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Facts
The assessee faced a penalty under Section 271(1)(c) of the Income Tax Act, 1961, for assessment years 2014-15 to 2016-17. The penalty was levied due to allegedly claiming a refund by fabricating losses from house property, following a search and seizure at the tax consultant's premises. There was a short delay in filing the appeals, which the assessee attributed to reasons like lack of knowledge of provisions and password changes by the consultant, and the appeal having to be filed at a different location.
Held
The Tribunal condoned the short delay in filing the appeals after finding sufficient reason. Referring to various precedents, the Tribunal held that it is proper to examine whether the tax consultant, Mr. Nagesh Shastry, was solely responsible for the fraudulent act. If the assessee's act was bonafide and the consultant was solely responsible, the penalty cannot be levied. Therefore, the issue was remitted back to the Assessing Officer for fresh consideration.
Key Issues
Whether the penalty levied under Section 271(1)(c) is sustainable when the assessee claims to be bonafide and the tax consultant is allegedly solely responsible for the fraudulent act.
Sections Cited
271(1)(c)
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Income Tax Appellate Tribunal, “C’’ BENCH: BANGALORE
Before: SHRI CHANDRA POOJARI & SHRI KESHAV DUBEY
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
All these appeals by assessee are directed against different orders of NFAC for the assessment years 2014-15, 2015-16 & 2016- 17 dated 22.12.2023, 26.12.023 & 26.12.2023 respectively.
The issue in all these appeals is with regard to levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (in short “The Act”) at Rs.1,90,511/-, Rs.2,04,941/- & Rs.2,41,054/- in the assessment years 2014-15, 2015-16 & 2016-17 respectively. Facts are similar in all these appeals.
There was a delay of 7 days in assessment year 2014-15, 3 days in assessment year 2015-16 and 3 days in assessment year 2016-17 respectively. The assessee has filed a condonation petition in all these appeals along with affidavit stating that a short delay in ITA Nos.324. 325 & 326/Bang/2024 Chandrasekhar Nudurumati, Hyderabad Page 2 of 6 these cases crept due to insufficient knowledge of the provisions of the Act and have no malafide intention. The delay was due to the fact that assessee does not check the regular mail ID to which the orders have been served. Further, due to change of password, even the consultant was not able to track the appeal order. The delay got caused due to the fact that appeal had to be filed at a location different from the residential premises of the assessee and due to aforesaid reasons there was a short delay in these cases, which may be condoned.
We have heard the rival submissions and perused the materials available on record. We find good and sufficient reason in filing belatedly by a short delay. Accordingly, we condone the delay and admit the appeals for adjudication.
Facts of the issue are that there was a search and seizure action in the case of Sri Nagesh Shashtri, Tax Consultant and the search at his premises revealed that there were various wrongly claiming of refund by fabricating wrong loss from house property in the case of assessee in these three assessment years. Consequently, the ld. AO after completion of the assessment invoked provisions of section 271(1)(c) of the Act and levied penalty u/s 271(1)(c) of the Act at 100% tax to be evaded due to furnishing of following particulars of income: AY Amount 2014-15 1,90,511/- 2015-16 2,04,941/- 2016-17 2,41,054/- 5.1 The ld. CIT(A) in these assessment years confirmed the levy of penalty. Against this assessee is in appeal before us.
We have heard the rival submissions and perused the materials available on record. Both the parties fairly conceded that similar issue came before this Tribunal in group of cases. In one of ITA Nos.324. 325 & 326/Bang/2024 Chandrasekhar Nudurumati, Hyderabad Page 3 of 6 the cases namely the Tribunal in the case of Ravikiran Netla in vide order dated 10.9.2020 has remitted the issue to the file of ld. AO as follows: 6. “We have heard both the parties and perused the material on record. In the quantum appeal order dated 19.2.2018, the CIT(Appeals) recorded these facts in para 5 of his order that Mr. Nagesh Shastry was instrumental in filing the revised return. However, the same facts and arguments in the penalty proceedings are not considered by the CIT(Appeals). In our opinion, it is proper to examine whether Mr. Nagesh Shastry is instrumental in claiming fraudulent refund on behalf of assessee by indulging in malpractices. If Mr. Nagesh Shastry is found solely responsible for such fraudulent act and that assessee's act is bonafide, penalty cannot be levied. With these observations, we remand this issue to the file of the CIT(Appeals) to consider all these facts and decide the issue afresh in accordance with law, after affording assessee opportunity of being heard.”
7. In the case of Shri Joison Kundu KulamJohny in ITA No.308/Bang/2021 dated 18.3.2022, the Tribunal held as under:
We have heard both the parties and perused the material on record. In the quantum proceedings, the assessee accepted the addition because he was misled by Mr. Nagesh Shastry who was instrumental in fling the revised return of the assessee making false claims. However, the same facts and arguments in the penalty proceedings are not considered. In our opinion, it is proper to examine whether Mr. Nagesh Shastry is instrumental in claiming fraudulent refund on behalf of assessee by indulging in malpractices. If Mr. Nagesh Shastry is found solely responsible for such fraudulent act and that assessee's act is bonafide, penalty cannot be levied. With these observations. we remand this issue to the file of the CIT(Appeals) to consider all these facts and decide the issue afresh in accordance with law, after affording assessee opportunity of being heard. 8. In the case of Mr. Veereshayya Angadi in & 11/Bang/2023 dated 19.6.2023, the Tribunal held as under: “5. After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in the case of Shri Ravikiran Netla in ITA No.2123/Bang/2018 dated 10.9.2020 wherein held as under: 6. “We have heard both the parties and perused the material on record. In the quantum appeal order dated 19.2.2018, the CIT(Appeals) recorded these facts in para 5 of his order that Mr. Nagesh Shastry was instrumental in fling the revised return. However, the same facts and arguments in the penalty proceedings ITA Nos.324. 325 & 326/Bang/2024 Chandrasekhar Nudurumati, Hyderabad Page 4 of 6 are not considered by the CIT(Appeals). In our opinion, it is proper to examine whether Mr. Nagesh Shastry is instrumental in claiming fraudulent refund on behalf of assessee by indulging in malpractices. If Mr. Nagesh Shastry is found solely responsible for such fraudulent act and that assessee’s act is bonafide, penalty cannot be levied. With these observations, we remand this issue to the file of the CIT(Appeals) to consider all these facts and decide the issue afresh in accordance with law, after affording assessee opportunity of being heard. 7. In the result, the appeal of assessee is allowed for statistical purposes.” 5.1 Further, the assessee raised additional grounds before us. The NFAC has no occasion to examine such issue. This is required to be considered by the NFAC. Being so, in the interest of justice, we remit the entire issue in dispute in both the appeals to the file of NFAC (First Appellate Authority) for reconsideration and to decide whether the assessee is bonafide in claiming excessive refund in its return of income and decide accordingly. If there is no fault of the assessee, assessee shall not be penalized for the action of the tax consultant.”
In the case of Veetil Kizkhakke Nirmal in & 8/Bang/2024 dated 4.3.2024 the Tribunal held as under: “7. Considering the rival submissions, we noted that the assessee is a salary employee and filing return regularly and he has claimed deduction under Chapter VIA more than the amount prescribed in Form 16 issued by the employer, to which during the assessment proceedings it was not accepted by the AO. As per submission, he took the help for filing return of tax practitioner named noted above and claimed excessive deduction. Therefore, the AO has imposed penalty which has been confirmed by the CIT(Appeals). During the course of hearing a decision of similar issue by the coordinate Bench in ITA No.411/Bang/2023 dated 14.9.2023 was produced in which it has been held as under:- “8. We have heard the rival submissions and perused the materials available on record. In our opinion, similar issue came for consideration before this Tribunal in the case of Sri Vinod Radhakrishna in ITA Nos.207 to 209/Bang/2023 wherein the Tribunal vide order dated 20.6.2023 held as under: “4. After hearing both the parties, we are of the opinion that similar issue came for consideration before this Tribunal in the case of Shri Ravikiran Netla in ITA No.2123/Bang/2018 dated 10.9.2020 wherein held as under: “We have heard both the parties and perused the material on record. In the quantum appeal order dated 19.2.2018, the CIT(Appeals) recorded these facts in para 5 of his order that Mr. Nagesh Shastry was instrumental in filing the revised return. However, the same facts and arguments in the penalty ITA Nos.324. 325 & 326/Bang/2024 Chandrasekhar Nudurumati, Hyderabad Page 5 of 6 proceedings are not considered by the CIT(Appeals). In our opinion, it is proper to examine whether Mr. Nagesh Shastry is instrumental in claiming fraudulent refund on behalf of assessee by indulging in malpractices. If Mr. Nagesh Shastry is found solely responsible for such fraudulent act and that assessee’s act is bonafide, penalty cannot be levied. With these observations, we remand this issue to the file of the CIT(Appeals) to consider all these facts and decide the issue afresh in accordance with law, after affording assessee opportunity of being heard.
In the result, the appeal of assessee is allowed for statistical purposes.” 4.1 Further, similar view has been taken in the case of Mr. Veereshayya Angadi in & 11/Bang/2023 vide order dated 19.6.2023. 4.2 It is also followed in the case of Shri Bolar Jayaraj Shetty in ITA Nos.184 to 186/Bang2023 dated 8.5.2023 by the Tribunal. 4.3 In view of the above, taking a consistent view, we remit this issue in dispute to the file of AO for fresh consideration to see whether the assessee is bonafide in claiming excessive refund. If the AO finds that if the assessee is bonafide and it was acted at the instigation of the tax consultant Mr. Nagesh Shastry, no penalty shall be levied u/s 271(1)(c) of the Act. 5. The issue in other appeals in ITA Nos.208 & 209/Bang/2023 for the AYs 2015-16 & 2016-17 are similar and applying the same ratio, the issue in these two appeals is remitted to the file of AO on similar directions. 6. In the result, all the appeals of the assessee in ITA Nos.207 to 209/Bang/2023 for the AYs 2014-15 to 2016-17 are partly allowed for statistical purposes.” 8.1 The facts of the present case is similar to the facts of the case cited (supra) in the case of Sri Vinod Radhakrishna. Hence, the issue in dispute is also remitted to the file of ld. AO to decide it afresh by verifying whether assessee’s consultant is instrumental in claiming excess deduction under Chapter VIA of the IT Act on behalf of assessee by indulging in malpractice or assessee is responsible for the same. If the assessee’s consultant is wholly responsible for such fraudulent act and the assessee’s act is bonafide, penalty cannot be levied u/s 270A of the Act. With this observation, we remit this issue in dispute to the file of ld. AO for fresh consideration after giving an opportunity of hearing to the assessee.”
8. Respectfully following the above judgment, we remit this issue in both the assessment years to the file of the AO to decide afresh in the above terms.