ROBIN BIPIN MEHTA,MUMBAI vs. ACIT CC 20, MUMBAI

This is an appeal filed by the assessee against the order of CIT(A)- 21, Mumbai dated 28/03/2016 for the A.Y.2011-12 in the matter of imposition of penalty u/s.271(1)(c) of the IT Act.

In this appeal, assessee is aggrieved for penalty of Rs.7,20,130/- imposed u/s.271(1)(c) of the IT Act.

Rival contentions have been heard and record perused. Facts in brief are that original return of income was filed on 27/07/2011 u/s.139(1) declaring income of Rs.11,51,000/-, thereafter search of seizure action u/s.132(1) was carried out on 13/09/2011. After search, AO issued notice u/s.153A on 30/11/2012. In reply to the same, assessee filed return of income on 31/10/2013 wherein income declared during course of search Mr. Robin Bipin Mehta was offered. The AO accepted return of income filed u/s.153A while passing order u/s.143(3) r.w.S.153A without making any further addition. Thus, return of income was accepted by the AO. Thereafter, AO passed penalty order u/s. 271(1)(c). The penalty so imposed was confirmed by the CIT(A) vide its order dated 31/10/2014 by relying on the decision of Ahmedabad Tribunal in Kirit Dahyabhai Patel 121 ITD 159. Against this order of CIT(A), assessee is in further appeal before us.

It was argued by learned AR Mr. B.V.Jhaveri that no addition was made to the income declared u/s.153A. Assessee has not concealed any income vis-à-vis the return of income filed u/s.153A. Reliance was placed on the decision of Bombay High Court in the case of B.G.Shirke Construction dated 06/03/2017. It was submitted that in the case decided by Bombay High Court, search action was carried out on 18/12/2008, thereafter, notice u/s.153A was issued for A.Y.2007-08 and 2008-09. In response to the notice, the assessee filed return of income u/s.153A. In an appeal filed by the Revenue before the High Court, High Court has held as under:- "11. In the present facts for the subject assessment ears it is an undisputed position that the pending assessment before the Assessing Officer consequent to return filed under section 139(1) of the Act for the subject Assessment years had abated. This is on account of the search and as provided in second proviso to Section 153A(1) of the Act. The consequence of notice under section 153A(1) of the Act is that assessee is required to furnish fresh return of income for each of the six assessment years in regard to which a notice has been issued. It is this return which is filed consequent to the notice which would be subject of assessment by the Revenue for the first time in the case of abated assessment proceedings. Consequent to notice under section 153A of the Act the earlier return filed for the purpose of assessment which is pending would be treated as non est in law. ... ."

Reliance was also placed by learned AR on the decision of Delhi High Court in case of Neeraj Jindal 79 Taxmann.com 96. In this case, return U/S 139(1) was filed on 30.12.2005 declaring income of Rs.1,72,799/-. A search and seizure operation U/S 132(1) was carried out on 11/01/2007 wherein cash of Rs. 5,26,5301- and jewellery worth Rs. 17,85,785/- were found from the premises and lockers of the assessee. Notice u/s 153A was issued on 26.02.2008. Return u/s 153A was filed on 23/10/2008 declaring Rs. 23,38,731/- wherein the assessee offered Rs. 21,65,932/- as additional income consisting of Rs. 5,26,530/- being cash found and Rs. 17,85,785/- being the undisclosed jewellery. The A.O completed the assessment u/s 143(3) r.w.s 153A without making any addition over and above the additional income declared in the return. Thereafter the A.O initiated and penalty U/S 271(1)(c) of Rs. 7,29,100/- on the concealed income of Rs. 21,65,932/- which was offered for taxation in the return of income filed u/s 153A of the Act. The CIT (A) as well as the ITAT deleted the penalty levied by the A.O by relying on the decision of the Hon'ble Tribunal in the case of in Prem Arora v. DCIT [(2012) 149 TTJ 590 (Del)]. In an appeal filed by the Department, the High Court held as under:- "21. Thus, it is clear that when the A.O has accepted the revised return filed by the assessee under section 153A, no occasion arises to refer to previous return filed under Section 139 of the Act. For all the purposes, including for the purpose of levying penalty under section 271(1)(c) of the Act, the return that has to be looked at is the one filed under Section 153A. .. ... What is clear from this is that Section 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the A.O accepts the Mr. Robin Bipin Mehta revised return filed under Section 153A, the original return under Section 139 abates and becomes non - est. Now, it is trite to say that the "concealment" has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penal under section 271 (1 )( c), what has to be seen is whether there is any concealment in the return filed b the assessee under section 153A, and not vis a vis the original return u/s. 139.'

Reliance was also placed on the decision of Gujarat High Court in case of Kirit Dahyabhai Patel 280 CTR 216. in this case, return of income u/s. l39(1) was filed on 07/06/2002 declaring total income of Rs. 1,30,900/-. A search and seizure operation u/s 132(1) was carried out on 04/09/2003 wherein certain incriminating documents were found. Notice u/s 153A was issued on 17112/2003. Return u/s 153A was filed on 31/05/2004 declaring Rs.9,00,940 including additional income of Rs. 5,50,000/-. The A.O accepted the said returns with no further addition. Penalty was levied u/s 271(1)(c) on the ground that neither transactions relating to concealed income were recorded in books of account nor disclosure was voluntary. The Commissioner (Appeals) deleted the penalty imposed u/s.271(1)(c). The ITAT concluded that penalty under section 271 (1)(c) could be levied with reference to assessments made under section 153A. 13 Considering the facts and circumstances of the case and also considering the decisions relied by learned senior advocate for the appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The CIT rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of the specific provision of S. 153A of the IT Act the return of income filed in response to notice under s. 153A of the IT Act is to be considered as return filed under s. 139 of the Act, as the AO has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty Mr. Robin Bipin Mehta under s. 271(1)(c) of the IT Act and the penalty is to be levied on the income assessed over and above under s. 153A, if any.

My attention was also invited by the learned AR to the observation made by Nagpur Tribunal in case of Purti Sakhar Karkhana Ltd., 153 TTJ 12. The Hon’ble Tribunal held as under:- "25 It follows that the concealment of income has to be seen with reference to additional income brought to tax over and above the returned by the assessee in response to notice issued under s. 153A of the Act. Accordingly, in our considered opinion for the purpose of imposition of penalty under s. 271(1)(c) resulting as a result of search assessments made under s. 153A, the original return of income filed under s.139 cannot be considered. .. .... In view of this, the AO has to frame an assessment on the basis of the return filed u/s 153A. As has been held above the penal under s. 271(1)(c) is imposable when there is variation in assessed and returned income. If there is no variation, there will be no concealment or furnishing of inaccurate particulars of income. When there is no concealment or furnishing of inaccurate particulars of income, question of levy of penalty under s.271(1)(c) of the Act will not arise.”

It was submitted by learned AR that the decision of Tribunal in the case of Kirit Dahyabhai Patel (supra) as relied by CIT(A) while upholding the penalty has been reversed by Hon’ble Gujarat High Court, accordingly this issue now stands in favour of the assessee. 9. Learned AR also raised legal issue to the effect that since penalty proceedings are initiated on charge of furnishing inaccurate particulars of income, then penalty cannot be levied on the charges of concealment of income and vice versa. Our attention was also drawn to the assessment order dated 12/03/2014, wherein AO initiated the penalty for furnishing inaccurate particulars of income as under:- "3.1 ... Penalty proceedings u/s 271 (1 )( c) of the IT Act are initiated separately for furnishing inaccurate particulars of income in the return Mr. Robin Bipin Mehta of income u/s 139(1) of the Act, leading to the concealment of the income."

Learned AR also drawn our attention to the penalty order dated 30/09/2014 wherein AO has levied the penalty on account of concealment of income after observing at page 9 of his order, which reads as under:- "I am therefore of the opinion that the assessee has knowingly and deliberately made false claims and concealed/furnished inaccurate particulars of his income as discussed above. I am further of the opinion that the asssessee's case squarely falls within ambit of explanation 1 to section 271(1)(c) and the assessee's case is a fit case, where the assessee has knowingly and deliberately tried to mislead the department and has attempted to conceal income by furnishing inaccurate particulars. " "In view of the above mentioned facts and circumstances of the case and relying upon the above mentioned Supreme Court and High Court judgment, I am satisfied that this is a fit case for levy of penalty uls 271(1)(c) of the Income Tax Act, 1961."

It was further submitted by learned AR that there is no question of furnishing inaccurate particulars of the income by the assessee in so far as assessee has disclosed the additional income in his return of income filed u/s.153A of the Act and the said income was accepted on completion of the assessment. Hence, there was no question of furnishing inaccurate particulars of income by the assessee vis-à-vis the return of income which was scrutinized by the AO.

Learned AR further contended that AO initiated penalty proceedings on the ground that the assessee had furnished inaccurate particulars of Mr. Robin Bipin Mehta income. However, in the notice u/s.274 r.w.s. 271 of the ACT, the AO had invoked both the limbs of Section 271 (1)(c) of the Act namely concealment of income and furnishing of inaccurate particulars of income. The notice issued 271 r.w.s. 274 of the Act is in a standard proforma and the AO has not striked out non-applicable clauses therein. Thus, AO has invoked both the limbs i.e. concealment of income as well as furnishing of inaccurate particulars and he has not identified as to in which one of the two limbs of 271(1)(c), the penalty was imposed. 13. Learned AR further submitted that it is not open to the AO to initiate the penalty for one of the two limbs and levy the penalty on the other limb. This clearly indicates non-application of mind on the part of the AO while issuing the notice and as well as passing order u/s. 271(1)(c). Reliance was placed on the decision of Samson Perinchery (ITA No.4625 to 4630/Mum/2013) order dated 11/10/2013. In this case, return of income u/s 139(1) for the AY 2003-04 declaring total income of Rs. 97,669/-. A search and seizure action was carried u/s 132 on 18/12/2008. Assessee filed return in response to notice u/s 153A on 30/03/2009 declaring total income of Rs. 30,26,460/- including additional income of Rs. 29,28,791/-. A.O accepted the return of income u/s 153A of the Act. Thereafter penalty u/s. 271(l)(c) was initiated for "furnishing of inaccurate particulars". However, the penalty was levied for "concealment of income". The CIT(A) dismissed assessee’s appeal. The Tribunal allowed the appeal and held as under:-

He has further drawn our attention to the decision of the Bombay High Court dated 05/01/2017, wherein Bombay High Court has confirmed the above order of the Tribunal in the case of Samson Perinchery after observing as under:-

Further reliance was placed on the decision of Bombay Tribunal in case of Wadha Estate & Developers order dated 24/02/2017 and Dharni Developers 61 taxmann.com 208. Learned AR also placed decision of Gujarat High Court in case of New Sorathia Engineering Co. 282 ITR 642, wherein it was held that if the proceedings are initiated on charge of concealment, then penalty cannot be levied on the charge of furnishing inaccurate particulars of income and vice versa.

On the other hand, it was contended by learned DR that penalty was initiated by AO for furnishing inaccurate particulars of income. She further contended at page 10, the AO has clearly observed that income was offered in respect of incriminating material found during course of search as well as jewellery so found. Our attention was also invited to the decision relied by assessee before the CIT(A) in the case of Muninaga Reddy 37 Taxmann.com 440, and which was distinguished by CIT(A) on the plea that decision is not applicable to the facts of the present case as there was survey u/s.133A in that case, whereas in the instant case there was search u/s.132(1).

I have considered rival contentions and carefully gone through the orders of the authorities below. I had also deliberated on the judicial pronouncements referred by lower authorities in their respective orders as Mr. Robin Bipin Mehta well as cited by learned AR and DR during the course of hearing before us in the context of factual matrix of the case. From the record, I found that income offered by assessee in the return filed in respect to notice u/s.153A was accepted by the AO without making any further addition. Under these circumstances, issue is covered by the decision of Delhi High Court in case of Neeraj Jindal (supra) wherein it was held that when AO has accepted the revised return filed by the assessee u/s.153A, no occasion arises to refer to previous returns filed u/s.139 of the Act. It was categorically observed by the Hon’ble High Court that for all the purposes, including for the purpose of levy of penalty u/s.271(1)(c) of the Act, the return that has to be looked at is the one file u/s. 153A. Thus, the return filed u/s.153A is in the nature of second chance given to the assessee, which incidentally gives him an opportunity to make good omission if any in the original return. Hon’ble High Court further observed that once the AO accepts the revised return filed u/s.153A, the original return u/s.139 abates and becomes the non-est. At this stage, concealment is to be seen with reference to the return filed by the assessee in response to notice u/s.153A and not with respect to the original return filed u/s.139. Gujarat High Court has also taken similar view in case of Kirit Dahyabhai Patel by reversing the order of the Tribunal. Bombay High Court in the case of B.G.Shirke Construction (supra) has also observed that that consequent notice u/s.153(1), assessee is required to furnish fresh return of income for each of the six assessment years in regard to which notice has been issued. This return which is filed consequent to the notice which would be subject of assessment by the Revenue for the first time in Mr. Robin Bipin Mehta the case of abated assessment proceedings. Consequent to the notice u/s.153A of the Act, the earlier return filed for the purpose of assessment which is pending would be treated as the non-est in law.

In the instant case, CIT(A) has confirmed the penalty by relying on the order of the Tribunal in case of Kirti Dahyabhai Patel . Since the order of the Tribunal has been reversed by the Hon’ble High Court reported at 280 CTR 216, the order of CIT(A) no more survives.

With regard to the legal contention taken by the assessee, I found that while issuing notice u/s.274 r.w.s. 271(1)(c) on 12/03/2014, the AO has ticked both the limbs of penalty u/s.271(1)(c) i.e., concealment of particulars of income as well as furnishing of inaccurate particulars of income. However, in the penalty order dated 30/09/2014, AO has levied penalty on account of concealment of income, however in the quantum order, the AO has initiated penalty proceedings on the ground that assessee has furnished inaccurate particulars of income, whereas penalty order is fixed regarding confirming penalty on account of concealment of income. As per judicial pronouncements in the case of Manjunatha Cotton & Ginning Factory 359 ITR 562 notice issued u/s.274 r.w.s. 271(1)(c) is bad in law, as it did not specify under which limb of Section 271(1)(c) penalty proceedings has been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. I find that similar view has been taken by the Karnataka High Court in case of SSA'S Emerald Meadows in 73 Mr. Robin Bipin Mehta taxmann.com 241 and SLP filed by Revenue before the Supreme Court was rejected by observing that there is no merit in the petition so filed. In this regard, I have perused the said praras 59 to 61 of the Hon‟ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory (supra) and the same read as under:

Clause (c) deals with two specific offences, that is to say, concealing particulars of income or furnishing inaccurate particulars of income. No doubt, the facts of some cases may attract both the offences and in some cases there may be overlapping of the two offences but in such cases the initiation of the penalty proceedings also must be for both the offences. But drawing up penalty proceedings for one offence and finding the assessee guilty of another offence or finding him guilty for either the one or the other cannot be sustained in law. It is needless to point out Mr. Robin Bipin Mehta satisfaction of the existence of the grounds mentioned in Section 271(l)(c) when it is a sine qua non for initiation or proceedings, the penalty proceedings should be confined only to those grounds and the said grounds have to be specifically stated so that the assessee would have the opportunity to meet those grounds. After, he places his version and tries to substantiate his claim, if at all, penalty is to be imposed, it should be imposed only on the grounds on which he is called upon to answer. It is not open to the authority, at the time of imposing penalty to impose penalty on the grounds other than what assessee was called upon to meet. Otherwise though the initiation of penalty proceedings may be valid and legal, the final order imposing penalty would offend principles of natural justice and cannot be sustained. Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid. The validity of the order of penalty must be determined with reference to the information, facts arid materials in the hands of the authority imposing the penalty at the time the order was passed and further discovery of facts subsequent to the imposition of penalty cannot validate the order of penalty which, when passed, was not sustainable. 61 The Assessing Officer is empowered under the Act to initiate penalty proceedings once he is satisfied in the course of any proceedings that there is concealment of income or furnishing of inaccurate particulars of total income under clause (c). 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 Pal reported in 292 flR 11 at page 19 has held that concealment of income and furnishing inaccurate particulars of income carry different connotations. The Gujrat High Court in the case of MANU ENGINEERING reported in 122 ITR 306 and the Delhi High Court in the case o VIRGO MARKETING reported in 171 Taxmn 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 invoke 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 striking of the relevant clauses will lead to an inference as to non-application of mind."

In the result, appeal of the assessee is allowed.