PREM PRAKASH AGARWAL,NAYA BAZAR AJMER vs. DCIT CENTRAL CIRCLE AJMER, JAIPUR ROAD AJMER

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, “B” JAIPUR Jh lanhi xkslkbZ] U;kf;d lnL; ,oa Jh jkBkSM deys’k t;arHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ fu/kZkj.k o"kZ@Assessment Year : 2017-18 cuke Prem Prakash Agarwal DCIT, Vs. 429/7, Naya Bazar, Ajmer Central Circle, Ajmer, Jaipur Road, Ajmer LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ACGPA 2972 H vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Sh. C. M. Agarwal (CA) jktLo dh vksj ls@ Revenue by : Sh. Ajay Malik (CIT) lquokbZ dh rkjh[k@ Date of Hearing : 10/01/2024 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 09/02/2024 vkns'k@ ORDER PER: RATHOD KAMLESH JAYANTBHAI, A.M. This appeal is filed by the assessee aggrieved from the order of the Commissioner of Income Tax (Appeals), Jaipur-5 [Here in after referred as (CIT(A))] for the assessment year 2017-18 dated 08.12.2023, which in turn arises from the order passed by the DCIT, Central Circle, Ajmer passed under Section 270A of the Income tax Act, 1961 (in short 'the Act') dated 04.03.2022.

Prem Prakash Agarwal vs. DCIT 2. The assessee assailed the present appeal on the following grounds; “1. On the facts and in the circumstances of the case and in law the order passed by Ld. CIT (A) for confirming penalty u/s 270A of Income Tax Act, 1961 is wrong, bad in law, invalid and void-ab-initio as the ld. AO initiated the penalty u/s 270A of Income Tax Act, 1961 in the appeal order without specifying the limbs of section 270A of the Act.

3. The fact as culled out from the records is that the assessee filed his return of income on 28.12.2017 for A.Y 2017-18 showing total income of Rs. 9,68,230/-. The assessee offered Rs. 9,68,230/- in ROI filed on 12.06.2019 in response to notice issued u/s 153A. In this case, while passing scrutiny assessment u/s 153A r.w.s. 143(3) of the Income Tax Act, 1961, on 20.05.2021, after making addition on account of undisclosed interest income of Rs. 1,41,000/- the assessment completed on the income of Rs. 11,09,230/-.

Prem Prakash Agarwal vs. DCIT 3.1 During the course of assessment proceedings, the assessee was asked to give the explanation of all the exhibits seized at the time of search proceedings. In response the assessee had submitted the page wise description of all the exhibits. As regarding, exhibit-11 of Annexure-A, page No. 1 to 92, the assessee submitted that he had settled the amount in the names of his notices and sister and given loans to various persons. Since the assessee has not challenged the addition to the returned income, the AO proceeded to finalize the penalty proceedings initiated in the assessment order vide notice dated 21.05.2021 which was duly served. The ld. AO based on the fact and circumstance deemed it fit to levy Penalty u/s 270A(1) r.w.s 270A(2)(a) of the IT Act, 1961 for Rs. 20,148/- on the under reported income of Rs. 1,41,000/- being the interest income offered in the assessment proceedings.

Prem Prakash Agarwal vs. DCIT “5.12 In the instant case, it is evident that during the course of assessment proceedings, the assessee had offered the undisclosed interest income of Rs. 1,41,000/- for taxation but the assessee had not disclosed this income in the return of income filed in response to notice issued u/s 153A of the I.T.Act, 1961. Meanwhile during the course of assessment proceedings, the assessee had submitted a revised computation of income declaring therein undisclosed interest income of Rs. 1,44,000/-. It shows that the assessee was aware with the facts of the case and entries found in the seized material and consequences of hiding the true facts of the case. The assessee has not voluntarily offered the undisclosed interest income of Rs.1,44,000/- but it was based on the facts and the entries found in the seized material. 5.13 In view of the above narrated facts and circumstances of the case, I am of the considered opinion that the appellant has failed to prove that he has not under- reported his income and I hold that the AO has rightly imposed a penalty u/s 270A(1) r.w.s. 270A(2)(a) of the I.T.Act, 1961 for under reporting of income.”

Prem Prakash Agarwal vs. DCIT On the facts and in the circumstances of the case and in law the penalty order passed u/s 270A of Income Tax Act, 1961 is wrong, bad in law. Invalid and void-ab-initio as the Id. AO issued notice under section 274 r.w.s. 270A of I. Tax Act without specifying the default of the assessee.”

Ld CIT (A) upheld the levy of penalty with the following observations:

“5.5 As per the provisions of section 270A of the I.T. Act, 1961, the assessee was liable to pay the penalty a sum equal to fifty per cent, of the amount of tax payable on under-reported income as the undisclosed interest income was neither declared in the ITR filed u/s 139(1) of the Act nor in the return submitted in response to the notice issued u/s 153A of the Act.

5.6 The AO held that the assessed income was greater than the income determined in the return processed under clause (a) of sub-section (1) of section 143 therefore was in the nature of under-reported income as defined u/s 270A of the I.T. Act, 1961 thus qualifying for levy of penalty under the said section. The AO has clearly mentioned the default of the assessee in the assessment order for which penalty proceedings u/s 270A of the I.T. Act, 1961 were initiated. The undisclosed interest income detected pertains to specified previous year and in the assessment order, the AO had made addition only on account of undisclosed income. Hence the contention of the appellant is not acceptable that the notices were without specifying the default of the assessee and without specifying the limbs of the section 270A of the I.T. Act, 1961.”

Thus from the decision of the Ld CIT(A) it is evident that Ld Assessing Officer has not specified the exact charge against the assessee either in the assessment order or in the show cause notice or in the penalty notice. Ld CIT (A) merely inferring the charge from the eventual order passed by the Ld Assessing Officer. However, the route taken by the Ld CIT (A) of inferring the cause from the effect is not a legally permissible route. In penalty proceedings, the Assessing Officer is required to show cause the appellant with the specific charge against him. After levy of penalty, deducing the charge from the penalty imposed by the Ld Assessing Officer does not met the requirement of law. From the order of the Ld CIT (A) it is undisputed that before passing the final order, the assessee was never show caused with the specific charge against him.

Hon’ble ITAT Pune Bench in decision dated 30.03.2023 in in the case of Kishor Digambar Patil Vs ITO Ward 2(1) Nashik held as under: “7. We are mindful to the evolution of present penalty law, whereby the legislature in his highest wisdom has brought-in this new simplified penalty scheme through insertion of section 270A with a pre-dominant intent to end highly debated and litigated provision of section 271(1)(c) of the Act. And in Prem Prakash Agarwal vs. DCIT this context it shall be apt to note the ‘Explanatory Memorandum’ to the provisions of Finance Bill, 2016 which explains the objective behind inserting this section 270A vide para 62.1 CBDT Circular 3/2017 (F. No. 370142/20/2016-TPL) as; “Under the existing provisions, penalty on account of concealment of particulars of income or furnishing inaccurate particulars of income is leviable under section 271(1)(c) of the Income-tax Act. In order to rationalise and bring objectivity, certainty and clarity in the penalty provisions, it is proposed that section 271 shall not apply to and in relation to any assessment for the assessment year commencing on or after the 1st day of April, 2017 and subsequent assessment years and penalty be levied under the newly inserted section 270A with effect from 1st April, 2017. The new section 270A provides for levy of penalty in cases of under-reporting and misreporting of income.” (Emphasis supplied)

7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word "misreporting" by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.

Thus, in view of the above legal position enunciated in various decisions supra ,as also in the decisions cited before the Ld CIT(A), levy of penalty u/s270A without specifying the default in the show cause notice i.e whether

Prem Prakash Agarwal vs. DCIT under reporting or misreporting as well in not specifying the specific limb under misreporting or under reporting , is illegal and needs to be cancelled for this reason alone. It is prayed accordingly. Without prejudice to above The AO had accepted the income so offered by the assessee during the course of assessment proceeding by considering that the income disclosed by the assessee falls under the definition of the undisclosed income of the assessee and the assessee has not disclosed this income earlier before the search proceedings.”

Thus, it is evident that the penalty has been imposed on the income disclosed by the Appellant though through filing revised computation of income. However, it is submitted that there is no difference in disclosure of income in the return or disclosure through filing revised computation before the completion of assessment proceedings. Therefore, the penalty which has been levied only on the returned income as substituted by the revised computation is not leviable even on merits. Reliance in this regard is placed on the following decisions:

Hon’ble High Court of Madya Pradesh in the case of CIT Vs Suresh Chand Mittal 241ITR124 (2000) MP Supreme Court Judgement in Sir Shadilal Sugar and General Mills Ltd. Vs. CIT, [1987]168 ITR 705 Hon’ble ITAT Delhi Bench in the case of M.G.Contractors Pvt.Ltd. Vs DCIT, Central Circle-1, Faridabad in to 7038/Del/2014 Hon’ble High Court of Gujarat in the case of Cheldas Khushaldas Patel And Ors. vs Commissioner Of Income-Tax 1992, 196 ITR 200 Guj held as under:

“ 7. The Commissioner, in the case of the firm, refused to waive penalty and interest for the assessment years 1976-77 and 1977-78 only on the ground that the returns filed beyond the prescribed period could not be considered to be returns in the eye of law. As pointed out above, since the returns for the said two assessment years were filed beyond the period prescribed for making assessment, the Income-tax Officer issued notice under section 148 of the Act and at the request of the petitioners treated the returns which were earlier filed as returns filed in response to the notice under section 148. It is urged on behalf of the Revenue that disclosure of income voluntarily and in good faith, as envisaged under sub-clauses (a) and (c) of sub-section (1), could be made only by filing a valid return and, if disclosure was not made by a valid return, such disclosure could not be considered, even if it was made voluntarily and in good faith

Prem Prakash Agarwal vs. DCIT 8. We are not inclined to accept the submission made on behalf of the Revenue. There is nothing in the above provision to support the Revenue's argument that disclosure could be made only by a valid return. What the provision envisages is a disclosure and not a disclosure by a valid return. It is significant that the provision does not require the filing of a return of income for disclosure of income. Disclosure need not necessarily be made by filing returns of income. It could be made either by an application or a letter or a return which might be beyond the period prescribed for making assessments. A return filed after the expiry of the period of limitation for making assessment would, in our opinion, amount to disclosure of income within the meaning of sub-clauses (a) and (c) of sub-section (1) of section 273A. It cannot be gainsaid that the return of income discloses the total income of the assessee filing the return. Therefore, merely because the return of income is filed beyond the period prescribed for making assessment, it would not mean that it does not disclose income. As pointed out above, a return of income does disclose the total income of the assessee and such return would not cease to be disclosure of his total income, merely because it is filed beyond the period prescribed for making assessment. In other words, it is not necessary that there should be a valid return filed before the expiry of the period prescribed for making assessment for making disclosure as envisaged under sub-clauses (a) and (c) of sub-section (1) of section 273A. Sub-clause (b) of sub-section (1) also speaks about full and true disclosure of particulars of income. So far as a case covered by clause (ii) of sub-section (1) is concerned, such full and true disclosure has to be made prior to the detection by the Income-tax Officer of concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income. Such disclosure could also be by a revised return or an application or a letter addressed to the taxing authority. Disclosure contemplated by sub-clauses (a), (b) and (c) cannot have different meanings. In other words, it has the same meaning and such disclosure could be made by a return within or beyond the prescribed time for making assessment or by a letter or an application to the taxing authority.”

Thus, in view of the legal position as to the true import of filing revised computation of income, explained by the Hon’ble High Court of Gujarat, the appellant cannot be held guilty of not furnishing correct particulars of its income. Merely because there is no express provision u/s 153A of the Act for revising the return of income, the revised computation which has the effect of substituting the original computation and particularly in the circumstances when the revised computation has not been tinkered with by the Ld AO in any manner and has been accepted as it is, the assessee should not be visited with a penalty for citing technicalities alone. Evidently, the revised computation of income is in substitution of original computation of income and has to be treated as such. In the circumstances, the appellant cannot be visited with a penalty. Hon’ble Ahmedabad Bench of the Tribunal in decision dated 17th May 2023 in the case of DCIT, Central Circle-1(1), Ahmedabad v. NBM Iron & Steel

Prem Prakash Agarwal vs. DCIT Trading Pvt. Ltd. [ITA No. 205/Ahd/2022, dated May 17, 2023] held that if an assessee during a survey surrendered his income and later showed that income in his regular income tax return, no penalty can be imposed on the assessee. Delhi Bench of the Hon’ble ITAT in the case of ACIT vs. Ashok Raj Nath [2015-ITR V-ITAT-MUM-129] has held that when the assessee voluntary disclosed additional income in the course of assessment proceedings and paid tax thereon and revenue has not placed any material that assessee want to conceal his income there is no basis arises for imposition of penalty. Hon’ble ITAT Mumbai Bench in the case of ITO vs. Gope M. Rochlani [2013- ITRV-ITAT-MUM-119] has held that undisclosed income offered in belated return filed u/s 139(4) is eligible for immunity from penalty under Explanation 5 to s. 271(1)(c). In the circumstances, it is prayed that the penalty levied by the Ld Assessing Officer and upheld by Ld CIT (A) be cancelled. It is prayed accordingly.”

Prem Prakash Agarwal vs. DCIT offered the principle amount and interest thereon. The ld. AO contended that assessee has not offered the additional interest income in the return of income filed in response to notice issued u/s. 153A of the Act. Based on those facts, the ld. AO considered that income as under report of income and consequently levied the penalty of Rs. 20,148/- u/s. 270A(1) r.w.s. 270(A)(2)(a) of the Act.

The ld. CIT(A) confirmed the action of the ld. AO by holding that the assessee was aware with the facts of the case and entries in the seized material and consequences of hiding true facts of the case will not help the assessee, he the assessee failed to disclose the income in response to the notice u/s. 153A of the Act. The assessee in the present appeal contended that income so offered by the assessee in the assessment proceeding before issue of any show cause notice and the same is voluntary action of the assessee. The ld. AO has not doubted the computation and quantum of income offered by the assessee and the same is considered based on the revised computation of income filed at the time of assessment proceedings. Thus, effectively there is not difference in disclosure of income in the return of disclosure through filling the revised computation of income. To support this Prem Prakash Agarwal vs. DCIT contention reliance was placed on the decision of Hon’ble High Court of Madya Pradesh in the case of CIT Vs Suresh Chand Mittal 241ITR124 (2000) MP, Supreme Court Judgement in Sir Shadilal Sugar and General Mills Ltd. Vs. CIT, [1987]168 ITR 705, Hon’ble ITAT Delhi Bench in the case of M.G.Contractors Pvt.Ltd. Vs DCIT, Central Circle-1, Faridabad in to 7038/Del/2014. The similar view that the assessee advanced that income can be declared in addition to the return of income in the assessment proceeding by filling a letter or revised computation and the same can be considered the appropriate disclosure of income by the assessee. To support this view he relied upon the decision of Hon’ble High Court of Gujarat in the case of Cheldas Khushaldas Patel And Ors. vs Commissioner Of Income-Tax 1992, 196 ITR 200 Guj. Even the similar issue is decided by the Delhi High Court in the case of Schneider Electric South East Asia(HQ) Pte Ltd. Vs. ACIT in W. P. (C) 5111/2022 wherein the court held that “7. This Court also finds that there is not even a whisper as to which limb of Section 270A of the Act is attracted and how the ingredient of sub-section (9) of Section 270A is satisfied. In the absence of such particulars, the mere reference to the word ‘misreporting’ by the Respondents in the assessment order to deny immunity from imposition of penalty and prosecution makes the impugned order manifestly arbitrary.

Prem Prakash Agarwal vs. DCIT 8. This Court is of the opinion that the entire edifice of the assessment order framed by Respondent No.1 was actually voluntary computation of income filed by the petitioner to buy peace and avoid litigation, which fact has been duly noted and accepted in the assessment order as well and consequently, there is no question of any misreporting.”

In the result, the appeal of the assessee is allowed.

Order pronounced in the open court on 09/02/2024.

Sd/- Sd/- ¼ jkBkSM deys’k t;arHkkbZ ½ ¼ lanhi xkslkbZ ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 09/02/2024 *Ganesh Kumar, PS आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Prem Prakash Agarwal, Ajmer 2. izR;FkhZ@ The Respondent- DCIT, Central Circle, Ajmer, Jaipur Road, Ajmer