RAJ KUMARI MAHESHWARI,JAIPUR vs. DY CIT, CC-II, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”SMC” 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. 125/JP/2021 fu/kZkj.k o"kZ@Assessment Years : 2010-11 Deputy cuke Smt. Raj Kumari Maheshwari Commissioner of 18, Gopal Li Ka Rasta, Vs. Income-Tax, Jaipur. Central Circle-2, Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AHXPM 3143 Q vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri R. K. Bhatra (C.A.) jktLo dh vksj ls@ Revenue by : Ms Monisha Choudhary (JCIT) a lquokbZ dh rkjh[k@ Date of Hearing : 19/04/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 13/06/2022

vkns'k@ ORDER

PER: DR. S. SEETHALAKSHMI, J.M. This appeal by the assessee is directed against the order dated 08.07.2021 of the ld. CIT(A), National Faceless Appeal Centre, Delhi [hereinafter referred to as (NFAC)], arising from penalty order passed U/s. 271(1)(c) of the Income Tax Act, 1961 (in short the “Act”) for the AY 2010- 11.

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appellant that the notice issued under section 271(1)(c) of the I.T. Act, 1961jfor imposition of penalty is wrong and had in law. 2. That without prejudice to the ground No. (1) above on the facts and in the circumstances of the case the ld. CIT(A) is wrong, unjust and has erred in law in confirming penalty of Rs. 204372 imposed by the Assessing Officer under section 271(1)(c) of the I. T. Act, 1961. 3. That the appellant craves the permission to add to or amend to any of the above grounds of appeal or to withdraw any of them.”

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5 Being aggrieved by the assessment order, the assessee preferred an appeal before the ld CIT(A). Before the ld. CIT(A), the assessee has reiterated its arguments in written submission, which is the part of the order . The CIT(A) for the reasons stated in his order has rejected the arguments and submissions made by the assessee.

" It is evident that the appellant had deliberately and intentionally not disclosed the true and correct income and had furnished in accurate particulars of income with the intention to evade tax. Hence the AO has rightly imposed the penalty u/s 271(1)(c) of the Act, and the imposition of penalty u/s upheld and grounds of appeal is dismissed. 7. During the course of hearing, ld. AR of the assessee also relied on the written submissions filed before the bench and the same is reproduced below:-

“a) In assessment order:-

In body of assessment order in last of para — 8 it is stated 'penalty proceedings u/s 271 (1) (c) of the Act, are initiated separately against the assessee for concealing the particulars of his income and/or furnishing of inaccurate particulars of income'. In para — 11 of assessment order it has been stated 'Penalty proceedings u/s 271 (1) (c) of the Act are initiated separately for concealing particulars of income and/or furnishing inaccurate particulars of income'.

Thus in assessment order for the initiation of penalty proceedings there is no satisfaction that whether penalty is initiated for

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concealment of income or for furnishing inaccurate particulars of income.

b) Notice u/s 274 Furthur in the penalty notice u/s 274 read with section 271 of Income Tax Act, 1961 dated 16-02-2015 (copy enclosed) A.O. issued printed notice by putting against

• have concealed the particulars of income or furnished inaccurate particulars of such income penalty u/s 271 (1) (c) initiate for undisclosed income of the specified year.

The notice dated 07-07-2015 was only reminder of penalty proceedings and final notice dated 24/04-01-2019 notice was also simply reminder of penalty proceedings u/s 271 (1) (c) initiated fixing date of hearing 11-02-2019.

It is submitted that any notice issued under section 274, read with Section 271 (1) (c) of the Income Tax Act, 1961, must specify limb of default under Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. In the absence of which no penalty should be levied on the assessee as determination of such limb is sine qua non for imposition of penalty under section 271 (1) (c).

1.2 It is pertinent to note that in the said assessment order where the penalty proceedings were initiated and notice Ld. A.O. has not clearly mentioned the limb, on the basis of which, penalty was proposed to be imposed. Ld. A.O. in assessment order or penalty notices did not specify the limb under which the penalty was initiated and simply issued a pre-printed notice without striking off the unnecessary portions of the notice. If the Ld. A.O. was .of the view that the assessee has concealed the income or furnishing inaccurate particulars of income then he should have deleted or not mentioned the other limb for imposition of penalty i.e. concealing the particulars of income.

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Thus, the penalty proceedings were initiated without specifying the limb of default i.e. whether the penalty was initiated for concealment of particulars of income or for furnishing inaccurate particulars of income. Thereafter the penalty was levied by holding that the assessee has concealed the particulars of income and the penalty was imposed on the concealed income. Therefore, the initiation and imposing of penalty is wrong, bad in law, invalid and void ab initio.

1.3 The notice u/s 271 should be specific on imposing of penalty u/s 271 (1) (c) of Income Tax Act, 1961 i.e. concealed particulars of income or furnishing inaccurate particulars of income. Reliance is placed on the decision of Hon'ble Karnataka High Court in the case of CIT Vs. M/s SSA's EMERALD MEADOWS reported in 2015 (11) TMI 1620 - , wherein Hon'ble Court has held that: -

"3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under section 274 read with Section 271 (1) (c) of the Income Tax Act, 1961 (for short 'the Act) to be bad in law as it did not specify which limb of Section 271 (1) (c) of the Act, the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee has relied on the decision of the Division Bench of this Court rendered in the case of COMMISSIONER OF INCOME TAX — VS — MANJUNATHA COTTON AND GINNING FACTORY (2013) 359 ITR 565.

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The department has filed SLP in Hon'ble Supreme Court which has been dismissed. Therefore, Honble Supreme Court has approved the findings made by Hon'ble Karnataka High Court in the case of CIT Vs. SSA's Emerald Meadows And CIT Vs Manjunatha Cotton & Ginnign Factory & others [2013] 359 ITR 565.

Honble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory [2013] 359 ITR 565 (Karnataka) after referring to the decision of Honble Supreme Court in the case of T. Ashok Pai (Supra) held as under: -

.......... Concealment, furnishing inaccurate particulars of income are different. Thus the Assessing officer while issuing notice has to come to the conclusion that whether is it a case of concealment of income or is it a case of furnishing of inaccurate particulars. The Apex Court in the case of Ashok Pai reported in 292 ITR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujarat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case of VIRGO MARKETING reported in 171 taxman 156, has held that levy of penalty has to be clear as to the limb for which it is levied and the position being unclear penalty is not sustainable. Therefore, when the Assessing Officer proposes to invoked the first limb being concealment, then the notice has to be appropriately marked. Similar is the case for furnishing inaccurate particulars of income. The standard proforma without sticking of the relevant clauses will lead to an inference as to non application of mind…….?

1.4 In the case of Jyoti Ltd. [2013] taxmann.com 65 (High Court- Guj), the assessing officer in his penalty order noted as under: - "In view of the above facts, it is clear that the assessee concealed income/furnished inaccurate particulars of income. I, therefore, consider it a fit case for levy of penalty u/s 271 (1) (c)" Hon'ble Gujrat High Court in the above case held that, where the Assessing officer in order of penalty did not come to a clear

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finding regarding the penalty being imposed on concealment of income or on furnishing inaccurate particulars of income, the Tribunal was justified in setting aside the impugned penalty order. Hon'ble Gujrat High Court followed the ratio laid down in the case of New Sorathia Engg. Co. [2006] 282 ITR 642 (Guj-High Court).

The above ratio laid down in the case of Manjunatha Cotton & Ginning Factory Supra) has been followed by various High Courts in the below mentioned cases: Shri Samson Perinchery. ITA 1154, 953, 1097, 1226 of 2014 (Order date —5.01.2017) (Bombay High Court)

ii SSA's Emerald Meadows [2016] 73 taxmann.com 241 (Karnataka High Court)

iii Mitsu Industries Ltd. ITA No. 216 of 2004, Gujarat High Court

Further attention is drawn towards the following judgement of the Hon'ble ITAT, Jaipur Bench: - (i) Narayana Heights & Towers, Vs. I.T.O. Ward — 2- 4 Jaipur ITA No. 1033/JP/2016 has canceled the penalty by holding that there is no specific charge by the Assessing officer. In our considered view, the assessing officer was not justified in imposing the penalty on this basis the action of the assessing officer is contrary to the provision of law."

ii) Shankar Lal Khandelwal v. DCIT — ITA No. 878/JP/2003. i) Radha Mohan Maheshwari v. DCIT — ITA No. 773/JP/2013. ii) Murari Lal Mittal ITA No. 334/JP/2015 order dated 09/11/16

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iii) Mrs Mradula Agarwal vs I.T.O. — ITA No. 176/JP/2016

1.5 In the resent judgment of the Hon’ble jurisdictional High Court in the case of Shevata Construction Co. Pvt. Ltd. ITA No. 534/2008, wherein the Hon’ble High Court at para 9 of its order held as under:-

“……Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observation made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing Officer in the assessment order it is held that the A.O. has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is so he has to say so in the notice and record a finding in the penalty order ...." (Emphasis Supplied).

The Hon'ble ITAT, Jaipur Bench, Jaipur has also in case of Lal Chand Mittal Vs. DCIT (ITA No. 772/JP/2016 order dated 29-12-2011 and various other cases decided by it held that on the basis of such notice issued by sending printed where only all the ground of section 271 (1) (c) are mentioned or where show cause notice u/s 271 (1) (c) for imposing of penalty without specifying the limb for reasons to impose penalty whether for concealment of income or furnish inaccurate particulars of income is not as per law and assessing officer did not have any jurisdiction to impose penalty u/s 271 (1) (c). In the case(s) Radha Mohan Maheshwari Vs. DCIT (ITA No. 773/JP/2013) Mohd. Sharif Khan Vs. DCIT (ITA No. 441/JP/2014) Shankar Lal Khandelwal Vs. DCIT (ITA No. 878/JP/2013) Murari Lal Mittal (ITA No. 334/JP/2015 order dated 9-11-2016 and Mridula Agarwal (ITA No. 176/JP/2016) the Hon'ble Bench upheld the same view.

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The Hon'ble coordinate ITAT, Jaipur Bench, Jaipur has also in a recent case of Ratan Kumar Sharma Vs. ITO Wad-7(1) (ITA No. 176/JP/2018 order dated 0803- 2019 and Heera Chand Jain Vs ITO W1-(2), Jaipur (ITA No. 964/JP/18) dated 30-04-2019 upheld the same view.

1.6 The Hon'ble ITAT, Amritsar Bench (THIRD MEMBER) in the case of HPCL Mittal Energy Ltd. Vs Add. CIT, Circle-1, Bhatinda held that "when Assessing Officer is satisfied at stage of initiation of penalty proceedings of a clear-cut charge against assessee of concealment of particulars of income, but imposes penalty by holding assessee as guilty of other charge (furnishing of inaccurate particulars of income) or an uncertain charge (concealment of particulars of income/furnishing of inaccurate particulars of income), penalty cannot be sustained"

1.7 Further the Hon'ble Supreme Court of India in case of PCIT (Central) Vs Golden Peace Hotels & Resorts Pvt. Ltd. (2021) 124 Taxmann.Com 249 (SC) held that " SLP dismissed against High Court ruling that recording of satisfaction by Assessing Officer that there was concealment of income or that any inaccurate particulars were furnished by assessee was sine qua non for initiation of penalty proceedings and in absence of such satisfaction, both Commissioner (Appeals) as well as Tribunal had correctly ordered to drop penalty proceedings against assessee"

Therefore, the concealment of income and furnishing inaccurate particulars of income, two are different defaults and they cannot be intermixed. In para — 4 of penalty order the A.O. held the default of concealment of income and levied penalty for concealment of income which too is not correct in law. Therefore, the penalty order of ld. AO deserves to be set aside and penalty levied by AO deserves to be cancelled.

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(2) The ground No. (2) of appeal is that without prejudice to the ground No. (1) above on the facts and in the circumstances of the case penalty of Rs. 2,04,372/- imposed by the assessing officer under section 271 (1) (c) of the I. T. Act, 1961 is wrong and bad in law.

The fact of the case is that assessee in the year under assessment sold a plot no. 8 at Gem Vihar, Sanganer, Jaipur. The said plot was purchased by assessee in the financial year 198990 for Rs. 30,000/- However at the time of filing of return of income the said purchase cost of land has wrongly been typed at Rs. 3,00,000/- instead of correct figure of Rs. 30,000/-. Because of this the cost of acquisition has been claimed excess by Rs. 2,70,000/-. During the assessment proceedings when assessee came to know about said mistake she voluntarily offered the said correction in the cost of acquisition claimed in return of income filed. Thus from the above said facts and circumstances of the case, it is clear that the intention of the assessee was not to hide or conceal her income. Her conduct was not deliberate or conscious.

The Ld. A.O. in penalty order stated that the assessee has claimed that it was an inadvertent and bonafide error. However, the claim is contrary to the assessee's ground of appeal filed before the CIT (A), Jaipur, against the addition of Rs. 992094/- . Now if the mistake was inadvertent and assessee has admitted during the course of assessment proceedings than the result of rectification of the mistake should be admissible by the assessee. However, in the instant case the assessee did not admitted the same and filed appeal before the CIT (A), where he is claimed that it was not a inadvertent mistake but the error incurred by the A.O. Therefore, it is evident that it was a well thought attempt by the assessee to decrease amount of Long Term Capital Gain by claiming excess cost of acquisition by Rs. 3,00,000/- instead of Rs. 30,000/-. In this connection it is submitted that while filing appeals in various cases of group the appeal in the case was also filed, but when appeal fixed for hearing noticing the said admitted facts same was withdrawn resulting as no appeal filed. The comments of Ld. A.O. are thus uncalled for.

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As the provisions of the section 271 (1) (c) the penalty can be levied on concealment / inaccurate particulars of income. The Supreme Court in case of Price Water House Coopers P. Ltd. Vs. CIT (2012) 348 ITR 306 held that 'the assessee should have been careful but in absence of due care in a case did not mean that assessee was guilty of either furnishing inaccurate particulars or attempting to conceal the income. Thus no penalty can be levied for a bona fide/inadvertent /human error.

Further Hon'ble by M.P. High Court in CIT Vs. SKY Auto Products Pvt. Ltd. (2004) 271 ITR 335 held that where the assessee, a new businessman claimed depreciation for the full year in the first year of starting production though he was entitled only to fractional depreciation, it was a case of bonafide mistake on the part of the assessee. Such a ground cannot be a good ground for imposition of penalty u/s 271 (1) (c).

The Hon'ble Supreme Court in the case of M/s K.C. Builders Vs. ACIT (2004) 265 ITR 562 held that mere omission from the return of an item of receipt does neither amount to be concealment nor deliberate furnishing of inaccurate particulars of income unless and until there is some evidence to show or some circumstance found from which it can be gathered that the omission was attributable to an intention or desire on the part of the assessee to hide or conceal the income so as to avoid the imposition of tax thereon. In the view of above there was neither concealment nor the assessee furnished the inaccurate particulars of income. The Hon'ble Supreme Court in case of Dilip N. Shroff Vs. JCIT (2007) 291 ITR 519 held that before penalty can be levied u/s 271 (1) (c) the entirety of circumstances must reasonably point to conclusion that assessee had consciously concealed his particulars of income or had furnished inaccurate particulars thereof Both the expressions "concealment of income" and `furnishing of inaccurate particulars" indicate some deliberation on the part of the assessee, though the word "deliberately" and the word "willfully" are no

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longer part of the statute. Mere omission or negligence would not constitute a deliberate act of suppression veri or suggession falsi. In view of the above it is neither concealment nor furnishing of inaccurate particulars and therefore provisions of section 271 (1) (c) are not applicable to the said addition. (3) General ground. Thus, it is submitted that penalty of Rs. 2,04,372/- imposed on assessee is wrong and bad in law which deserves to be deleted.”

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“12. We have considered the rival contentions and carefully perused the material placed on record. From the facts of the present case, we noticed that the trading additions were made by the A.O. and confirmed by the ld. CIT (A), however, no additions were made on account of non- genuine or bogus purchases but were estimated additions out of purchases wherein the A.O. by estimating disallowed 25% of the purchases thereof on account of unverifiability of purchases while allowing 75% of said purchases as allowable. Further in appeal, the ld. CIT(A) by estimating disallowed 15% thereof on account of unverifiability of purchases and at the same time, allowed 85% of said purchases. In this way, according to the ld AR, the purchases cannot be held to be bogus as the said purchases were held by both the authorities as unverifiable because 85% of the same purchases have also ready been allowed by the ld. CIT(A). Thus, according to the ld. AR, it is a case where purchases are not doubted but bills of purchases were held unverifiable because of non-verification thereof from sellers.” 13. The additions in the present case have been made as trading additions by invoking Section 145(3) of the Act. As per the ld. AR, the appeal filed by the assessee against order of ld. CIT(A) was got wrongly withdrawn under misconception and in assessee’s own case for the preceeding year i.e. A.Y. 2007-08 on the same facts, the ITAT did not uphold disallowance of 15% of purchases but ordered to assess the income of assessee on average gross profit declared and admitted by the A.O.. Thus, in this way, the purchases which was held unverifiable cannot be held to be bogus and the addition on the basis of estimation do not fall within the purview of Section 271 (1) (c) of the Act. 14. After appreciating the facts of the case, we noticed that the assessee had furnished all particulars before the A.O. and no deficiency or

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mistake was found therein and technically, the invocation of provision of Section 145 (3) of the Act by the A.O. was on account of and lack of verifiability of some of the purchases. In this way, the additions made in the present case were purely on estimation. It is a settled law that additions based on estimation where higher trading profit as declared against the gross profit has been declared therein, in that cases, no penalty is leviable as it cannot be held that in those cases, the assessee has concealed income or of furnishing inaccurate particulars of income within the provisions of Section 271(1) (c) of the Act. This proposition has been upheld in case of CIT Vs. Dhillon Rice Mills (2002) 256 ITR 209 (ALL) and in case of Hari Gopal Singh Vs. CIT (2002) 258 ITR 85. In both these decisions, it has been held by the Hon’ble Courts that the provisions of Section 271(1)(c) are not attracted to cases where the income of an assessee is assessed on estimate basis and additions are made therein. As per the facts of the present case, the additions were made on estimation basis whereas the gross profit declared by the assessee was much better than the previous years. Even in the case of CIT Vs. Aero Traders P. Ltd. (2010) 322 ITR 316 it was held by the Hon’ble Court the profit was estimated after rejection of the books of account due to certain discrepancies, imposed a penalty on the assessee on the ground that it was clear case of furnishing of inaccurate particulars of income. However, the Tribunal held that it did not amount to concealment of income or furnishing of inaccurate particulars of income therefore, deleted the penalty and Hon'ble High Court of Delhi confirmed the order of ITAT. Further the Hon’ble Rajasthan High Court in case of Shiv Lal Tak Vs. CIT 251 ITR 373 also upheld the said proposition. Further glaring facts have also been placed on record before us wherein we noticed that the ld. CIT(A) in assessee’s own case for the previous year i.e. A.Y. 2007-08 had deleted the penalty levied by the A.O. on identical facts and circumstances, therefore, taking into consideration the totality of facts and circumstances of the case as mentioned above, we are of the view that since the additions in the present case were made purely on the basis of estimation, therefore, no penalty is leviable or attracted in the present case. Accordingly, we direct to delete the penalty levied U/s 271(1)(c) of the Act. 15. In the result, this appeal of the assessee is allowed.”

16 ITA No. 125 /JP/2021 Smt. Raj Kumari Maheshwari 14. We are of the Considered view taking entire facts and circumstances of the case, the case citations relied by the Ld AR for the assesee and the decision passed by this Tribunal in the case of M/s Vijay Kedia Vs ACIT in ITA No. 1266/JP/2019 order dated 30/07/2021, wherein identical issue had been decided in favour of the assessee, therefore, we are of the view that concealment of income or furnishing of inaccurate particulars of income are two different forms and they cannot be inter mixed, therefore, we quash the penalty proceedings initiated U/s 271(1)(c) of the Act. Hence, Ground Nos. 1 to 3 of the appeal is allowed. In the result, the appeal of the assessee is allowed

Order pronounced in the open Court on 13/06/2022. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼,l-lhrky{eh½ (Dr. S. Seethalashmi) (RATHOD KAMLESH JAYANTBHAI) ys[kk lnL; @Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 13/06/2022. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Smt. Raj Kumari Maheshwari, Jaipur. izR;FkhZ@ The Respondent- DCIT, Central Circle-2, Jaipur. 2. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 5. xkMZ QkbZy@ Guard File { ITA No. 125/JP/2021} 6. vkns'kkuqlkj@ By order, सहायक पंजीकार@Aेेज. त्महपेजतंत