NISHA ANIL SUREKHA,MUMBAI vs. ASST CIT CEN CIR 3(2), MUMBAI

The captioned appeals by two assessee assails separate orders of Ld. Pr. Commissioner of Income tax (OSD) [h/c CIT(Appeals)-51] [hereinafter referred to as ‘CIT(A)’] qua confirmation of penalty u/s 271(1)(c) for several Assessment Years [AY]. Since, the issue springs out from common set of facts, we dispose-off all the appeals by way of this common order for the sake of convenience and brevity. First, we take up for AY 2006-2007 filed by Shri Anil Kumar Surekha, where the assessee is aggrieved by confirmation of penalty of Rs.4,13,659/- u/s 271(1)(c) vide Ld. CIT(A) order dated 04/03/2015.

Briefly stated, the assessee, being resident individual was subjected to an assessment u/s 153A read with section 143(3) of the Income Tax Act, 1961 for impugned AY vide Assessing Officer [AO] order dated 22/03/2013 consequent to search & seizure action u/s 132(1) in case of M/s Ispat Industries Limited and its group concerns. The assessee was Executive Director (Finance) of the said group and in-charge of the finance and account of the company for past many years and derived income from ‘salary’ and ‘other sources’. The original return of income was filed declaring income of Rs.42,29,900/- which was enhanced to Rs.50,17,019/- in return filed pursuant to notice under Section 153A and the same was accepted as such by the revenue without any further additions in the said assessment. The penalty proceedings u/s 271(1)(c) were initiated in the assessment order for ‘concealment of particulars of income’ and accordingly, a notice u/s 274 read with section 271(1)(c) was issued to the assessee. Finally, the assessee was saddled with a penalty of Rs.4,13,659/- @100% of tax sought TO 3864/M/2015 Shri Anil Kumar Surekha & Smt. Nisha Anil Surekha Assessment Year 2006-07 to 2010-11 to be evaded on Rs.7,87,119/-, being the difference between income reflected in original return vis-à-vis income reflected in 153A return for ‘furnishing of inaccurate particulars of income’ by invoking Explanation 5A of Section 271(1)(c). The same was confirmed by the Ld. CIT(A) vide order dated 04/03/2015 by noting the express provisions of Explanation 5A, against which the assessee is in appeal before us. 3. The Ld. Counsel for assessee [AR], Shri D.V.Lakhani, first of all, placing reliance on judgment of Hon’ble Delhi High Court in PCIT Vs. Shri Neeraj Jindal [ITA NO. 463/2016 & CM NO. 26604/2016 dated 09/02/2017], contended that the returned income u/s 153A has been accepted as such without any further additions by the revenue and therefore, penalty could not be levied. Further, the difference in the two incomes arose only due to certain interest on Bank deposits whereas all the accounts held by the assessee were duly disclosed in the original return of income and hence, there was no mala-fide intention to evade the taxes and the assessee reflected the correct income after realizing the mistake, which was finally accepted by the revenue. The revenue has nowhere disturbed the income returned by the assessee and therefore, penalty deserves to be deleted. Further, our attention has been drawn to the fact that the penalty has been initiated in the assessment order for ‘concealment of particulars of income’ whereas the penalty has finally been levied for ‘furnishing of inaccurate particulars of income’ which are two different connotations and therefore, vitiates penalty proceedings on the grounds of violation of principles of natural justice. The showcase notice u/s 274 did not specify the limb for which the penalty was being initiated / levied and therefore, the assessee never knew the grounds of levy of penalty and therefore, the same was liable to be quashed in terms of decision of Apex court in the case of CIT Vs SSA’s Emerald Meadows [72 taxmann.com 248]. Per contra, the Ld. DR, has drawn our attention to the explicit language provided in Explanation 5A to the Section 271(1)(c) to contend that the deeming fiction provided in the explanation squarely applies to the facts of the case and therefore, the penalty has rightly been levied by the lower authorities. TO 3864/M/2015 Shri Anil Kumar Surekha & Smt. Nisha Anil Surekha Assessment Year 2006-07 to 2010-11 4. We have heard the rival contentions and perused relevant material on record. So far as the applicability of Explanation 5A is concerned, we fully agree with the contentions of the Ld. DR that the language of Explanation 5A makes it amply clear that whenever additional income is declared in a return of income filed after the date of search, the assessee is deemed to have concealed the particulars of his income or furnishing of inaccurate particulars within the meaning of Section 271(1)(c). The cited judgment of Hon’ble Delhi High Court was rendered in the context of Explanation 5 and hence, the same do not apply to the case of the assessee. However, we have also note that the penalty has been initiated on one limb but finally imposed for another limb. Further, the show-cause notice u/s 274 read with section 271 issued to the assessee did not specify the limb for which the penalty proceedings were being initiated against the assessee which took away a valuable right of the assessee and therefore, vitiates the penalty proceedings. Our view stands fortified by the above-cited judgment of Apex Court where the decision of Hon’ble Karnataka High Court has been confirmed, which in turn, relied upon the judgment of same court in CIT Vs Manjunatha Cotton & Ginning Factory [359 ITR 565]. Respectfully following the settled judicial discipline / precedent, we hold the penalty proceedings to be bad in law and therefore, quash the same. The assessee’s appeal stands allowed. 5. The assessee is saddled with similar penalties under similar circumstances for other AYs which have been contested before us in the following manner:-