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Income Tax Appellate Tribunal, “A’’ BENCH: BANGALORE
Before: SHRI GEORGE GEORGE K. & SHRI CHANDRA POOJARI
PER CHANDRA POOJARI, ACCOUNTANT MEMBER:
This appeal by assessee is directed against the order of NFAC passed u/s 250 of the Income Tax Act, 1961 (in short “The Act’) dated 30.03.2023 for the assessment year 2016-17.
2. Ground Nos.1, 5 & 6 of the assessee’s appeal, which reads as follows are too general in nature, which do not require any adjudication. Hence, these grounds are dismissed. 1. “That the learned Commissioner of Income Tax (Appeals) ['CIT(A)'] erred on facts and circumstances of the case and in law by confirming the impugned Penalty Order passed by the learned Assessing Officer ('AO') under section 271(1)(c) of the Income Tax Act, 1961 ('the Act'). 5. The learned CIT(A) has erred on facts and in circumstances of the case and in law by confirming the impugned Penalty Order which lacks sufficient and appropriate justification for the levy of penalty being imposed on the Appellant.
Basavaraj Laxmanagouda Biradar, Vijayapura Page 2 of 10
The learned CIT(A) erred in passing the order ignoring / misinterpreting the decisions of the higher appellate authorities.
3. At the outset, it was observed that there was a delay of 164 days in filing the appeal before this Tribunal. The ld. A.R. has filed a condonation petition along with sworn affidavit stating that the assessee is staying in a semi-urban area without proper internet connection and also not familiar with e-mails, English communication, documents and notices uploaded in the Income Tax portal. The assessee thus had got the email id of his previous tax consultant updated as the contact mail id (i.e. gurushantk@yahoo.com and COSMOSPC01@GMAIL.COM. Later, the assessee discontinued the services of that tax consultant. However, the assessee did not realize the importance of getting the email ids changed in the income tax portal / records. Order of the CIT(A) seems to have been communicated through email. The emails might have reached the mail boxes of the previous tax consultant. However, the tax consultant who is not in contact with the assessee anymore, did not inform / forward it to the assessee. The assessee did not receive any hard copy of the Order passed by the CIT(A) at his postal address. Therefore, the assessee was unaware of the Order of the CIT(A) until 18 October 2023. For the above reason, he could not take any action to file an appeal before the ITAT within the stipulated time limit. 3.1 On 18 October 2023, when the assessee's present consultant CA Subhash Indi checked the income tax portal, he came to know that the above referred Order passed by the ld. CIT(A) has been passed and the assessee’s appeal has been dismissed. CA Subhash Indi immediately updated the assessee about the Order passed by the ld. CIT(A).
3.2 As soon as the assessee learnt about the Order passed by the ld. CIT(A), he took necessary steps to consult the tax and law
\ Basavaraj Laxmanagouda Biradar, Vijayapura Page 3 of 10 experts to discuss the way forward. After due consultations, when he was advised to file the instant appeal, he requested the tax consultants to prepare the appeal. The appeal documents were prepared and shared with him on 02 November 2023. Thereafter, the documents were signed and sent to the tax consultant for filing after which they got it filed before this Tribunal. Due to the above reasons, there has been a delay of about 164 days (i. e. from 29 May 2023 to 09 November 2023). Accordingly he prayed that the delay may be condoned.
On the other hand, ld. D.R. strongly opposed the admission of appeal for adjudication stating that assessee is very negligent in its approach and the law assists only the person who is vigilant and not who sleep over their rights.
We have heard the rival submissions and perused the materials available on record. In this case, there was a short delay of 164 days in filing appeal before this Tribunal. The assessee has explained vide condonation petition that assessee was not wellversed in e-mails and also very poor in English knowledge. Thus, he has given his CA’s e-mail ID for contacting him. However, his previous CA has not taken proper steps to go through the assessee’s income tax portal and to file appeal before this Tribunal. Hence, there was a lack of communication between assessee and assessee’s previous auditor. The assessee has taken steps only after it contacted new CA by name Shri Subhash and assessee came to know about the order of the ld. CIT(A) only when the present consultant CA Subhash checked the assessee’s IT portal and there after assessee took steps to file the appeal before this Tribunal. Thus, there was a delay of 164 days. In our opinion, as seen from the condonation petition, there was a good and sufficient reason to file appeal belatedly before this Tribunal. Accordingly, we condone the delay of 164 days in filing the appeal before us and admit for adjudication.
Basavaraj Laxmanagouda Biradar, Vijayapura Page 4 of 10 6. Ground No.2 of the assessee’s appeal reads as follows:
The learned CIT(A) has erred on facts and in circumstances of the case and in law by confirming the impugned Penalty Order though the Show Cause Notice issued by the learned AO did not specify the limb of section 271(1)(c) of the Act [in the notice dated 12 December 2019 issued under section 274 read with section 271(1)(c) of the Act], under which he was considering levy of penalty and thereby offending the principles of natural justice that vitiates the impugned Order under section 271(1)(c) of the Act. 6.1 Facts of the issue are that in this case penalty u/s 271(1)(c) of the Act has been initiated vide show cause notice dated 28.12.2018 which reads as follows:
Basavaraj Laxmanagouda Biradar, Vijayapura Page 5 of 10 6.2 The ld. A.R. submitted that this issue is squarely covered by the judgement of Hon’ble Karnataka High Court in the case of CIT Vs. Manjunatha Cotton & Ginning Factory reported in 35 Taxmann.com 250, wherein held that notice u/s 274 of the Act should specifically state the grounds mentioned in section 271(1)(c) of the Act i.e. whether it is for concealment of income or for furnishing of incorrect particulars of income. Sending printed form, where all the grounds mentioned in section 271 are mentioned, would not satisfy requirement of law. The assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. On the basis of such proceedings no penalty could be imposed to the assessee. Taking up of penalty proceedings on one limb and finding the assessee guilty of another limb is bad in law. Thus, he submitted that penalty order to be quashed.
We have heard the rival submissions and perused the materials available on record. In the present case, the ld. AO has initiated the penalty proceedings in the assessment order dated 29.12.2018 by observing that “since the assessee ha concealed the income and filed inaccurate particulars, penalty u/s 271(1)(c) of the Act is being initiated separately”. Later the ld. AO while levying the penalty u/s 271(1)(c) of the Act vide order dated 19.6.2019 observed in para 9 & 10 as follows:
“9. The assessee has not furnished any specific explanation but has made general submission. No reasonable cause has been furnished for concealing the particulars of income. In view of the facts and circumstances, the assessee's explanation is not acceptable. The assessee has requested to drop the penalty proceeding but could not substantive his claim with documentary evidences. The assessee has furnished inaccurate particulars of income thereby leading to concealment of income. It is only on the probing by the department, the assessee has agreed to the additions and not suo-moto. Hence, the assessee has concealed the income.
10. Considering the above facts and circumstances, I hold the assessee in default within the meaning of section 271(1) (c) read with Explanation-1 of the Income Tax Act, 1961 in respect of Rs. 80,91,500/-
Basavaraj Laxmanagouda Biradar, Vijayapura Page 6 of 10 considered as concealment within the meaning of section 271(1)(c). Hence, this is a fit case for levy of penalty under section 271(1)(c). The minimum penalty (100%) leviable U/s. 271(1)(c) works out to Rs.25,00,273/- and maximum penalty (300%) leviable of Rs.75,00,819/-. Therefore, I hereby levy penalty at the rate of 100% of the tax evaded on account of concealment of income, I impose minimum penalty of Rs.25,00,273/-(Rupees Twenty five Lakhs Two Hundred seventy three) under section 271(1)(c) of the Income Tax Act, 1961.” 7.1 Thus, it is evident from the above finding of the ld. AO that the ld. AO has initiated the penalty for both limb of section 271(1)(c) of the Act i.e. concealment of income and filing inaccurate particulars of income. For same purpose, notice u/s 274 of the Act has bee issued as seen from the above and penalty was also levied for the lapse of both counts mentioning the same thing in the penalty order. Being so, there is no merit in the argument of the assessee’s counsel that the ld. AO has not specified the grounds on which penalty has been levied whether for concealment of income or furnishing of inaccurate particulars of income. On the other hand, in the present case, the penalty has been levied for concealment of income and for furnishing inaccurate particulars of income. Being so, the judgement of Hon’ble Karnataka High Court relied by the assessee’s counsel in the case of Manjunatha Cotton & Ginning Factory cited (supra) is of no assistance to the assessee. Accordingly, this ground No.2 of the assessee’s appeal is dismissed.
Next ground Nos.3 & 4 of the assessee’s appeal which reads as follows:
“The learned CIT(A) has erred on facts and in circumstances of the case and in law by confirming the impugned Penalty Order though the learned AO had not given enough opportunity of being heard to the Appellant.”
4. The learned CIT(A) has erred on facts and in circumstances of the case and in law by confirming the impugned Penalty Order which is based on the Assessment Order under section 143(3) of the Act passed by the learned AO who has made additions only on the basis of assumptions, surmise and conjectures.”
Basavaraj Laxmanagouda Biradar, Vijayapura Page 7 of 10 8.1 The crux of above grounds is that levy of penalty u/s 271(1)(c) of the Act is unjustified. The facts of the issue are that in this case, the assessee has filed return of income electronically for the assessment year 2016-17 on 24.3.2017 declaring total income of Rs.7,07,920/-. Later, the assessment has been completed u/s 143(3) of the Act vide order dated 29.12.2018. While framing the assessment order, the ld. AO has made an addition of Rs.80,91,500/- u/s 68 of the Act towards the cash deposited into bank account with Shri Basaveshwar Sahakari Bank Niyamit, Bagalkot. According to the ld. AO, the assessee has not explained the sources from which the said impugned cash amount has been deposited into assessee’s bank account. Consequently, the ld. AO has initiated the penalty proceedings for furnishing inaccurate particulars of income and concealing the particulars of income and he levied penalty at 100% of tax to be evaded, which worked out at Rs.25,00,273/-. On appeal, the ld. CIT(A) has confirmed the same. Once again, assessee is in appeal before us.
We have heard the rival submissions and perused the materials available on record. In the present case, the assessee has deposited a sum of Rs.80,91,500/- to assessee’s bank account with Shri Basaveshwar Sahakari Bank Niyamit, Bagalkot. The ld. AO called for the source from which the said amount has been deposited into assessee’s bank account. The assessee’s statement has been recorded u/s 131 of the Act on 16.11.2018. The assessee has answered to question No.8 as follows: “Q.No.8. From Bank statement of Shree Basavaeshwar Sahakari Bank Niyamit, Bagalkot it is noticed that you have deposited cash to the extent of Rs.81,64,537/-please furnish the sources for the said cash deposits with documentary evidences in support of your claim. Ans. Cash to the extent of Rs,81,64,537/- received from Hanmant Mallappa Biradar, at 96, Plot No. 2, Sadashiva Nagar, Ashram Road, Vijayapur, 9481670000 and same has been deposited in bank. And same has been paid to labours through bearer cheque. The said cheque book will be furnished within two days.”
Basavaraj Laxmanagouda Biradar, Vijayapura Page 8 of 10 9.1 This answer of the assessee has been cross verified with Shri Hanamant Mallappa Biradar vide his statement recorded u/s 131 of the Act on 22.11.2018 to the specific question No.8. He replied to it as follows:
Q.No.8. From Bank statement of Shree Basavaeshwar Sahakari Bank Niyamit, Bagalkot, in the name of Shri. Basavraj Laxaman Biradar, it is noticed that he has deposited cash to the extent of Rs.81,64,537/- and explained sources for the said cash deposits received from my brother in law Shri Hanamant Mailappa Biradar. Please explain with documentary evidences in support of your claim. Ans. Yes, Cash to the extent of Rs.75,00,000/- paid by me to Shri Basavaraj Laxmangouda Biradar S/o Shri. Laxman M. Biradar, residing at A/P Bagalkot Road, Rajaji Nagar, Vijayapur. He is working as site in-charge, he has withdrawn the same as and when required and made the labour payment.
9.2 Further, the ld. AO called for information u/s 133(6) of the Act from Shri Basaveshwar Sahakari Bank Niyamit, Bagalkot that whether the bank has confirmed that assessee has deposited cash to the tune of Rs.81,64,537/- and also Rs.5 lakhs hypothecation loan credited to assessee’s account. Once again, the statement u/s 131 of the Act was recorded from assessee on 6.12.2018 and answer to question Nos. 8 & 9, which reads as follows:
Q.No.8. From Bank statement of Shree Basavaeshwar Sahakari Bank Niyamit, Bagalkot it is noticed that you have deposited cash to the extent of Rs.81,64,537/-. You have stated in your earlier statement dated 16.11.2018 entire cash received from my brother in law Shri Hanamant Mallappa Biradar and same has been deposited in bank. However, your brother in law in his statement dated 22.11.2018 stated that only Rs. 75,00,000/- paid in cash. Do you agree his statement? Ans. Yes, I made my statement that entire cash was deposited Shri. H. M. Biradar. But actually, I received an amount of Rs.75,00,000/- only from Shri. H. M*. Biradar. Balance cash of Rs.6,64,537/- not able to recollect. Q.9. It is noticed that from Balance sheet of Hanmant Mallappa Biradar, has shown as sundry creditors of Rs.43,20,308/- in your name. From this statement it reveals that you have omitted to offer the said amount. Please explain? Ans.: Since he has not paid said amount to me I offered only whatever credited to my bank account. 9.3 The ld. AO not agreeing with the above contention of the assessee, he made addition towards the cash deposit at Rs.80,91,500/-. Consequently, he levied penalty u/s 271(1)(c) of the Act on the said amount. Now the contention of the ld. A.R. is that Basavaraj Laxmanagouda Biradar, Vijayapura Page 9 of 10 assessee in a bonafide belief and given the explanation that the said assessee has received a aum of Rs.75 lakhs from assessee’s brother- in-law Mr. Hanmant Mallappa Biradar and Mr. Hanmant Mallappa Biradar also confirmed that he has paid said amount of Rs.75 lakhs to the assessee. Further, balance amount of Rs.6,64,537/-, which has been deposited to bank account for which assessee was not able to recollect source of same. However, the ld. AO has considered the entire amount, which has been added in the assessment order to levy penalty u/s 271(1)(c) of the Act.
9.4. The contention of the ld. D.R. is that assessee has not challenged the addition made in the assessment order, as such there is no necessity of proving the concealment of income or furnishing inaccurate particulars of income at the end of the ld. AO. In our opinion, imposition of penalty is not automatic. Even if the assessee has not challenged the addition made in the assessment order and the non-challenging of the assessment order itself would not be sufficient for the ld. AO either to initiate penalty proceedings or imposing penalty unless it is discernible from the assessment order, that it is on account of such unearthing or enquiry concluded by authorities, which has resulted in payment of such tax and if not it would have escaped from tax net. In that case, assessee has given an explanation and that explanation is bonafide and not found to be false. Even otherwise, ld. AO has not brought on record to show that explanation offered by the assessee is false or not bonafide. In the present case, explanation offered by the assessee is bonafide and it is also backed by the statement recorded from Mr. Hanmant Mallappa Biradar who has confirmed that he has given Rs.75 lakhs to assessee, which has been used to deposit to assessee’s bank account. Even the confirmation given by Shri Hanmant Mallappa Biradar was brought on record by ld. AO. He is not ready to explain the same and find deficiency in his statement, which is unwarranted. The explanation offered by the assessee cannot be Basavaraj Laxmanagouda Biradar, Vijayapura Page 10 of 10 rejected outrightly. Since the explanation offered by the assessee being bonafide to explain the receipt of amount of Rs.75 lakhs so as to deposit into bank account, the balance amount to the tune of Rs.6,64,537/- which is not explained by the assessee, he has given evasive reply that he is not able to recollect the source of deposit. In our opinion, out of Rs.80,91,500/-, the assessee has explained the sources for Rs.75 lakhs as above. Balance Rs.5,91,500/- is not explained. Hence, the ld. AO has to recompute the penalty only towards unexplained source of Rs.5,91,500/- only and not of the entire amount of Rs.80,91,500/-. Accordingly, the issue is remitted to the file of ld. AO for limited purpose of recomputing the penalty u/s 271(1)(c) of the Act in respect of unexplained source of Rs.5,91,500/-. Ordered accordingly.
In the result, appeal of the assessee is partly allowed.
Order pronounced in the open court on 8th Jan, 2024