VASIMKHAN HAMIDKHAN PATHAN,DANG vs. INCOME TAX OFFICER, WARD-5, NAVSARI, NAVSARI

Grounds of appeal

During the penalty proceedings, the Assessing Officer noted that it is proved beyond doubt that assessee has committed a default of concealment of income. The penalty u/s 271(1)(c) is leviable to the extent of tax on the addition of Rs.3,67,500/-. The concealment has come to notice as a result of scrutiny assessment proceedings only. Had the case not been re-opened u/s 147/148 of the Act, the assessee would have succeeded in tax evasion. Considering the facts and circumstances of the case, Assessing Officer held that assessee had concealed his income by not filing the return of income and not showing his income and paying due taxes thereon and therefore Assessing Officer levied penalty u/s 271(1)(c) of the Act to the tune of Rs.17,253/-.

Before us Ld. Counsel for the assessee submitted that assessee has suo- motu disclosed his business income and paid tax thereon. The assessee has submitted bona fide explanation. The Ld. Counsel took us through paper book page-16 and stated that on the identical facts, the penalty u/s 271(1)(c) of the Act, was deleted by the co-ordinate Bench of ITAT Delhi Benches in Vasimkhan H Pathan the case of Meeta Gutgutia vs. ACIT in for A.Y. 2008-09 dated 31.03.2016, wherein the co-ordinate Bench of ITAT Delhi held that Assessing Officer had simply accepted the returned income u/s 148 of the Act. Hence, the penalty u/s 271(1)(c) will not be imposable. The ld Counsel also relied on the judgment of Hon`ble Supreme Court in CIT v. Suresh Chandra Mittal [2001] 251 ITR 963 (SC).

We have considered the rival submissions and perused the relevant finding given in the order ld NFAC/Ld.CIT(A). We note that Assessing Officer initiated the penalty proceedings on account of concealment of particulars of income to the tune of Rs.3,67,500/-. However, in penalty proceeding, also the Assessing Officer levied the penalty on account of concealment of income. We note that Ld. Counsel submitted that assessee did not conceal the income and was in the bona fide believe that the said income, which was taxed u/s 147 of the Act, was not assessable under the Act. We note that there is no finding of the Assessing Officer in the assessment order that assessee has concealed his income; rather Assessing Officer has accepted the returned income filed by assessee, as it is, (in response to notice u/s 147 of the Act). We note that Hon’ble Madras High Court in the case of CIT v. K.R. Chinni Krishna Chetty [2000] 246 ITR 121 has held that under section 271(1)(c) of the Act the authority is given the Vasimkhan H Pathan discretion to levy a penalty if there is concealment of particulars of income and even as regards the quantum of the penalty there is a discretion. Of greater importance is the necessity for a definite finding that there is concealment, as without such a finding of concealment, there can be no question of imposing any penalty. In the assessee’s case, the AO has not given any finding in assessment order that the assessee had concealed any income or furnished inaccurate particulars of such income. He had simply accepted the returned income u/s 148 of the Act. Hence, assessee’s case is covered by the decisions referred to above and penalty u/s 271(1)(c) will not be imposable.

We also note that the Co-ordinate Bench of ITAT Delhi, in the case of Meeta Gutgutia (supra), on the same identical facts, deleted the penalty under section 271(1)(C) of the Act, observing as follows: “6. We have heard the rival submissions and perused the material on record. It is an undisputed fact that the returned income has been accepted, there is no satisfaction recorded by the assessing officer that assessee had concealed income with reference to return of income filed by him in response to notice u/s 148. Hon’ble Supreme Court in Varkey Chacko v. CIT [1993] 203 ITR 885 has held that a penalty for concealment of particulars of income or for furnishing inaccurate particulars of income can be imposed only when the assessing authority is satisfied that there has been such concealment or furnishing of inaccurate particulars. A penalty proceeding, therefore, can be initiated only after an assessment order has been made which finds such concealment or furnishing of inaccurate particulars. The penalty was permissible under the law on the date on which the offence of concealment of income was committed, that is to say, on the date of the offending return. Hon’ble Madras High Court in the case of CIT v. K.R. Chinni Krishna Chetty [2000] 246 ITR 121 has held that under section 271(1)(c) of the Act the authority is given the discretion to levy a penalty if there is concealment of particulars of income and even as regards the quantum of the penalty there is a discretion. Of greater importance is the necessity for a definite finding that there is concealment, as without such a finding of concealment, there can be no question of imposing any penalty. In the assessee’s case, the AO has not given any finding in assessment order that the assessee had concealed any income or furnished inaccurate particulars of such income. He had simply accepted the returned income u/s 148. Hence assessee’s case is covered by the decisions referred to above and penalty u/s 271(1)(c) will not be imposable. In CIT v. Suresh Chandra Mittal [2001] 251 ITR 963 (SC) the assessee filed revised returns showing higher income after search and notice for reopening of assessment, to purchase peace and avoid litigation and Department Vasimkhan H Pathan simply rested its conclusion on the act of voluntary surrender done by the assessee in good faith, High Court was justified in holding that no penalty could be levied. The assessee’s case is on more strong footing as that of Suresh Chand Mittal (supra) decided by Hon’ble Supreme Court. As held in earlier paragraphs there should be variation in assessed and returned income and such variation should be as a result of concealment. It is not the case of assessing officer that penalty u/s 271(1)(c) has been imposed on certain additions made to the returned income. Hon’ble Delhi High Court in the case of M/S S.A.S. Pharmaceuticals (supra) while deciding the issue levy of penalty u/s 271(1)(c) in paragraph 15 has held as under: “15. It necessarily follows that concealment of particulars of income or furnishing of inaccurate particulars of income by the assessee has to be in the income tax return filed by it. There is sufficient indication of this Court in the judgment in the case of Commissioner of Income Tax, Delhi-I Vs Mohan Das Hassa Nand 141 ITR 203 and in Reliance Petro products Pvt. Ltd (supra), the Supreme court has clinched this aspect, viz., the assessee can furnish the particulars of income in his return and everything would depend upon the income tax return filed by the assessee.”

Therefore, in view of the facts of the case we are of the opinion that no penalty was imposable u/s 271(1)(c) of the Act and we accordingly direct the AO to delete the penalty.”

Therefore, based on the facts and circumstances, as narrated above, and respectfully following the precedent applicable to the assessee`s facts, we delete the penalty imposed by the Assessing Officer. This ground of assessee’s appeal is allowed.

In the result, appeal of the assessee is allowed. Order is pronounced on 21/12/2023 in the open court.