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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI B.R.BASKARAN (AM) & SHRI RAM LAL NEGI (JM)
These appeals have been preferred by the assessee against three separate orders all dated 24/2/2015 passed by the Ld. CIT(Appeals)-52, Mumbai, for the Asst. Years 2003-04, 2004-05 & 2005-06 respectively whereby the Ld. CIT(A) dismissed all the three appeals filed by the assessee against the penalty orders passed by the AO and confirmed the penalty levied u/s 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’). Since all these appeals pertain to the same assessee, for different Asst. years and the issue involved in all the appeals are common, the same were clubbed and heard together and are being disposed of by this common order for the sake of convenience.
Since the facts of all the appeals are similar, we take the brief facts of the case pertaining to the assessment year 2003-04 as lead case. The assessee is an employee of M/s. Dimple Drums & Barrels Pvt. Ltd. A search & seizure operation u/s 132 of the Act was carried out on 15/05/2008 at the residential and business premises of M/s. Dimple Drums & Barrels Pvt. Ltd. and its associates including its directors/partners. During the course of search and seizure an amount of Rs. 5,00,00,000/- was admitted as undisclosed income in the hands of different concerns/persons of the group. Shri. Amit Kotadia, Surendra Kotadia, Dinesh Kotadia and Rajesh Kotadia, directors of M/s. Dimple Drums & Barrels Pvt Ltd., filed a common letter dated 24/06/2008 before the investigation Wing of the income tax department admitting an undisclosed income of Rs. 5 crores.
Accordingly notice u/s 153A of the I.T. Act was issued to the assessee on 09/09/2008 asking him to file its return of income within 30 days of receipt of the notice. In response thereof the assessee filed its return of income for A.Y. 2003-04 declaring the total income of Rs. 3,35,191/- including undisclosed income of Rs. 1,00,000/-. Notices u/s 143(3) and 142(1) along with questionnaire were issued and in response thereof, the assessee furnished the details pertaining to the documents seized during the search. Since, it was noticed that the assessee had been provided rent free accommodation by M/s Dimple Drums & Barrels Pvt. Ltd. and the assessee had not declared the perquisite value in its return of income filed in response of notice u/s 153 of the Act, the AO calculated the perquisite value of rent free unfurnished accommodation @ 15% of the gross salary for the year under consideration and made addition of Rs. 39,000/- to the income of the assessee and completed the assessment u/s 143(3) read with section 153 of the Act, determining the total income of the assessee at Rs. 3,74,191/-. In appeal the Ld. CIT(A) confirmed the additions made by the AO. Penalty proceeding u/s 271(1)(c) of the Act was accordingly initiated for concealment of undisclosed income to the tune of Rs. 1,00,000/-and concealment of perquisite value of rent free accommodation of Rs. 39,000/- and minimum penalty of Rs. 51,083/-was levied u/s 271(1)(c) of the Act.
In appeal the Ld. CIT(A) confirmed the penalty. The assessee is in appeal before the Tribunal against the impugned order passed by the Ld. CIT(A). The assessee has challenged the impugned order on the following effective grounds:- “On the facts and in the circumstances of the case the learned Commissioner of Income Tax (Appeals) (CIT(A) on facts in
confirming the penalty on amount voluntarily disclosed of Rs. 1,00,000/- in the return of income filed after payment of tax and interest and explaining the source of earning.
1.2 The CIT(A) failed to appreciate that the Assessing Officer (A.O) did not issue any direction for initiation of penalty in respect of this particular addition and the A.O completing the assessment u/s 143(3) accepted the facts stated in para(1) above.
1.3 The provisions of section 271(1)(c) and reference to section 271 (1B) is not legal and have been wrongly construed.
2. The CIT(A) was not justified in confirming the penalty in respect of perquisite value of Rs. 39,000/- as the Appellant had shown salary income on the basis of certificate issued by the employers and shall all facts relating to perquisite were disclosed.”
Before us the Ld. authorized representative of the assessee (AR) for the assessee submitted that the Ld. CIT(A) has wrongly confirmed the penalty order as the A.O had not issued any direction for initiation of penalty in respect of particulars of addition made by the AO. The Ld. CIT(A) has wrongly confirmed the penalty in respect of perquisite value of Rs. 39,000/- as the appellant had shown the details of income on the basis of salary certificate issued by the employers. The Ld AR further submitted that the provisions of section 271(1)(c) section 271(1)1B have been wrongly construed by the authorities below. Relying on the decision rendered by Pune Bench of the ITAT in Ajit Tamchadra Jadhav vs. ACIT (ITA No. 2104/PN/2013 A.Y. 2003-04) and the decision rendered by the Hon’ble High Court of Telangana and Andhra Pradesh in CIT vs. Lotus Constructions [2015] 370 ITR 475 (T&AP) submitted that the impugned order is liable to be set aside.
On the other hand the Ld. DR relying on the concurrent findings of the authorities below submitted that since the order under challenge has been passed in accordance with the provisions of law, there is no merit in the case of the appellant/assessee.
We have heard the rival submission and also perused the documents placed before us. In our considered view there is no merit in the contention of the assessee that the AO has not issued directions for initiation of penalty in assessment order as the AO has specifically mentioned in the assessment order that penalty show cause notice u/s 271(1)(c) read with section 274 of the Act is issued separately issued. Moreover, the penalty order has been passed considering the contentions of the assessee. Hence, the law relied upon by the assessee is not applicable to the present case. So far as addition of Rs. 1,00,000/- is concerned, the assessee has himself declared the income of Rs. 34,564 on account of interest and Rs. 23,625/- on account of dividend (total Rs. 58.189/-) and rounded off Rs. 1,00,000/- in his return of income filed in response to the notice issued u/s 153A of the Act. Under these circumstances the contention of the assessee that the Ld. CIT(A) has wrongly confirmed the penalty levied by the AO is devoid of any merit.
Since the search action in his case was carried out after the 1st day of June, 2007, the assessee’s case falls under Explanation 5A to section 271 of the Act, which reads as under:
“Explanation 5A- Where, in the course of a search initiated under section 132 on or after the 1st day of June, 2007, the assessee is found to be the owner of – (i) any money, bullion, jewellery or other valuable article or thing (hereafter in this Explanation referred to as assets) and the assessee claims that such assets have been acquired by him by utilizing (wholly or in part) his income for any previous year ; or (ii) any income based on any entry in any books of account or other documents or transaction and he claims that such entry in the books of account or other documents or transactions represents his income(wholly or in part) for any previous year, Which has ended before the date of search and- (a) where the return of income for such previous year has been furnished before the said date but such income has not been declared therein, or (b) the due date for filing the return of income for such previous year has expired but the assessee has not filed the return, Then, notwithstanding that such income is declared by him in any return of income furnished on or after the date of search, he shall, for the purposes of imposition of penalty under clause (c) of sub- section(1) of this section, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income.”
In view of the said explanation, the assessee shall, for the purpose of imposition of penalty under clause (c) of sub-section (1) of section 271 of the Act, be deemed to have concealed the particulars of his income or furnished inaccurate particulars of such income. Therefore, the assessee is liable for penalty u/s 271(1)(c) of the Act. However, in our considered view the assessee is liable for penalty in respect of concealment of income of Rs. 58,189/-( Rs. 34,564+ Rs. 23,625/-) and not on the entire amount of Rs. 1,00,000/- as the remaining amount of Rs. 41,811/- has been added on estimation basis, though by the assessee himself. Since the amount of Rs. 41,811/- has been added on estimation basis, penalty cannot be levied on the said amount. We accordingly order to delete the penalty on Rs. 41,811/-.
As regards the penalty in respect of additions made on account of perquisite value of rent free accommodation @ 15% of the gross salary of the assessee, the AO has made addition as per the provisions of income tax Act 1961. The assessee cannot take the plea that he had furnished the income details as per the salary certificate issued by his employer and if the employer had not mentioned the aforesaid fact in the salary certificate, it was the duty of the assessee to mention the same in his return of income. So non- mentioning of this fact certainly amounts to concealment of income as well as furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. Hence, we are of the considered view the CIT(A) has rightly upheld the findings of the AO.
We, therefore, uphold the findings of Ld. CIT(A) on confirmation of penalty on addition made on account of perquisite value calculated by the AO, however, modify the findings of the Ld. CIT(A) regarding penalty on addition of undisclosed income of Rs. 1,00,000/- as discussed above. AO is therefore directed to calculate the penalty amount on addition of Rs. 58,189/- as undisclosed income. We decide the appeal accordingly.
In the result appeal filed by the assessee for A.Y. 2003-04 is partly allowed. -2821/Mum/2015 A.Y. 2004-05 & 2005-06
The facts and circumstances of the present appeals are similar and the issues involved are also identical except the amounts of additions and penalty calculated thereon and since we have partly allowed the appeal filed by the assessee for A.Y. 2003-04, we also partly allow the appeals filed by the assessee for the A.Ys. 2004-05 and 2005-06. Accordingly, we confirm the penalty imposed on additions made on the amount of perquisite value of rent free accommodation provided to the assessee by the employer of the assessee during the respective assessment years under consideration, however, direct the A.O to calculate the penalty on undisclosed income on account of interest and dividend earned by the assessee disclosed in his returns filed for the assessment years 2004-05 and 2005-06, in response to the notice issued u/s 153A of the act and to deleted the penalty calculate on the addition made on estimation basis.
2. In the result, appeal filed by the assessee for the A.Y’s. 2003-04, 2004-05 and 2005-06 are partly allowed.