Bhatnagar v. CIT amount on the ground that explanation regarding (2005) 279 ITR 451 "Lallo" against whose entry source of amount but (All) stood in the Black diary was also explained the not traceable and could not be reason for its claim as found and also nature of exempt and later on, amount was not explained. once assessee came to know about error in return as per advice of erstwhile tax consultant assessee deposited the 3. CIT v. Mahabir During the course of search tax amount along with and seizure, it was revealed Prasad Bajaj [2008] interest due u/s 234B & 298 ITR 109 that transactions made were 234D. Further Ld. AO (Jharkand) found to have mostly been neither challenged nor kept out of the books. And disapproved the no others explanation explanation provided by provided other than additional the assessee. income offered on the basis of peak credit for bank deposit.

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It is further submitted that ld. CIT(A) grossly erred in confirming the action of Id. AO without appreciating the fact that imposition of penalty is not a natural consequence of additions made in quantum proceedings, but requires fresh and separate consideration. It is a well-established law that quantum proceedings and penalty proceedings are totally distinct and while imposing penalty, Id. AO has to bring something more on record that assessee has furnished inaccurate particulars of income rather than merely mechanically imposing penalty just because some additions have been made and upheld.

Hon'ble Supreme Court in the case of Anantharaman Veerasian Co. Vs. CIT, 123 ITR 457 held that the findings in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings. It is also well settled that the criterion and yardsticks for the purpose of imposing penalty u/s 271(1)(c) of the Act are different than those applied for making or confirming the addition. It is, therefore, necessary to re-appreciate and reconsider the matter so as to find out as to whether the addition or disallowance made in the quantum proceedings actually represents the concealment on the part of the assessee as envisaged in section 271 (1)(c) of the Act, and whether it is a fit case to impose the penalty by invoking the said provisions.

Hon'ble Apex court in the case of Eilly Lilly & Company reported in 312 ITR 225 has held that the penalty proceedings is not an automatic or mandatory fallout of the addition made during the assessment proceedings, therefore, the same should not be levied in routine manner. •

Thus it is humbly prayed that error while filing return of income u/s 139(1) of the Act isabsolutely inadvertent and was rectified as soon the same came to the notice of assessee, it is therefore, requested that penalty 6,48,900/- levied u/s271(1)(c) of the Income Tax Act may please be deleted.” In support reliance was placed on the decision in case of M/s Rane Industries Pvt. Ltd vs. DCIT in ITA No. 555/PUN/2020 vide order dated 13.06.2022.

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the Act. The AO has not mentioned that the assessee has concealed the particulars of income or furnished inaccurate particulars of income from the assessment order, the findings of the AO are that the assessee has concealed the particulars of his income or furnished inaccurate particulars of such income. Further, the ld. AR for the assessee submitted that a show cause notice was issued u/s 274 r.w.s. 271(1)(c) of the Act does not spelt out the charge against the assessee i.e. as to whether the assessee is guilty of having concealed the particulars of income or furnished the particulars of income. We observed that the ld. AO failed to consider regarding that there is no escapement of income of Rs. 21,00,000/- being which is exemption of special allowance claimed by the assessee are genuine . The AO erred in finding that the income of the assessee as Rs. 44,53,415/- shown by him in his return of income filed for the assessment year 2012-13 as escaped income. We observed that the exemption of Rs. 21,00,000/- was claimed by the assessee on the basis of expert advice of tax professional regarding the special allowance. During the course of reassessment proceedings when the assessee came to known that the exemption was claimed incorrectly the assessee himself withdrew the claim and paid due taxes along with interest amount. We also observed that the ld. CIT(A) has recorded the written submissions filed by the assessee during the appellate proceedings which is considered carefully and but in holding the finding of the AO is unjustified. Going through the present facts and circumstances of the case we are of the view that concealment of income is quite different from furnishing of inaccurate particulars of income. We do not have any hesitation on this point to delete the penalty and the addition made. In support, reliance was placed on the judgments referred by the ld. AO and ld. CIT(A) without appreciating that facts of the case are on different facts than that the assessee’s case where the assessee not only provided explanation regarding the source of amount but also explained the reasons for its claim as

18 ITA No. 194 /JP/2021 Mahesh Kumar Agrawal exempt when the assessee came to know about error in return as per advice of erstwhile tax consultant and the assessee deposited the tax amount along with interest due u/s 234B & 234D. The ld. CIT(A) and the AO impose the penalty is unjustifiable . Reliance was placed on the judgments in case of CIT vs. reliance Petrochemicals Pvt. Ltd. (supra) and Pune Bench of ITAT in case of M/s Rane Industries Pvt. Ltd. vs DCIT in ITA No. 555/PUN/2020 dated 13.06.2022 where the assessee’s case is similar and identical where no hesitation to delete the penalty by following precedents where the excess claim of deduction was due to bona fide and unintentional mistake.

In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on 29/08/2022. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼,l-lhrky{eh½ (RATHOD KAMLESH JAYANTBHAI) (Dr. S. Seethalashmi) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 29/08/2022. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Mahesh Kumar Agrawal, Jaipur. 1. izR;FkhZ@ The Respondent- ACIT, Circle-7, Jaipur. 2. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 194/JP/2021} vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत