MRS. SANDHYA DHANORKAR,NAGPUR vs. ACIT, CIRCLE- 6, NAGPUR

PER AMARJIT SINGH, J.M.

The assessee has filed the present appeal against the order dated 12th November 2014, passed by the learned Commissioner (Appeals)-

II, Nagpur, relevant to the assessment year 2009-10, in which the

penalty levied by the Assessing Officer under section 271(1)(c) of the

Income Tax Act, 1961 (for short “the Act”) to the tune of ` 13,76,195,

was confirmed.

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declaring total income to the tune of ` 50,70,151. Thereafter, the case

was selected for scrutiny under CASS and order under section 143(3) was passed on 30th December 2011 assessing total income to the tune

of ` 84,87,684. The Assessing Officer raised the additional income to

the tune of ` 24,17,542 and accordingly, penalty to the tune of `

8,21,720 was levied. The assessee filed an appeal before the learned

Commissioner (Appeals) who deleted the penalty upon the addition

except an amount of ` 13,76,195, which was claimed by the assessee

as expenditure but subsequently issued the Debit Note. Since the

assessee was not satisfied, therefore, the present appeal filed before

us.

available on record. At the time of assessment under section 143(3) of

the Act, the Assessing Officer demanded the evidence in support of the

expenditure to the tune of ` 13,76,195. The assesee had issued Debit

Note with regard to the amount and explained that the expenditure

was claimed wrongly. Thereafter, the assessee himself offered the said

amount as his income. The Assessing Officer after the completion of

assessment under section 143(3) of the Act initiated the penalty

proceedings on account of addition to the tune of ` 24,17,542 which

includes the said amount to the tune of ` 1376195. The learned

Commissioner (Appeals) deleted the penalty upon the other additions,

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however, upheld the penalty upon the addition the tune of `

13,76,195. The contention of the assessee is that the amount of `

13,76,195 was wrongly claimed as expenditure whereas the assessee

had issued the Debit Note of this amount. Finding mistake, the

assessee corrected the mistake and offered the said amount as income

to the assessee. The learned Counsel for the assessee has argued that

the mistake in the accounts book is not a concealment of income or

furnishing of inaccurate particulars of income, therefore, in the said

circumstances, no penalty is leviable in view of the order passed by

the Co-ordinate Bench of the Tribunal, Mumbai Bench, in the case of

Heranba Industries Ltd. v/s DCIT, ITA no.2292/Mum./2013, order dated 8th April 2015. On the other hand, the learned Departmental

Representative strongly relied upon the order passed by the learned

Commissioner (Appeals) in question. The factual position is not in

dispute. The Tribunal in the case of Heranba Industries Ltd. (supra)

has held that the mistake cannot be said to be deliberate attempt to

evade the tax. The relevant finding of the said law is hereby

reproduced below:-

“4. We have considered rival contentions, carefully gone through the orders of the authorities below and also deliberated on the judicial pronouncements referred by the lower authorities in their respective orders as well as cited by ld. DR & AR during the course of hearing before us. From the record we found that at the very first instance share application money was surrendered by assessee with a request not to initiate any penalty proceedings. The AO passed order u/s.143(3) adding surrendered amount

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u/s.69A on the plea that assessee has surrendered amount only after issue of notice. It is not disputed by the department that sum which was added u/s.69A was one which was surrendered by the assessee itself. Neither there was any detection nor there was any information in the possession of the department except for the amount surrendered by the assessee and in these circumstances it cannot be ITA No.2292/13 said that there was any concealment. In case of CIT vs. Suresh Chandra Mittal251 ITR 9 (SC), Hon'ble Supreme Court observed that if the assessee has offered the additional income to buy peace of mind and to avoid litigation penalty u/s.271(1)(c) of the Act cannot be levied. In the instant case, there was no malafide intention on the part of the assessee and the AO had not brought any evidence on record to prove that there was concealment of income. At the time of surrender itself contention of not initiating any penalty proceedings was there. No additional matter was discovered to prove that there was concealment of income. The AO has included the amount of share capital in the total income of assessee merely on the basis of assessee's declaration/surrender. The AO did not point out or refer any evidence or material to show that the amount of share capital received by the assessee was bogus. It is also not the case of the revenue that material was found at the assessee's premises to indicate that share application money received was an arranged affair to accommodate assessee's unaccounted money. Thus there was no detection by the AO that share capital was not genuine. The surrender of share capital after issue of the notice u/s.143(2) could not lead to any inference that it was not voluntary. Admittedly the assessee has offered the amount of share capital for taxation voluntarily and it was not the case of revenue that the same was done after its detection by the department. It is quite clear from the record that this entire transaction was not detection of the AO that the share capital was not genuine and that the assessee had offered the amount without any specific query. EvenITA No.2292/13 surrender of amount by the assessee after receipt of questionnaire could not be lead to any inference that it was not voluntary, in the absence of any material on record to suggest that it was bogus or untrue. The contention that in every case where surrender is made inference of concealment of income must be drawn under S.58 of Evidence Act, cannot be accepted in view of the decision of Punjan & Haryana High Court in the case of Careers Education & Infotech (P) Ltd., (2011) 336 ITR 257 (P&H). Not an iota of evidence was narrated to support the addition made except the surrender made by the assessee itself. When no concealment was ever detected by the AO, no penalty was impossible. Recently, Hon'ble Punjab & Haryana High Court in the case of Siddharth Enterprises vide order dt. 14th July, 2009 held after considering the decision of Hon'ble Supreme Court in the case of Union of India & Ors. vs. Dharamendra Textile Processors

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& Ors. (2008) 306 ITR (SC) 277 that the judgment of Hon'ble Supreme Court in the case of Dharmendra Textiles (supra) cannot be read as laying down that in every case where particulars of income are inaccurate, penalty must follow. What has been laid down is that qualitative difference between criminal liability under s. 276C and penalty under s. 271(1)(c) had to be kept in mind and approach adopted to the trial of a criminal case need not be adopted while considering the levy of penalty. Even so, concept of penalty has not undergone change by virtue of the said judgment. It was categorically observed that penalty should be imposed only when there is some element of deliberate default and not a mere mistake. This being the ITA No.2292/13 position, the furnishing of inaccurate particulars was simply a mistake and not a deliberate attempt to evade tax. Hon'ble Supreme Court in the case of CIT vs. Suresh Chandra Mittal 251 ITR 9 (SC) observed that where assessee has surrendered the income after persistence queries by the AO and where revised return has been regularized by the Revenue, explanation of the assessee that he has declared additional income to buy peach of mind and to come out of waxed litigation could be treated as bona fide, accordingly levy of penalty under s. 271(1)(c) was held to be not justified.”

view that the factual position of the present case is also the same. The

assessee has shown the expenditure to the tune of ` 13,76,195 in his

books of account, however, he had issued the Debit Note in connection

with the said expenditure. After raising the question, the assessee

admitted his mistake and offered the said amount as his income.

Showing expenditure in the books of account is a mistake, however,

Debit Note had already been issued which was on record at that time.

The finding of the case in Heranba Industries Ltd. (supra) is quite

applicable to the facts of the present case, therefore, in the said

circumstances, we are of the view that the learned Commissioner

(Appeals) has wrongly confirmed the penalty on the amount of `

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13,76,195, which is not liable to be sustainable in the eyes of law. We

set aside the finding of the learned Commissioner (Appeals) on this

issue and delete the penalty. The grounds raised by the assessee are

allowed.

Order pronounced in the open Court on 29.06.2017

Sd/- Sd/- P.K. BANSAL AMARJIT SINGH VICE PRESIDENT JUDICIAL MEMBER

NAGPUR, DATED:

Copy of the order forwarded to:

(1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Nagpur City concerned; (5) The DR, ITAT, Nagpur; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary

(Dy./Asstt.Registrar) ITAT, Nagpur