Income Tax Appellate Tribunal - Pune
Dilip Yeshwant Oak, Pune vs Assessee on 30 April, 2007
THE INCOME TAX APPELLATE TRIBUNAL
PUNE BENCH 'B', PUNE
BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER AND
SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER.
I.T.A. Nos. 998 & 999/PN/2007.
Assessment Years : 2002-03 & 2003-04.
Mr. Dilip Yeshwant Oak, Asstt. Commissioner of,
Malati Madhav, Vs. Income-tax, Circle-5,
819 Bhandarkar Institute Road, Pune.
Pune-411 004.
Appellant. Respondent
Appellant by : Shri S.U. Pathak.
Respondent by : Shri Hemant Kumar Lewa.
ORDER
Per D KARUNAKARA RAO A M These are the two appeals filed by the assessee against the different orders of the CIT(Appeals) commonly dated 30th April, 2007 in connection with levy of penalties u/s 271(1)(c) of the Income-tax Act, 1961 levied for AY 2002-03 & 2003-04. The grounds in both the appeals are identical but for the amounts of penalties levied. For the sake of convenience, both these two appeals are clubbed and they are being disposed in this composite order and, for the sake of completeness, the grounds for the assessment year 2002-03 are reproduced as under :
1. On the facts of the case and in law, the learned Commissioner of Income-
tax (Appeals) erred in confirming the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 of Rs.4,80,000/- on Appellant.
2. The learned Commissioner of Income-tax (Appeals) erred in not appreciating that the learned Assessing Officer had not recorded the requisite satisfaction regarding concealment of particulars of income or furnishing inaccurate particulars as required as per the provisions of Section 271(1)(c) and therefore the levy of penalty is not justified.
3. Without prejudice to above Grounds of Appeal the Ld CIT(A) erred in not appreciating that the Appellant had voluntarily and suo moto declared additional income of Rs.50 lacs for Assessment Years 2002- 2 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
03, 2003-04 and 2004-05 on the date of survey i.e. 13.02.2004 itself and furnished year-wise bifurcation thereof on 16.02.2004 without any knowledge of the Department having conducted bank enquiries.
4. Without prejudice to above Grounds of Appeal, the Ld CIT(A) ought to have restricted the levy of penalty only to the extent of 100% of the tax sought to be evaded i.e. Rs.3,92,348/-.
2. The summary of the above grounds is that the present appeal is filed against the decision of the CIT(A) in confirming the penalty u/s 271(1)(c) of the Act for both the AYs. Assessee is aggrieved against such levy as the CIT(A) failed to see the fact that the AO failed to record the requisite satisfaction and when there is sue motto disclosure of income voluntarily without being privy to the discoveries of the enquiries with the bank by the department. Without prejudice, the assessee prays for restricting the sum of penalty to 100% of the tax only.
3. Briefly stated, relevant facts of the case are that the assessee is engaged in conducting coaching class for GRE and other Examination under the name and style of M/s Dilip Oak's Academy. The assessee filed original return on 19-9-2002 declaring the total income of Rs.84,61,890/-. An action u/s 133A of the Income- tax Act, 1061 was undertaken by the AO in the premises of the assessee on 13- 2-2004. During the survey action, certain discrepancies were found. To cover up the same, the assessee offered an additional income of Rs. 7 lacs for assessment year 2002-03 in statement recorded under oath at the time of survey on 16-02-
004. The return was subsequently revised to Rs.97,44,150/- on 9-3-2004. While filing this return, the assessee offered the said additional income of Rs.12,82,258/- and the same as under:
i) Income under the Business and profession Rs. 12,80,000/-
ii) Income under the head other sources Rs. 2,258/-
----------------
Total Rs.12,82,258/-
----------------
The above additional income was stated to be invested in fixed deposits with various banks. Assessee filed the revised return of income incorporating the said income. During the course of assessment proceedings, assessee provided requisite break up of FDs for Rs.12,70,000/-. Finally, the assessment was completed and the AO accepted the income returned in the revised return and 3 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
the said assessment became final. There is no litigation on the merits of the assessment. There was additional income for other AY ie 2003-04 and figures are different. Otherwise the facts are identical.
4. During the course of scrutiny assessment, penalty proceedings u/s 271(1)(c) of the I.T. Act were initiated for concealing the particulars of the income and furnishing inaccurate particulars thereof. AO is of the view that the discrepancies noticed during the course of survey u/s 133A and consequent disclosure of additional income of Rs.7 lakhs for the assessment year in question and subsequent revision of return on 9-3-2004 offering additional income of Rs.12,8,258/-, attracts penalties. Notice u/s 274 r.w.s. 271(1)(c) was issued and served on the assessee on 23-7-2004 to appear before the AO on 10-8-2004, and to submit his say in this regard. In response to the said notice the assessee vide his written submission dated 10-8-2004 stated as under :
"
a) No discrepancies were found by the survey party pertaining to assessment year 2002-03 nor are any discrepancies found during the course of assessment proceedings.
b) I have disclosed correctly Rs.12,82,260/- as an additional income for above year voluntarily and suo motu to avoid litigation and buy peace thereby proving my credentials and intention to disclose the full and correct income. I have paid additional tax and interest aggregating to Rs.5,45,349/- being tax of Rs.3,92,368/- and penal interest of Rs.1,52,981/-.
c) Your Honour has vide order u/s 143(3) dated 12th July 2004 accepted the total income as per my revised return of income and assessed the total income at Rs.97,44,150/- i.e. same as declared by me in my revised return of income.
d) The declaration for assessment year 2002-03 was on the oral understanding that no penalty will be initiated and / or levied for assessment year 2002-03.
e) I have fully co-operated with the department in completing the assessment for assessment year 2002-3.
f) I am a regular tax payer for last 20 years or so. No major addition/disallowance were made in my case in scrutiny assessment and other proceedings for any earlier assessment years or the year under consideration."
Thus, the non-discovery of incriminating discoveries in the survey action, voluntary and sue motto disclosure of Rs 50 lakhs, valid revising of the returns 4 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
incorporating the said undisclosed income/FDs, oral promises of the AO for non levy of penalties etc are the defense for the assessee. To support his explanation for non levy of penalty u/s 271(1)(c) of the Act, the assessee cited various case laws and decision pointing out the similarity in his case to those mentioned in reply. As per the assessee, the declaration of additional Income made by him in the revised returns was voluntarily and it is to buy peace and consequently, requested the AO to drop the penalty proceedings.
5. During the course of penalty proceedings before the AO, further, it was submitted that no discrepancies were found by the survey party and that the appellant correctly disclosed Rs.12,82,260/- as additional income of the assessee for the AY 2002-03. The total revised income was accepted without any further additions and, therefore, there should not be any case for initiating/levy of penalty proceedings. It was further stated that the assessee was a regular tax payer and he fully co-operated with the department all the twenty years. Further, he referred to the fact that the declaration was made on the oral understanding that no penalty would be initiated for the AY under consideration.
6. However, the Assessing Officer did not accept the submissions of the assessee that no discrepancy was found as during the course of survey. According to the Assessing Officer, enquiries were conducted with the banks to verify whether the assessee and his family members had any unaccounted fixed deposits. As a result of said enquiries, it was found that there were FDs which were not furnished by the assessee in the return of income for A.Ys. 2002-03 and 2003-04. The Assessing Officer also noted that these FDs exceeded the amount of additional income disclosed by the appellant vide his statement under oath and it was because of this reason that assessee at the time of filing of revised return declared Rs.12,82,056/- as additional income instead of Rs.7,00,000/- originally declared during the survey action u/s 133A of the Act. At the end of the penalty proceedings, AO considered the facts of the case as well as the legal propositions and rejected the above explanation of the assessee.
5 ITA Nos. 998&999/PN/2007Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
Finally, AO held that the assessee concealed the particulars of income and failed to offer satisfactory explanation to the AO. Resultantly, he proceeded to levy penalty of Rs.4 lakhs for the assessment year 2002-03. However, as seen from para 4 of the penalty order, the AO gave a finding that the assessee cooperated with the Department in filing the revised return of income and paid taxes as agreed during the survey operation. Aggrieved with the above levy of penalty, the assessee filed an appeal before the CIT(Appeals).
First appellate proceedings:
7. During the appellate proceedings before the CIT(A), the assessee submitted that declaration of Rs.50 lakhs for all the three assessment years, filing of the revised return of income u/s 139(5) of the Act validly offering higher total income than that of the declared Rs.50 lakhs constitute a voluntary act of furnishing of income and the said higher income relates to the fixed deposits with certain banks held in the names of the members of the family. Further, it was stated that all these FDs were made out of his income either in his name jointly with his wife or in his wife's name jointly with his name or in the name of his minor daughter. Further, it was stated that all these FDs were kept on cumulative basis. Since assessee was following cash method of accounting for income from business and profession as well as for income from other sources, the interest on these fixed deposits would be included in the year of maturity of each fixed deposit. The submissions made before the Assessing Officer were reiterated before the CIT(A). Further, it was stated that the assessee disclosed an additional income of Rs.50 lakhs for the year 2002-03 to 2004-05 before any detection by the department and where there was no discovery of any incriminating material. The bank enquiries were undertaken by the survey party behind the back of the assessee and the survey party did not ask any question regarding any undisclosed FDRs with the banks in the statement recorded. The additional income of Rs.50 lakhs disclosed was significantly higher than the amount of FDRs hinted by the survey party on the basis of bank enquiries. Finally, the assessee relied upon various case laws referred before the Assessing 6 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
Officer and further relied upon a number of additioan case laws to submit that where the revised return was accepted by the department, penalty u/s 271(1)(c) was not leviable. It was further argued that the requisite satisfaction regarding concealment was not recorded by the Assessing Officer as the proposition that the additional income assessed was due to the bank enquiries made by the survey party and not on account of disclosure made by the appellant in his statement was not apparent from the assessment order. The decision of the Delhi High Court in the case of CIT v. Ram Commercial Enterprises Ltd. 246 ITR 568 was relied upon. It was further stated that the declaration was made on the oral understanding that no penalty would be initiated or levied and the appellant had cooperated in the assessment proceedings and also that no major addition/disallowances had been made in appellant's case in scrutiny assessments for the earlier years.
8. On considering the above submissions, the CIT(A) held that cooperation of the assessee may be a case for waiver of penalty u/s 273A but not for the proceedings u/s 271(1)(c) of the Act. The CIT(A) did not appreciate the existence of oral understanding for not levying the penalties. On the assessee's contention relating to filing of revised return voluntarily, the CIT(A) is of the opinion that the additional income brought to tax relates to the event of survey. Therefore, the voluntary action of the assessee is not absolute. The CIT(A) is of the opinion that discovery of additional evidence and other fixed deposits relates to the enquiries conducted by the Department at the back of the assessee. Regarding the bonafide approach of the assessee in filing the revised return, the CIT(A) is of the opinion that the assessee mis-used the provisions of section 139(5) of the Act for enhancing his concealed income deliberately and he did not see the assessee's sue motto attempt to come clean voluntarily. Accordingly, he rejected the inadvertence-based submissions of the assessee and confirmed the penalty levied by the AO.
7 ITA Nos. 998&999/PN/2007Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
2nd Appellate Proceedings:
9. During the proceedings before us, Shri S.U. Pathak, learned counsel for the assessee, read out the relevant portions of the orders of the Revenue and argued for the proposition that the assessee's case is not a fit case for levy of penalty. The submissions briefly are as follows ie (i) the assessee is regular in filing the return of income for the last two decades and engaged in the enrichment or empowerment of the youth of India; (ii) the survey operation u/s 133A hardly resulted in discovery of any incriminating evidences to support the disclosure of additional income of Rs.50 lakhs or any other undisclosed FDs; (iii) the assessee offered the said additional income covering three assessment years which constitutes a voluntary and bona fide act; (iv) In compliance of the above disclosure, the assessee filed the revised returns of income not only including the above said additional income but also enhancing the said income sue motto and voluntarily to the extent of left over fixed deposits lying with the banks in names of the self and members of the family without going into the ownership of the FDs and the period it relate to. This is a voluntary and bona fide offer and it is full and true disclosure; (v) The revised return of income is a valid one. The AO did not find a mistake either on legal front as well as on merits in such revised return; (vi) The CIT(Appeals) erroneously held and tried to find mistakes in the assessee's offer of additional income which is declared under bonafide belief which constitutes a reasonable cause for non levy of penalties u/s 271(1)(c); (vii) taking us through various documents filed before us by way of a paper book, the Sri Pathak, learned counsel for the assessee demonstrated that the impugned additional income/ fixed deposits in fact does not belong to the years under consideration. The impugned FDs have real genesis in the year 1999. Therefore, the AO wrongly taxed in the years under consideration merely because it is offered by me. There is no enquiry into by the AO on the issues of actual ownership and actual AYs, they relate to. Further, he mentioned that penalty u/s 272(1)(c) of the Act should be levied in the assessment years under consideration in respect of the income/FDs, which in fact pertains to earlier AYs;
(viii) the counsel also mentioned that some of the FDs are held in the names of 8 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
the members of the family, such as, wife and the child. In such circumstances, without going into the facts of ownership of the income/FDs, the penalty cannot be levied on such income relatable to the disputed income. BY referring to the copies of the receipts from the Bank, which FDs were made, Sri Pathak demonstrated that the FDs stand in the names of Mrs. Kishori Dilip Oak and Sarika Dilip Oak, the members of the family. Pages 33 to 56 of the paper book are relevant in this regard; (ix) The counsel argued stating that the whatever the enquiries made by the department and their tactics might have resulted in ensuring the disclosure of additional income but the fact is that there is no iota of material, forget about the incriminating material, as seen from the orders to substantiate the penalty. Further, he mentioned that the penalty proceedings are entirely different and distinct from that of the assessment/quantum proceedings;
(x) Further, Mr. Pathak, learned counsel for the assessee, relied on the decisions of Bombay High Court in the case of Jainarayan Babulal vs. CIT 170 ITR 399 (Bom) and CIT vs. Bhimji Bhanjee & Co 146 ITR 145 (Bom) to substantiate his arguments.
10. Per contra, Ld AR for the Revenue relied on both the orders of the revenue. The case of the revenue is that the impugned additional income/FDs was brought to tax by the direct efforts of the revenue by way of conducting survey action and the subsequent enquiries with the Bank. He dismissed the arguments of the assessee which revolve around the sue motto and voluntary declaration of additional income. In response to the queries from the Bench on if the impugned additional income is earned by the assessee only and not by assessee's spouse and the daughter (FDs stand in their names) and if the said income is fully taxable in the AYs under consideration, the revenues' AR has nothing concrete to answer. His only defense in this regard is that these arguments of the counsel came up for the first time before the Tribunal. In fact, the revenue prayed for setting aside the issues to the files of the Revenue.
9 ITA Nos. 998&999/PN/2007Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
11. We have heard both the parties and perused the orders of the Revenue. We have also gone through the paper book filed before us including the fixed deposit analysis, related documents which were also available to the revenue authorities.
Undisputed facts include the following (i) there is survey action on the assessee; (ii) the said action resulted in enforcing the assessee to disclose the additional income of Rs 50 lakhs or more for three AYs; (iii) Assessee filed the returns/revised returns validly complying with the admission made during the survey action; (iv) assessee paid relatable taxes on the impugned additional income as per the provisions of the Act; (v) there was an oral request of the assessee to the AO for non levy of penalties u/s 271(1)(c) of the Act in respect the said additional income; (vi) the revised income offered by the assessee in the returns/revised returns is much higher than Rs 50 lakhs spread over three AYs;
(vii) the FDs in question are not held in the name of the assessee and in fact they stand in the names of his wife and his daughter; (viii) the source income for making of the impugned FDs do not pertain to the AYs under consideration and in fact, the said income relates to the earlier AYs ie 1999-2000; (ix) AO did not establish that the source income of the FDs or other income and its ownership vest with the assessee and not with wife or daughter of the assessee before deciding to levy the penalty u/s 271(1)(c) of the Act.
12. Further, from the revenue side, we have examined the information available in their possession to substantiate the levy of impugned penalty. On perusal of the both the orders of the revenue, we do find notice anything incriminating material gathered either during the survey action or during the post survey enquiries with the bank has been specifically mentioned. However, they contain mere oblique reference to the bank enquiries and scanty material against the assessee, which is quantitatively disproportionate to the extent of disclosure offered by the assessee. In any case, neither the AO has described the said material nor the CIT(A) highlighted the incriminating nature of the same in their respective orders while levying/confirming the penalty. These orders are 10 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
silent on the said material as to how the income in question is a concealed for the AYs under consideration and nothing is made out about the incriminating nature of the same. Even before us none of these said documents, however scanty they may be, were produced to demonstrate that the impugned additional income was declared by the assessee only due to said incriminating material discovered during the survey operation or post survey operation. While this is the position from the revenue's side, we find that the assessee has not only offered the additional income but also filed the revised return by enhancing the income. Though, the CIT (A) referred to certain enquiries with the banks as a reason for such an enhancement, nothing is brought to our notice to support the allegations of the revenue. Inn the light of the above factual matrix of this case, we find it is necessary to explore the scope of the relevant penalty provisions and the same is as under.
13. Scope of the Penalty provision: Section 271(1)(c) of the Act is the relevant provisions and main section, which is relevant for the present appeal read as follows.
"" 271(1) If the assessing officer or the commissioner (Appeals) or the commissioner in the course of any proceedings under this Act, is satisfied that any person--
(a)... & (b)...
(c) has concealed the particulars of his income or furnished inaccurate particulars of such income,
(d)..
he may direct that such person shall pay by way of penalty,--
.....
...."
The above provisions were explained by the Apex Court in the case of CIT v. Reliance Petro-products Pvt. Ltd., 322 ITR 158 (SC) and relevant held portion of the said judgment is as follows:
"A glance at the provisions of section 271(1)(c) of the Income-tax Act, 1961, suggests that in order to be covered by it, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. The meaning of the word "particulars" used in section 271(1)(c) would embrace the details of the claim made. Where no information given in the return is found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars. In order to expose the assessee to penalty, unless the 11 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
case is strictly covered by the provision, the penalty provision cannot be invoked. ........ There can be no dispute that everything would depend upon the return filed by the assessee, because that is the only document where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. To attract penalty, the details supplied in the return must not be accurate, not exact or correct not according to the truth or erroneous.
Where there is no finding that any details supplied by the assessee in its return are found to be incorrect or erroneous or false there is no question of inviting the penalty under section 271(1)(c). A mere making of a claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. Such a claim made in the return cannot amount to furnishing inaccurate particulars. "
Thus, the return of income or valid revised return is the basis or the starting point for arriving at the accuracy or inaccuracy of the particulars/claims "because that is the only document where the assessee can furnish the particulars of his income..... To attract penalty, the details supplied in the return must not be accurate, not exact or correct not according to the truth or erroneous". In the light of the said settled position, we have examined the facts of the instant case, where the assessee furnished the valid revised return, which was accepted by the AO without pointing out a single inaccuracy and without making any further additions in the assessment. In such circumstances, we find that it is not a fit case for levy penalty.
14. Order of the CIT(A) refers to misuse by the assessee of the provision of section 139(5) of the Act and according to him, furnishing additional income in the revised return as done in this case by the assessee, does not constitute either a case of omission or a case of wrong statement therein. We do not subscribe this proposition of the CIT(A). In this regard, we have perused the provisions of section 139(5) which read as follows.
139..
....
(5) If any person, having furnished a return under subsection (1), or in pursuance of a notice issued uunder subsection (1) of section 142, discovers any omission or any wrong statement therein, he may furnish a revised return...."
From the above, it is evident that both the expressions "omission' or 'wrong statement therein' are qualified by the word 'any' and mean that every 12 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
omission or wrong statement and there for the scope of these expressions are not so narrow as attempted to be made out by the CIT(A) in his order. Thus, the finding of the CIT(A) in this regard are dismissed.
15. There are different penalty provisions for different defaults under the Income Tax Act 1961 and penalty under the provisions of section 271(1)(c) is one them. For the levy of the penalty under section 271(1)(c), it is established legal proposition, there has to be positive material to indicate that the assessee has concealed income or had furnished inaccurate particulars of income. To elaborate, the AO must have gathered such material, which is undisputedly reliable and incredible to establish the concealed income of the assessee. Penalty for concealment could not be levied merely when the assessee offers some income not backed by the material as the assessee can offer such income for various reasons. It is for the AO to crystallize the ownership of such income and year it relates to. Further, there has to be some material to compare and to prove that what is stated by the assessee is false or inaccurate. Assessment proceedings are distinct and different from that of the penalty proceedings. Sustaining of the additions in quantum appeal or assessee decision to not to file further appeal for some reasons, does not automatically invite the levying the penalty. Penalty cannot be sustained in such cases where there is some possibility for the acceptance of the assessee's explanation. It is so held in the case of Star International P Ltd 23 SOT 88 (Luck). Further, when two views are possible, real ownership of the FDs/income and correct AYs as in this case, a bona fide belief for claim or allowance cannot be subjected to concealment merely because such belief is erroneous under the law as held in the case of Shetty GD 112 ITD 103 (Pune). In the light of the above, we are of the opinion that it is not a fit case for levy of penalty.
16. Application of the above scope of the provisions to the facts of the instant case: In the instant case, no inaccuracy in matters of furnishing of the particulars of income in the revised return/return has been noticed by the 13 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
revenue. Thus, so far as the revised return of income is concerned, it is a valid and free of any inaccuracy in matters of furnishing of particulars of income. Therefore, the conditions specified in the main parts of the section 271(1)(c) are not violated by the assessee.
Regarding revenue's allegation that the impugned additional income is the outcome of the survey action, we find the impugned income in fact does not pertain to the AYs under consideration fully as the impugned FDs are originally made with the income earned by the assessee in the earlier AYs and the income earned by the assessee in the AYs under consideration relates to the interest segments on the FDs on accrual basis. But the assessee has followed the cash system. Thus, the major portion of the disclosed income does not relate to the AYs under consideration. Regarding the income earned by the assessee during the year under consideration, the assessee cannot be found fault with in this regard too as the assessee follows cash system of accounting. Thus we find there exists a couple of disputes about the impugned additional income offered by the assessee. The disputes relates (i) ownership and (ii) the correct AYs for incidence of tax on the impugned additional income/FDs. Ownership is in dispute as the impugned FDs were not made in the name of the assessee and they stand in the names of his wife and daughter. Who is the real owner of these FDs ie additional income? Regarding the incidence of tax, we find there is clarity on the actual year of earning of the impugned FDs/income. On the face of it, we find that the some of the FDs were made in the year 1999 out of the income earned in those years. Of course, the assessee offered to income to tax in the AYs under consideration and AO did not take it to the accurate AY for the reasons better know to him. Thus, additional income in question is not free from dispute so far as its ownership and year incidence of tax is concerned. There is no finding of fact at the level of the Income Tax authorities on the issue of clear ownership of income and the relevant assessment year. The wholesale and adhoc approach of the AO is evident in taxing the impugned additional income. In our considered opinion, such an approach cannot be the basis for levy of penalty u/s 271(1)(c) of the Act.
14 ITA Nos. 998&999/PN/2007Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
17. We have also perused the decisions cited before us and the ones mentioned in pages 8 to 11 of the paper book. From the perusal of the Bombay High Court decision in the case of Jainarayan Babulal vs. CIT 170 ITR 399 (Bom), it is noticed that the penalty u/s 271(1)(c) is not attracted in respect of the income which is assessed in the wrong assessment year as in assessee's case. In that case the impugned income is taxable in the AY is 1949-50. Relevant portions from the said judgment read as follows:
"No penalty could be imposed for the non disclosure of that income in assessment for the assessment year 1950-51"
In the process, the Hon'ble High Court relied on the apex court's judgment in the case of Baladin Ram (71 ITR 427) where the apex court ruled that,-
"the only way in which the income from undisclosed source could be assessed was to make the assessment on the basis of .. the previous year for such income..."
Therefore, it is a decided issue at the level of the jurisdictional High Court, which is binding on us, that no penalty u/s 271(1)(c) of the Act is leviable in respect of the concealment income, which was assessed in the wrong AY and in the wrong person for any reasons. Further, no penalties are leviable when the assessee has nowhere admitted that it had concealed its income as held by the jurisdictional High Court of Bombay in the case of CIT vs. Bhimji Bhanjee & Co. 146 ITR 145 (Bom).
18. To sum up, the revenue has failed to crystalise that the impugned additional income/FDs, which is subject matter of the penalty, is actually earned by the assessee and it is validly and undebatably taxable in the hands of the assessee, which is relevant factor in these penalty proceedings. We should not be confused with the fact that the assessee sue motto offered of the said income in his hands, for some other reasons and this fact is entirely different and not relevant in such matters of penalty proceedings. Further, taxing of the said income in the wrong assessment years is another factor, which goes against the 15 ITA Nos. 998&999/PN/2007 Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
revenue legally. Thus, there is exits debate on these accounts. It is a trite law that the penalty provisions are not attracted which the additional income, which is subject matter of the penalty, is not free from the dispute or debate. As such, there is no inaccuracy on part of the assessee in furnishing of the particulars of income in the return finally accepted by the revenue, as discussed in the preceding paragraphs of this order. Further, there is no direct evidence or material gathered by the revenue or gathered and used in the penalty proceedings as evident from the impugned orders except making unspecific, mysterious and oblique references, which has no consequences in penalty proceedings. Further, it is evident from the impugned orders that the assessee has all along cooperated with every proceeding undertaken by the revenue against the assessee and it was so stated by the revenue in their orders.
19. Therefore, in the factual and the legal matrix detailed above, we are of the opinion that the penalty levied by the AO and confirmed by the CIT(Appeals) have to be deleted as it is not a fit case for levy of penalty. Accordingly the grounds raised by the assessee are allowed.
ITA No. 999/PN/2007 (A.Y.: 2003-04)20. We find that the grounds raised by the assessee are identical in this assessment year also barring the fact that the amount of penalty levied is Rs.4.8 lakhs. During the proceedings before us, both the parties have mentioned that considering the commonality of the facts, the arguments of the parties made in connection with the appeal ITA No. 998/PN/2007 of the assessee are equally applicable to the present appeal under consideration and they also mentioned that the decision of the Tribunal given for the assessment year 2002-03 vide ITA No. 998/PN/2007 is applicable to this appeal too. So, considering the above, we are of the opinion that the penalty sustained by the CIT(Appeals) has to be deleted. Accordingly the grounds raised in this appeal are allowed.
16 ITA Nos. 998&999/PN/2007Mr. Dilip Yeshwant Oak Asstt. Years: 2002-03 & 2003-04.
21. In the result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 16th day of March, 2011.
Sd/- sd/-
(I.C. SUDHIR) (D.KARUNAKARA RAO)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Pune,
Dated : 16th March, 2011
Wakode
Copy of the order is forwarded to :
1. Assessee.
2. ACIT, Circle-5, Pune.
3. CIT(A)-II, Pune.
4. CIT-III, Pune.
5. D.R., ITAT-B Bench, Pune.
By order
Assistant Registrar
I.T.A.T Pune