PRATIK BHARAT SHAH,MUMBAI vs. ASSTT. CIT ,RANGE- 16(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद"य लेखा लेखा सद"य सद"य राजे"" सद"य राजे"" राजे"" केकेकेके अनुसार राजे"" अनुसार अनुसार PER RAJENDRA, AM- अनुसार Challenging the orders,dated 14.2.14,of the CIT(A)-27,Mumbai the assessees have filed the above mentioned appeals.As the same issue-levy of penalty u/s.271(1)(c)(1)(c) of the Act-is involved in both the cases and the assessees are members of the same family,so,we are adjudicating both the appeals by a single order. ITA/3429/Mum/2014 2.Assessee,an individual filed his return of income,on 29.3.2010,declaring income of Rs. 39, 16,000/-.Subsequently,a revised return was filed on 31.03.2011 showing income of Rs.46.76 lakhs,The return was processed u/s.143(1) of the Act. The case was selected for scrutiny and a notice u/s. 142(2) was issued on 20.08.10. The AO completed the assessment u/s.143(3) of the Act,on 12.12.11,determining the income of the assessee at 46,77,550/-.

3.During the assessment proceedings,the assessee was asked as to why the revised return should be considered,as the original rerun was not filed in time as provided u/s.139(1)of the Act. Accordingly,the revised return was not considered filed as per the provisions of section 139 (5) of the Act. In his submission, dated /12/2011, the assessee stated that he had not 3428&29-PratimaS&Pratik.S received intimation u/s. 143 (1) and that accordingly he had revised his return. The AO held that explanation filed by the assessee was not acceptable,that the order u/s. 143 (1) of the Act was passed on 26/08/2010, that as per the provisions of section 139 (5) returns filed u/s. 139

(1) only could be revised. Therefore, he held that revised returns filed by the assessee would not be considered.While completing the assessment, the AO held that he had not offered income under two heads namely income from house property (Rs.54,864/-) and income from other sources (Rs.7.05 lakhs). He initiated penalty proceedings u/s. 271(1)(c) for furnishing inaccurate particulars of income in the original return.The AO issued a notice u/s. 274 read with section 271(1)(c) asking the assessee to explain as to why the penalty should not be levied under the said section. In his explanations, filed on 06/01/2012 and 22/06/2012, the assessee accepted that he had committed mistakes. After considering the submission of the assessee and the cases relied upon by him, the AO held that the original return was filed on 29/03/2010, that the revised return was filed only after the assessee came to know that the case had been selected for scrutiny and that notice u/s. 143 (2) had been served upon him, that the act of filing of revised return was not voluntarily, that return filed late as per the provisions of section 139(4) could not be revised, that it was the duty of the assessee to disclose the true amount of total income for the year under appeal,that the reason for revising the return was claim of maintenance charges against the rent which was not allowable u/s.23/24 of the Act, that the assessee had claimed that he was not having full information about the bank interest on FDRs held by him as well as held on behalf of his minor son.The AO further held that cases relied upon by the assessee were not applicable to the facts of the matter before him.He finally held that assessee had concealed/ furnished inaccurate particulars of income in the original return,that it was a fit case where penalty u/s.271(1)(c) was required to be imposed.Finally, the AO imposed a penalty of Rs.2.58 lakhs.

3428&29-PratimaS&Pratik.S 4.Aggreived by the order of the AO,imposing penalty,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him,it was argued that he had filed belated return of income on 29/03/2010, that upon discovering the fact that maintenance charges were claimed against the rental income and that interest on fixed deposit was inadvertently not disclosed while filing the regional return of income the assessee voluntarily rectified the mistake by filing revised return, that the AO erred in not appreciating the fact that assessee informed him about the non-disclosure of property income to the extent of Rs. 54,864/- and other sources income to the extent of Rs. 7.05 lakhs much before the effective start of assessment proceedings in the month of June,2011, that TDS certificates from Allahabad Bank and Punjab and Sindh Bank were not received by the assessee before the date of filing of the original return, that as soon as the TDS certificates were received,the assessee calculated the accrued interest figure and voluntarily disclosed the same by filing a revised return.After considering the available material, the FAA held that penalty could be levied u/s. 271(1)(c) if the AO was satisfied that any person had furnished inaccurate particulars of the income or had concealed the particulars of income, that there was a strict liability on the assessee for not concealing income or for not giving inaccurate particulars while filing the return, that the penalty levied section 271(1)(c) was a civil liability, that the willful concealment was not an essential ingredient for levying the penalty, that it was the duty of the assessee to make a correct and complete disclosure of his income. The FAA referred to the explanation of the section 271(1)(c) and held that provisions of clause (B) of the explanation to section 271(1)(c) of the Act were attracted for testing the exigibility of penalty in the case under consideration, that the assessee was not able to prove that explanation filed by it was bona fide, that he could not prove that all the facts relating to the competition of income were disclosed, that the assessee had hidden or concealed the FDR interest income, that he had made a false claim of expenditure against the house property income.

3428&29-PratimaS&Pratik.S 5.Before us,the Authorised Representative(AR)argued that at the time of filing of original return accrued interest figures were not available with regard to the FDRs with the Allahabad bank, Punjab and Sindh bank as well is the FDRs standing in the minor name of the assessee, that the TDS certificates from the respective banks over received on 18/03/2011, that at the time of filing of original return passbook was not available/traceable, that the interest accrued remained to be shown in the original return, that in the revised return the assessee had shown the income arising out of the interest from the FDRs.He referred to the reconciliation statement of the interest income.With regard to maintenance charges,he stated that the assessee had inadvertently claimed the charges in the original return, that while filing the revised return the property income was increased by Rs.54/864/-, that there was no intention to furnish inaccurate particulars or conceal the income, that the assessee revised the return as soon as he came to know about the mistakes committed by him. He further stated that the penalty was not levied for the same reason for which notice was issued.He referred to the cases of Kishore J Janani (ITA/6890/M/2012-11/03/2016),Hafiz Contractor(ITA/622/ Mum/ 2013-02/9/2015),Mangalam Drug & Organics Ltd.(ITA/5454/Mum/2011-24/09/ 2015), Mahabir Prasad Agarwal (IT A/739/KOL/2013-dated,15/01/2016) and Manjunath Cotton & Ginning Factory (359ITR565).

The Departmental Representative (DR) argued that it was a clear case of furnishing of inaccurate particulars, that the assessee himself had admitted “inadvertent mistake” with regard to house property income, that the accrual of interest was not dependent on TDS, both the authorities have given clear finding about the failure of the assessee.

6.We have heard the rival submissions and perused the material before us.Before proceeding further,we would like to mention that no authority is required to hold that the assessment and 3428&29-PratimaS&Pratik.S penalty proceedings are different and the issue of levy of penalty has to be taken independently.Additions made during the quantum proceedings should not result in automatic levy of penalty.What is important is the explanation filed by the assessee during the penalty proceedings.If the explanation indicate that stand taken by him about an expenditure or a claim is one of the plausible views then no penalty should be levied irrespective of the facts that what treatment was given to it during the assessment or appellate proceedings.Is,short,if the explanation is not so fanciful that a person of common prudence would agree with it,then the assessee should not be visited by penal provisions. But,if the explanation is prima facie contrary to the provisions of the Act then the intention of the assessee would have no role to play in deciding the penalty u/s.271(1)(c)of the Act.In other words,while levying the penalty,explanation offered by the assessee,has to be considered independently.

In the case before us,the penalty proceedings had been initiated for furnishing inaccurate particulars of income and the assessee had understood the spirit in which the assessment is completed.The notice has to be read along with the assessment order during the course of which proceedings had been initiated.In the assessment order the AO had mentioned that penalty proceedings were initiated for furnishing inaccurate particulars.While imposing the penalty the AO had held that the assessee had concealed/furnished inaccurate particulars.In our opinion,the act of initiation of penalty has culminated in imposing penalty on same footing.

6.1.It is true that all the cases of filing of inaccurate particulars of income may not result in concealing the particulars of income-in some cases there may be only filing of inaccurate particulars and in some other cases there may be concealment of particulars of income. But, there may be a few cases where filing of inaccurate particulars lead to concealment.Thus,it is not every case that the AO should strike off the phrases in the show cause notice.What the Hon’ble Karnataka High Court has held in the case of Manjunath Cotton & Ginning 5 3428&29-PratimaS&Pratik.S Factory(supra) is that penalty should not be levied for furnishing of inaccurate particulars,if same was initiated for concealing the particulars of income.The Hon’ble court has not deliberated upon a situation where both the omissions are there and penalty is initiated for both counts but penalty is levied only for one omission/ commission, after considering the explanation filed by the assessee.If the AO at the time of finalising the assessment arrives at the conclusion that an assessee has furnished inaccurate particulars and finally levies penalty for that omission only,then in our opinion it cannot be held that failure of the AO to cancel a particular phrase in the notice is fatal and the penalty order should be treated invalid.Decision to initiate penalty proceedings during the assessment order , issuing a show cause notice in pursuance of the assessment order and passing of penalty order after hearing the assessee are the three stages of levy of penalty. Therefore,the notice alone cannot be considered in isolation-all the three stages are to be considered cumulatively.

6.2.Now,coming back to the facts of the case under consideration,we find that the assessee had not disclosed accrued interest in the return of income and had made a patently inadmissible claim with regard to the house property. As far explanation offered by the assessee about the interest is concerned we hold that his explanation was bona fide.If the factors like receipt of TDS certificate in the month of March,2011 and subsequent development are considered it becomes clear that there was plausible reason for filing a revised return of income.Therefore,in our opinion penalty should not have been levied with regard to the accrued interest not shown in the original return.But,as far as the second addition is concerned there was no justification on part of the assessee to claim of maintenance-charges against the rental income.In the explanation filed by the assessee,he has stated that it was an inadvertent mistake.We are of the opinion that it is not an issue where two views are possible or there can be difference of opinion.It is a clear case of making an inadmissible claim,as state earlier.Has the case not been scrutinised,the assessee would have 6 3428&29-PratimaS&Pratik.S walked away with it. It is also a fact that so-called revised return was filed after the AO had issued a notice u/s.143(2)notice.We should not forget that only a miniscule percentage of the returns are selected for scrutiny by the depart -ment.Therefore,it is the duty of the taxpayers to pay due taxes.It is their right that they are not taxed for the income that has not been received or accrued to them. But,the other side of the coin is that they should not put forth totally inadmissible claim and reduce the tax liability.For such a omission,if penal provisions are invoked by the AO they should not have any grudge.Therefore,we hold that the AO had rightly levied penalty for claiming maintenance charges against the rental income.

6.3.We have gone through the cases relied upon by the assessee.In our opinion, same are distinguishable on facts.In the case before us,the penalty was initiated for and in the order passed u/s.271(1)(c)of the Act,the AO had mentioned that he was levying penalty for furnishing as stated in the earlier part of our order. Considering the peculiar facts and circumstances of the matter,we decide the effective ground of appeal in favour of /against the assessee,in part.

ITA/3428/Mum/2014: 7.The facts of the case are identical to the facts of the case of Pratik B Shah -the only difference is of amounts involved.The interest income accrued to the assessee is Rs. 4,14,682/-and the maintenance charges claimed by her against the rental income is Rs. 2, 55, 540/-.Following our order in the case of Pratik B Shah,ground is decided in favour of the assessee,in part.