MURLI DODEJA,MUMBAI vs. ITO 21(3)(3), MUMBAI

The Appellant submits that the Assessing Officer be directed to delete penalty levied u/s. 271(1)(c) of Rs.45,900/- for A.Y. 2005-06 and Rs. 30,600/- for A.Y. 2007-08)

Brief facts of the case are that the assessee has filed original return of income declaring total income of Rs. 2,51,293/- on 9th August, 2005. & 3 Information was received by the AO from the ITO, Investigation Unit II, Mumbai stating that the members of the Dodeja family have deposited huge cash in bank accounts and the same were not shown in their returns of income filed with the Revenue. The case was reopened u/s 147 of the Act by the AO after obtaining sanction u/s 151 (1) of the Act from Jt. Commissioner of Income Tax 21(3) , Mumbai and reasons were recorded for the reopening of the assessment. Notice dated 15.3.2012 u/s 148 of the Act was issued by the AO and duly served upon the assessee. The assessee in response to the afore-stated notice submitted that the assessee has already received notice dated 19-03-2012 u/s 148 of the Act from Asstt. Commissioner of Income, Circle 2, Kalyan . The assessee also submitted that the assessee has already filed voluntarily revised return of income on 28-02-2011 with Dy. Commissioner of Income Tax, Range 2, Kalyan and paid the due taxes due along with interest to the credit of Central Government. Subsequently , the records were transferred by ACIT, Circle 2, Kalyan to the A.O. on 30-10-2012 along with all the documents such as reasons recorded as well replies filed by the assessee. It was observed by the A.O. that the assessee is an individual and has declared income from business and income from other source. It was observed by the AO that the assessee had deposited cash amounting to Rs. 1,50,000/- in his S.B. Account maintained with Union Bank of India , Shahad, Ulhasnagar on 25th September, 2004. The assessee submitted before the AO that the assessee has voluntarily filed revised return of income on 28-02-2011 much before receipt of any inquiry from the A.O. or notice u/s 148 of the Act dated 19-03-2012 from ACIT, Kalyan and notice u/s 148 of the Act dated 29-03-2012 from the A.O. The assessee has also submitted affidavit dated 21-03-2011 stating the facts and circumstances in which the assessee had deposited the cash of Rs. 1,50,000/- in his bank account, the copy of the affidavit was submitted before the AO in re-opening proceedings u/s 147 r.w.s. 143(3) of the Act. The A.O. observed that the assessee has filed return of income on 28-02-2011 which is not at all a revised return as per the ITA No. 3847/Mum/2016 & 4 provisions of Section 139(5) of the Act of 1961 as the time limit for furnishing a revised return of income for assessment year 2005-06 has lapsed on 31st March, 2007. The assessee had filed original return of income with the ITO, Ward 21(3)(3) but the assessee had filed alleged revised return of income with ACIT, Cir. 2, Kalyan. It was observed by the A.O. that the assessee has deposited an amount of Rs. 1,50,000/- in his bank account in September, 2004 and still did not declare the said income in the return of income which was filed with Revenue on 09-08-2005. It was observed by the AO that Dodeja family was under enquiry and investigation in respect of tax evasion petition , from October 2010 and thus it could not be said that revised return of income was filed prior to the enquiry and issue of notice u/s 148 of the Act.The AO held that the assessee has deposited cash amounting to Rs.1,50,000/- in his SB A/c in United Bank of India , Shahad, Ulhasnagar on 25-09-2004. It was observed by the AO that since the assessee has filed a return of income on 28-02-2011 in which he has declared the cash deposit as his income from other sources, and requested to consider the same as a return in response to notice u/s 148 of the Act, no separate additions were made by the AO in respect of the cash deposited in the bank account as the total income computed as per the computation in the revised return was taken in computation vide assessment order dated 29-11-2012 passed by the AO u/s 143(3) r.w.s. 147 of the Act. Penalty proceedings were initiated by the AO by issue of notice dated 29-11-2012 u/s 274 r.w.s. 271 of the Act dated 29-11-2012 as the assessee has furnished inaccurate particulars of his income in the return of income filed with the Revenue. In response, the assessee filed an explanation vide letter dated 18th March, 2013 with the AO on 10-4-2013, as under:-

The assessee has filed the return of income for the above year before receipt of any inquiry from the Assessing Officer or notice u/s 148 which was the received by the assessee after filing the return of income.

The assessee has filed voluntarily revised return of income and made true and full disclosure of his income in the said revised return of income and paid the tax due to the department along with interest payable u/s 234A/B/C just by the piece and avoid protected litigation with Income Tax Department.

Considering the above facts that the assessee has voluntarily filed revised return of income and said revised return is regularized by Assessing Officer no penalty u/s 271(1)(c) is leviable.

The ld. Counsel for the assessee submitted that the assessee had filed his return of income on 9th August, 2005 and the said return of income was revised by the assessee voluntarily on 28-02-2011. The assessee deposited cash of Rs. 1,50,000/- in bank account maintained with Union Bank of India, Shahad Branch which was not considered income by the assessee while filing original return of income as per the advice of Advocate ex-tax consultant for more than 30 years who advised assessee said amount was not chargeable to tax. The assessee had filed revised return of income on 28-02-2011 with ITO, Kalyan wherein said cash deposit of Rs.1,50,000/- was included as income in the revised return of income filed with the Revenue. It is submitted that the assessee is not an educated person and does not understand the complex income tax procedures. It was submitted that the said revised return of income was filed prior to issue of notice u/s 148 of the Act. The learned counsel for the assessee submitted that the assessee had submitted bonafide explanations and hence the penalty cannot be levied u/s 271(1)(c) of the Act. The assessee has filed revised return and the said income was declared and due taxes have been paid to the Revenue. Thus it was submitted that penalty of Rs. 45,900/- levied by the AO u/s 271(1)(c) of the Act as confirmed by learned CIT(A) cannot be sustained and need to be deleted.

The ld. D.R., on the other hand relied on the orders of authorities below. & 8 8. We have considered rival contentions and also perused the material available on record and case law’s relied upon by the rival parties. We have observed that the assessee filed original return of income on 9th August, 2005. The assessee held bank account with Union Bank of India, Shahad , Ulhasnagar in which assessee had deposited an amount of Rs. 1.5 lacs in cash which was not declared and disclosed in the return of income originally filed with the Revenue on 09-08-2005. It is the contention of the assessee that he relied on the expert advise of his tax-consultant who advised him that the said amount received was not taxable being his share in profits and investment in discontinued family business of properties on realization of funds invested in the properties on family separation . The assessee filed so called revised return of income on 28th February, 2011 wherein said cash deposit of Rs.1.50 lacs in Union Bank of India, Shahad was duly included as income although the prescribed time limit for filing revised return of income as prescribed u/s 139(5) of the Act had lapsed long back on 31-03-2007. The said so called revised return of income was also not filed by the assessee with jurisdictional AO but with the ITO, Kalyan , but said so called revised return of income was admittedly filed prior to issuance of separate notice’s u/s 148 of the Act by ITO, Kalyan and as well by the jurisdictional AO which remained uncontroverted and is an admitted position between the rival parties as notices u/s 148 of the Act was issued by the ITO, Kalyan as well jurisdictional AO only in the month of March 2012 while the so called revised return of income was filed earlier on 28-02-2011. It is the say of the Revenue that tax evasion petition was filed against the assessee which was investigated by Revenue since September 2010 which is the main reason for the assessee filing so called revised return of income with the Revenue on 28-02-2011. It was the contention of the Revenue that very few percentage of the cases are selected for scrutiny and had there been no tax evasion petition filed against the assessee , the assessee would not had come forward to file the so called & 9 revised return of income on 28-02-2011. Thus, it is the contention of the Revenue that the alleged revised return of income filed by the assessee on 28- 02-2011 including the said undisclosed income of Rs.1,50,000/- which was deposited in cash in an undisclosed bank account with Union Bank of India would have never come into notice of the Revenue and there would have been loss of Revenue. Merely because tax evasion petition is filed against the tax- payer does not mean that the tax-payer has concealed income or furnished in-accurate particulars of income and it could not be said with the certainty that the Revenue will in each of such cases shall proceed against the tax- payer by re-opening the concluded assessment in each and every tax evasion petition filed against the tax-payer. The tax-payer can always come forward and explain and account for its sources of income with the return of income filed with the Revenue. The tax-payer can also come forward with an explanation that certain receipts were not included as income in the return of income filed with the Revenue as the said receipts do not bear the character of income within the four corners of charging provisions of the Act or the receipt had a character of being an exempt income within statutory provisions of the Act of 1961 . There are also possibilities that the tax evasion petitions could be filed to cause vengeance on the tax-payer with a malice to seek revenge and retribution against the tax-payer. The fate of tax evasion petition hinges on the outcome of an enquiry and investigation conducted by the Revenue. The tax-payer may when tax-evasion petition is filed against him also re-visit his financial data for the relevant period and in order to avoid un- necessary and protracted litigation with Revenue come forward to file revised computation of income and pay taxes with applicable interest on some additional disclosure out of caution to avoid litigation. This is a normal and reasonable human conduct which falls within preponderance of human probabilities . The assessee in the instant case came forward and filed so called revised return of income on 28-02-2011 albeit beyond stipulated time u/s 139(5) of the Act of 1961 which expired on 31-03-2007 but before ITA No. 3847/Mum/2016 & 10 issuance of notice u/s 148 of the Act by the Revenue in the month of March 2012 as well the assessee filed affidavit dated 21-03-2011 explaining facts and circumstances under which the said cash of Rs.1,50,000/- was deposited in his bank account which was not included in the return of income filed with the Revenue which shows and proves bona-fide conduct of the assessee . The assessee had submitted that the said receipt of Rs.1,50,000/- which was deposited in cash in Bank account with Union Bank of India, Shahad was advised to be tax-free by his tax-expert Advocate for last thirty years .It is also submitted that the assessee being not highly educated person trusted the said advocate tax-expert and did not included the said receipt of Rs.1,50,000/- in the return of income filed with the Revenue. The assessee had also filed an affidavit dated 21-03-2011 explaining the facts and circumstances wherein the said income was not included as income in the return of income originally filed with the Revenue. Revenue could not controvert the contents of the affidavit filed by the assessee to prove that the said affidavit had a false or untrue averments made by the assessee. In our considered view keeping in view facts and circumstances of the case, penalty levied u/s 271(1)(c) of the Act cannot be sustained under the afore-stated circumstances as the assessee had came forward with an explanation which is a reasonable and bonafide explanation complying with the mandate of Section 271(1)(c) of the Act read with explanation 1 and hence penalty levied by the AO u/s 271(1)(c) of the Act as confirmed by learned CIT(A) is hereby ordered to be deleted. Thus, the assessee’s appeal in for assessment year 2005-06 is allowed . We order accordingly.

The facts in assessee’s appeal in 2007-08 are similar to facts in assessee’s appeal in ITA 3847/Mum/2016 for assessment year 2005-06 and hence our decision in shall apply mutatis mutandis to the assessee’s appeal ITA No. 3847/Mum/2016 & 11 in 2007-08. Thus, the assessee appeal in ITA No. 3848/Mum/2016 for assessment year 2007-08 stand allowed.

In the result, appeals of the assessee in for assessment year 2005-06 and 2007-08 are allowed.