LATE SMT SHANTI DEVI (THROUGH CHANDER MOHAN MERWAH AS APPROVED REPRESENTATIVE),GURGAON vs. ACIT CIRCLE-7, NEW DELHI

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ITA 508/DEL/2020Status: DisposedITAT Delhi09 August 2023AY 2008-097 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the penalty levied under Section 271(1)(c) was unsustainable. This was primarily due to a defective notice issued under Section 274, which failed to specify whether the penalty was for concealment of income or furnishing inaccurate particulars.

What were the facts?

The assessee, an elderly widow, failed to disclose interest income from foreign bank deposits due to a bonafide error and ignorance about its taxability in India. She had resided in Kuwait, a tax-free country, for over 35 years. The income was disclosed and taxes paid upon being pointed out during reassessment proceedings.

What were the issues?

Whether a penalty under Section 271(1)(c) can be levied when the notice under Section 274 is vague and does not specify the limb of the section under which penalty is initiated? Whether a bonafide mistake by an elderly assessee constitutes concealment of income for penalty purposes?

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 274

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(4)Show list

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Income Tax Appellate Tribunal, DELHI BENCH ‘G’, NEW DELHI

Before: Sh. C. M. GargDr. B. R. R. Kumar

Hearing: 02.08.2023Pronounced: 09.08.2023

Heard together (4 matters)

ITA No. 506/Del/2020
ITA No. 507/Del/2020
ITA No. 508/Del/2020
ITA No. 509/Del/2020

Read from the judgment's own cause title. This page is filed under one of them.

ORDER

Per Dr. B. R. R. Kumar, Accountant Member:

1.

1. The present appeals have been filed by assessee against the orders of ld. CIT(A)-24, New Delhi dated 29.11.2019.

2. Since, the issue involved in all these appeals are similar, they were heard together and being adjudicated by a common order.

3. In following grounds have been raised by the assessee:

2 to 509/Del/2020 Late Smt. Shanti Devi “1. The id AO ignored that the deceased Mrs. Shanti Devi, Appellant had been a regular Income Tax Assessee with no past default ever in complying with the law and having paid the Tax dues with Interest on the Incomes.

2. The Ld. AO erred in ignoring her old age being a super senior citizen, a widow about 90 years plus in age and in frail health, hard of hearing with many age related health issues who could hardly be believed to be treated as alert or clever or cunning to be a willful defaulter with levying a penalty u/s 271(1)(c) in this case as there was no deliberate concealment of income on part of the deceased and The Income from foreign deposits escaped from taxation in India in her case due to her bonafide error and genuine ignorance about taxability of interest earned on deposits with foreign banks of the deceased.

3.

The Ld. AO did not consider the fact that the deceased assessee had been a resident in Kuwait for more than 35 years since her marriage where there were no Direct or Indirect Taxes and all such Interest on Bank deposits were not taxable in Indie as well while she was abroad and accordingly believed that interest on such deposits in Foreign Bank accounts held since while she was in Kuwait were not taxable in India even after returning to India.

4.

The Ld. ACIT ignored the fact that the deceased had only a primary level basic reading & writing education, thus substantiating the fact that taxability of Interest income on Foreign Bank Deposits could be a genuine error as claimed by her with no intention of concealment of income.

5. Ld. ACIT erred in law and facts of the case in computing penalty by ignoring the claim of Bank Charges debited to these foreign accounts as deduction from the Interest earned from such deposits even though it was not allowed during Assessment proceedings.

3 to 509/Del/2020 Late Smt. Shanti Devi 6. Ld. ACIT erred and Ld. CIT Appeal has also been unlawful and harsher by not giving credit for computing the penalty imposed ignoring the Bank Charges debited to these foreign accounts as deduction from the Interest earned from such deposits, although the same were verifiable from the bank statements on records and the claim of bank charges were accepted later by Ld CIT Appeals -23 in AY 2010-11 and AY 2011-12 vide the orders dated 07.10.2015.

7. The Ld. CIT Appeal has also been harsh in upholding that late Smt. Shanti Devi knowingly and intentionally concealed the Income from foreign deposits ignoring the facts and belief of banafide error, - without believing that there could be a mistake or bonafide error, - Being a regular Income Tax Assessee with no past default, - by an old lady of about 90 years of age, - A super senior citizen, - A widow about 90 years plus in age, - Her frail health, hard of hearing with many age related health issues, - Having only a primary level basic reading & writing education - Having stayed out of India for over 35 years in a Tax free country, - could have reasonably having reason to believe for such foreign deposits held since her days in Kuwait out of such Incomes abroad in the past, - even though she declared the Income from such foreign deposits post search operations under section 153A and - therefore the penalty @ 100% of the tax amounts under section 271(1)(c) being prejudicial and against the principal of natural justice and law be deleted.

8. The Appellant reserves the right to add further explanations with facts and more grounds of appeal to get relief for the conscience of the departed soul

4 to 509/Del/2020 Late Smt. Shanti Devi who had been truthful to the best of her knowledge and belief in filing her taxes.” 4. The assessee Late Smt. Shanti Devi aged 90 years born in 1922, stayed in Kuwait for over 35 years, expired on 25.09.2018. The assessee had disclosed the interest income in the returns filed u/s 153A and paid taxes on the returned income. The AO made addition of Rs.67,753/-, Rs.68,740/-, Rs.70,107/-, Rs.1,29,767/-, for Assessment Years 2006-07 to 2009-10.

5.

The Assessing Officer levied penalty u/s 271(1)(c) on the addition made on account of interest income. During the hearing, the ld. AR raised a jurisdictional issue of the notice being defective and the Assessing Officer was not clear under which limb of Section 271(1)(c) viz., concealment or furnishing of inaccurate particulars of income on which the penalty being initiated.

6.

The ld. AR has also relied on the following judgments:

1.

The ITAT Mumbai in the case of Jefferris India Pvt. Ltd. in vide order dated 28.03.2019 held that no penalty can be imposed u/s 271(1)(c) when there was no willful concealment and mistake involved only a human error.

2.

The Hon’ble jurisdictional High Court in the case of CIT Vs. Sidhartha Enterprises (322 ITR 80) wherein it was held that for penalty for concealment to be levied, there must be some element of deliberate default. Penalty cannot be levied where as wrong claim is made by mistake.

5 to 509/Del/2020 Late Smt. Shanti Devi 3. The Hon’ble Andhra Pradesh High Court in the case of CIT Vs. Sania Mirza in ITA No. 526 of 2011 order dated 09.02.2012, held that addition of income earlier not offered to tax due bonafide mistake, but pointed out in the reassessment proceedings would not amount to concealment of particulars of income as the amount was offered to tax as soon as it was point out.

7.

We find that the page no. 7 of the Assessment Order, the Assessing Officer has mentioned “that the assessee has concealed and failed to furnish true particulars of his income.”

8.

We find that the page no. 8 of the Assessment Order, the Assessing Officer has mentioned “penalty proceedings u/s 271(1)(c) and u/s 271AAA are being initiated.”

9.

We also find that the para no. 4.3 of the penalty order, the AO quoted the entire section without referring to the specific limb to which the penalty is envisaged by the Assessing Officer…..

“4.3 …..concealed the particulars of her income or furnished inaccurate particulars of such income.”

10.

On this issue, we are guided by the following judgments:

1) Karnataka High Court: CIT vs. Manjunatha Cotton and Ginning Factory: 359 ITR 565 held that notice under section 274 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 2) Bombay High Court: Mr. Mohd. Farhan A. Shaikh Vs ACIT Section 271(1)(c): Penalty-Concealment-Non-striking off of the irrelevant part while issuing notice u/s 271(1)(c) of the Income Tax Act, order is bad in law. Assessee must be informed of the ground of the penalty proceedings only through statutory notice. An omnibus notice suffers from the vice of vagueness.

3) The Hon’ble jurisdictional Delhi High Court in the case of PCIT vs. Sahara India Life Insurance Co. Ltd. in of 2019, reiterated that notice under section 274 should specifically state the grounds on which penalty was sought to be imposed as the assessee should know the grounds which he has to meet specifically.

4) The aforesaid principle has been reiterated in the in the case of CIT vs. SSA'S Emerald Meadows: 73 taxmann.com 241 (Kar) [Revenue’s SLP dismissed in 242 Taxman 180]

11.

Hence, respectfully following the order of the Hon’ble Jurisdictional High Court, since the AO has not been specified u/s 274 as to whether penalty is proposed for alleged ‘concealment of income’ OR ‘furnishing of inaccurate particulars of such income’, the penalty levied is hereby obliterated.

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