Income Tax Appellate Tribunal - Jaipur
Rajendra Kumar Sharda, Jaipur vs Ito, Kota on 26 February, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM
vk;dj vihy la-@ITA No. 150/JP/2016
fu/kZkj.k o"kZ@Assessment Year : 2010-11
Rajendra Kumar Sharda, cuke Income Tax Officer,
46, Sharda Bhawan, Brijpura, Vs. Ward 2(3),
Kota. Kota.
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AFFPS 1259 D
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri Mahendra Gargieya (Adv)
jktLo dh vksj ls@ Revenue by : Smt. Neene Jeph (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 22/02/2018
mn?kks"k.kk dh rkjh[k@ Date of Pronouncement : 26/02/2018
vkns'k@ ORDER
PER: BHAGCHAND, A.M. This is an appeal filed by the assessee emanates from the order of the ld. CIT(A), Kota dated 13/12/2015 for the A.Y. 2010-11.
2. The assessee is an individual. The return of income was originally filed on 30/3/2011 declaring total income of Rs. 1,69,830/-. The case was selected for scrutiny. The Assessing Officer was having AIR information that the assessee is maintaining a savings bank account No. 08370100013570 with Bank of Baroda, Jhalawar Road, Kota. During the 2 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO year the assessee has deposited Rs. 16,50,500/- in cash and received interest of Rs. 43,361/-. This amount as well as interest earned thereon was not disclosed in the return of income by the assessee. The assessee was asked by the Assessing Officer to file copy of bank account other than the bank account No. 4106 vide ordersheet entry dated 23/08/2012. The Assessing Officer also issued notice U/s 133(6) of the Income Tax Act, 1961 (in short the Act) dated 24/08/2012 to the bank of Baroda and the bank submitted a copy of bank account to the Assessing Officer on 27/08/2012. On 15/10/2012, the assessee filed revised return of income and disclosed additional income of Rs.
15,91,060/- wherein Rs. 12,00,000/- was declared as cash deposit in the bank account maintained with Bank of Baroda which was not disclosed in original return of income and Rs. 2,21,231/- being interest earned of Rs. 43,361 in the savings bank account at Bank of Baroda and interest of Rs. 1,77,870/- received from Hitkari Vidhyalaya Sahkari Shiksha Samiti, Kota. These amounts were not disclosed in the original return filed on 30/3/2011 wherein total income declared was only of Rs.
1,69,830/-. The Assessing Officer held the revised return being null and void and rejected the contention of the assessee that the department was not in the knowledge of the fact that the assessee has undisclosed bank account other than the bank account disclosed in original return.
3 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO The A.O. made addition and initiated penalty proceedings and issued notice U/s 274 of the Act. The Assessing Officer levied the penalty of Rs.
3,91,750/- being 100% of tax sought to be evaded for the reason that the assessee has knowingly furnished inaccurate particulars of income and committed default in terms of Section 271(1)(c) of the Act. The ld.
CIT(A) has confirmed the action of the Assessing Officer.
3. Now the assessee is in appeal before the ITAT by taking following grounds of appeal:
"1. The impugned order passed U/s 271(1)(c) of the Act dated 11/3/2013 is barred by limitation and hence pleased be quashed.
2. The impugned penalty order U/s 271(1)(c) of the Act dated 11/3/2013 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be deleted.
3. Rs.3,91,750/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming penalty imposed U/s 271(1)(c) of the Act of Rs. 3,91,750/-. The penalty so imposed and confirmed being totally contrary to the provisions of law and facts kindly be deleted in full."
4. The main issue involved in the appeal is confirming the penalty of Rs. 3,91,750/- by the ld. CIT(A). The ld. CIT(A) has decided the issue by holding as under:
"I have gone through the assessee's submissions and A.O's findings- In the case of Madhushree Gupta Vs UOI, decided by Delhi High Court it was mentioned that in Ram Commercial Enterprises 246 ITR 568 (Del) (affirmed in Rampur Engineering 309 ITR 143 (Del) (FB)}, the Delhi High Court held that if the AO did not record his satisfaction that the assessee had concealed 4 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO particulars of his income before completion of the assessment proceedings, the initiation of penalty proceedings was bad in law and the order imposing penalty was invalid. To supersede this law, sub-sec (IB) was inserted in s. 271 by the Finance Act, 2008 with retrospective effect from 1.4.1998 to proiri.de that if the assessment order contained a direction for initiation of penalty proceedings under 271 (1) (c) it would be deemed to constitute satisfaction of the AO. S. 271 ( I B ) was challenged as being constitutionally invalid on various grounds. HELD upholding the validity of s. 271 (IB) on its own reading of the provision that:
(1) There is no cogent reason why retrospectivity to s. 271 (IB) is w.e.f.
01.04.1989. However, this cutoff date does not create invidious discrimination and violate Art. 14 vis-a-vis those whose case is to be considered on the basis of law obtaining prior to 01.04.1989 because if an assessee has fallen foul of the law on penalty he cannot be heard to say that rigours of law ought not to apply to him because another person similarly placed is not exposed to such a rigour. There is no equality in illegality.
(2) Ram Commercial (and other judgements) do not lay down that reasons have to be recorded. The emphasis is on recording of satisfaction and that the prima facie satisfaction reached by the AO must be reflected and/or apparent from the assessment order itself.
(3) This law is not changed by s. 271 (IB). The Revenue cannot urge that prior to s. 271 ( I B ) , ''satisfaction'' both at the initiation stage and the imposition stage was required but after s. 271 ( I B ) it is required only at the stage of imposition and not at the stage of initiation.
(4) S. 271 ( I B ) merely provides that an order initiating penalty cannot be declared bad in law only because it states that penalty proceedings are initiated. However, it must still be discernible from the record that the 5 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO Assessing Officer has arrived at prima facie satisfaction for initiating penalty proceedings.
In this case these conditions are satisfied. There has been clear recording of satisfaction in the Assessment proceedings for initiating the penalty proceedings.
Further though there is view in law that Notice under Section 274 of the Act should specifically state the grounds mentioned in Section 271(1) (c), i.e., whether it is for concealment of income or for furnishing of incorrect particulars of income & sending printed form where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law and also that the assessee should know the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended. However if we look at the operative portion of the Assessment order, it is clear that the A.O had mentioned in his order that The original return filed by the assessee on 30.03.2012 declaring total income of Rs. 1,69,830/-. Thereafter, the investigation work carried out by the department by obtaining copy of bank account No. 08370100013570 with Bank of Baroda, Kota u/s 133(6). Because of investigation, during the assessment proceedings the assessee was forced to file a belated return on 15.10.2012. In this belated return the assessee declared total taxable income at Rs. 15,90,160/-. Thereby, admitting unexplained investment of Rs. 12,00,000/- and undisclosed interest of Rs. 2,21,231/- which was not shown by the assessee in the original return of income. This fact clearly proves that the assessee has made willful attempt to conceal income of Rs. 14,21,230/- and also furnish inaccurate particulars of income to here that extent...
Since the initial finding in the Assessment order found the assessee guilty of the default on both counts, the Notice u/s 274 , even though in printed format, did not require that any of the conditions needed to be struck off 6 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO when making him aware of basis of penalty proceedings initiated against him.
Therefore I find Assessee's case not covered by the preconditions laid down in judicial interpretations of law in this regard. This ground of appeal is accordingly dismissed.
Ground No.2 As regards the Assessee's contention that since it was a voluntary admission, the Penalty should not have been imposed and that it is bad in law and deserves to be cancelled, we have to rely on facts involved also in each case rather that apply a general rule. If the additions made by the AO had been accepted by the assessee and he has not disputed the same in the appeal, whether such acceptance of addition leads to the concealment of income.
Hon'ble Supreme Court in case of Sir Shadilal Sugar Mills (168 ITR 705) held that there may be a hundred and one reasons for not protesting and agreeing to an addition but that does not follow to the conclusion that the amount agreed to be added was concealed income. Indeed, there may be numerous reasons with the tax payer for not approaching the first appellate authority for justice, for example the following:
a. To avoid the pains of further litigations, numerous hearings and mental tensions borne in it;
b. The risk of enhancement at the first appellate authority on various technical issues;
c. Nowadays commonly seen attitude of assessment in Appellate
proceedings
d. Heavy litigation cost of Representatives
e. Withdrawn of appeal at instance of Assessee is the discretion of
Appellate authority.
7 ITA 150/JP/2016_
Rajendra Kumar Sharda Vs ITO
Hon'ble Supreme Court in CIT vs. Mak Data Ltd. vs. CIT [2013-ITRV-SC-140] has held that under Explanation 1 to s. 271(1)(c), voluntary disclosure of concealed income does not absolve assessee of s. 271(1)(c) penalty if the assessee fails to offer an explanation which is bona fide and proves that all the material facts have been disclosed.
Karnataka High Court in case of CIT v. Manjunatha Cotton & Ginning ITA No. 1307/Bang/2003 [2013-ITRV-HC-KAR-093] has held that even if the assessee has not challenged the order of assessment levying tax and interest and has paid the same, that by itself would not be sufficient for the authorities either to initiate penalty proceedings or impose penalty, unless it is discernible from the assessment order that, it is on account of such unearthing or enquiry concluded by authorities which has resulted in payment of such tax or such tax liability came to be admitted, and if not, it would have escaped from tax net as opined by the Assessing Officer in the assessment order.
In this case, the original return was filed by the assessee on 30.03.2012 declaring total income of Rs. 1, 69,830/-. The assessee was operating an undisclosed account and getting interest income and had it not been for the detection in the AIR information and investigation by the department, the Assessee would not have disclosed the said account. Further it was after the order sheet entry dated 23/08/2012, when the assessee was specifically asked to filed copy of bank a/c other than his disclosed account and the issue of notice u/s 133(6) dated 24.08.2012 to Bank of Baroda, Jhalawar Road, Kota (in response to which the bank also filed a copy of the undisclosed account No. 08370100013570 vide latter dated 27.08.2012), that the assessee started taking adjournments and ultimately filed a belated revised return declaring total taxable income at Rs. 15,90,160/- thereby, admitting unexplained investment of Rs. 12,00,000/- and undisclosed interest of Rs. 2,21,231/- which was not shown by the assessee in the original return of 8 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO income. The return filed under the above circumstances cannot be said to be a "voluntary" return.
The Assessee's contention that it did not know that what was to be done with the Income related to the account which was in joint name, does not hold good in the background of the case available. The assessee is a regular taxpayer and knows that any income earned has to be offered for tax. Maintaining a separate Bank account and carrying out transactions and not disclosing its earnings to the department clearly show that the belief was not bonafide but intentional.
Under the above circumstances and in view of the opinion propounded in the case laws cited above, I am of the opinion that penalty has been rightly imposed in this case, the conditions required for initiation are satisfied. There has been clear recording of satisfaction in the Assessment proceedings for initiating the penalty proceedings, the order has been passed after providing reasonable opportunity and is speaking. Hence, the matter does not deserve any relief. This ground of appeal is accordingly dismissed."
5. While pleading on behalf of the assessee, the ld AR has submitted a written submissions wherein he has made the pleadings, which are reproduced as under:
The declaration of income was voluntary: At the outset, it is submitted that the declaration of additional income of Rs.12,00,000/- being the cash deposit in the bank account and the interest thereon, were declared voluntarily, suo moto and in good faith before any detection made, even remotely.
The assessing officer in the assessment order as also in the penalty order and the CIT(A) also repeatedly rejected assessee's contention that the 9 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO department was not in the knowledge of the bank deposit made by the assessee in A/c No. 3570, by alleging that such information was already available with the department, based on AIR information and investigation by the department (and therefore, vide order sheet entry dated 23.08.2012 the assessee was specifically asked to file copy of that other bank account). However, such an inference and allegation, is completely contrary to facts on record on the following reasoning:
1. Firstly, it is not known as to what the so called AIR information contained or whether the contents of such AIR information was meant for the assessee alone when it was a joint Bank A/c.
2. Secondly, the only so called investigation made by the AO was that a notice u/s 133(6) was issued on 24.08.2012 to the BOB, Jhalawar Road, Kota, in response to which the Bank filed a copy of said bank account no. 3570 vide letter dated 27.08.2012 which was admittedly in the joint name of brothers. Thus, when admittedly the so called undisclosed bank account was a joint a/c in the name of 3 brothers, how it could be said that the assessee & assessee alone was responsible for the same, in his individual capacity. Thus, it is not the case of AO that the bank information revealed that the bank a/c exclusively belonged to the assessee only.
3. It is not the case of the department that the Bank in its reply dated 27.08.2012 stated that the assessee himself deposited cash of Rs.16,50,500/- nor there was any evidence to show that it is the assessee alone who deposited and none of the other brothers.
4. It is also not a case of the AO (by referring to the said reply of the bank) that the amount of bank interest of Rs.43,361 was received by the assessee only. If so, how it could be the income of the assessee alone.
10 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO 5.1 It is wrong to say (pg 2 pr 4 of the assessment order) that the assessee vide order sheet entry dated 23.08.2012, was once again asked to produce the copies of the bank account other than... In fact, on this aspect, the assessee was asked for the first time on 23.08.2012 only. Prior thereto, the first notice was issued on 01.09.2011 u/s 143(2) simply to inform that the case was selected for scrutiny and it was adjourned sine die. Another notice u/s 143(2) dated 08.08.2012 was issued for 23.08.2012 which was not accompanied with any questionnaire. Thus, till 23.08.2012, no specific question was raised by the AO asking as regard the source of cash deposit and interests thereon in the said other bank account.
5.2 It is also not the case of the AO that after the receipt of the said letter dated 27.08.2012 from BOB, the assessee was again specifically asked to show cause as to why the income of the said bank account be not added in his hand only w.r.t the cash deposits and interest be assessed in his hands alone even though it was a joint bank account. Had it been so and had AO acted after such notice, there could be same justification.
5.3 On the other hand, the assessee right from the beginning has been contending that after the receipt of the initial notices for the scrutiny, when the ld. AR and CA, was scrutinizing the bank accounts, with a view to prepare the details to face the scrutiny assessment, they also came across the other bank account number 3570 which was in the joint names of the assessee and his other two brothers namely Shri Mahesh Kumar Sharda and Shri Harish Kumar Sharda. However, otherwise the said bank account, in fact, belonged to (all) the four brothers including Shri ArvindSharda and their mother Smt. Mohini Devi therefore, the appellant was under
11 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO impression that the deposits made in the said bank account were not to be shown by all the individuals in their respective ITR's. But however, after discussion with all the brothers, the ld. AR advised the appellant to consider such deposits in his hands only. This was advised/decided, also with a view to avoid the probable prolonged litigation with the department.
5.4 Under this background, the appellant came forward and revised all the returns for A.Y. 2007-08 to 2011-12 on 15.10.2012.
These facts were explained vide letter dt. 15.10.2012 (PB 5) filed along with the revised ROI (PB 20-30). However, till this date, the assessee was not further asked why the deposits be added in his hand alone.
Legally speaking such return of income might not be admissible however, it was a good material available on the record showing that the appellant had already included such income in its taxable income and very notably, the tax payable thereon was also deposited and was duly accepted by the AO as well.
5.5 Also it was not the case of AO that the assessee was in the knowledge of the facts that the AO had made some enquiry with regard to the said bank deposit and the replies given by the bank to the AO. It is quite natural that when preparing to face a scrutiny assessment, one is supposed to look into the bank accounts and the various transactions therein. The other account number 3570 was a joint bank account in the name of three brothers and therefore, while filing the return originally and also when preparing for the scrutiny assessment, there was no occasion for the assessee to come forward and to disclose the fact of informing of this background also to the AO. However, when the AO on 23.08.2012 12 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO asked the assessee to file a copy of the other bank account also, the issue was discussed with the other family members and its counsel.
5.6 From the above fact &events, it is evidently clear that there was no prior detection at all w.r.t the additional income shown by the assessee. Merely based on the AIR information, the assessee was merely asked to file a copy of the other bank account no. 3570 which was admittedly a joint bank account. Legally speaking, the facts of such a case, clearly indicated that such matter must have been examined in the hands of AOP/BOI only. Only after making due enquiries from all the joint bank account holders, a decision could have been taken by the AO as regard the assessment of the undisclosed income, if any.
5.7 There was no specific query regarding Account No. 3570 and much less query regarding deposits and sources thereof.
6. The prayers of adjournments from the period from dated 23.08.2012 to dated 08.10.2012 were made only for two reasons i.e. because of his other professional engagement and preoccupations the ld. counsel was busy and secondly, the time being taken to discuss the matter with the other family members.
7. The authorities below, apart from referring to the AIR information had also referred to some investigation by the department however, it is not at all made known right from the assessment order till the order of the CIT(A) as to what type of other investigation, the department had made and whether the result of such investigation pointed out the undisclosed income belonged to the assessee & assessee alone and not to other brothers (at least the other two brothers whose name also admittedly appeared in the said very bank account). It is not a case of search & seizure, survey, etc. 13 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO where undisclosed income was unearthed based on direct evidence found.
8.1 The substantive and vital fact going to the root that the said bank account was a joint bank account in the name of 3 persons including the other 2 brothers, has not been denied at any stage and therefore, the bonafide of the contention of the assessee that after discussion with the AR & brothers with a view to avoid litigation and to have buy mental peace, the assessee came forward to show the additional income could not doubted. It is unfortunate that instead of appreciating such an attempt from the assessee, the department has rather imposed penalty and such contention has been rejected by the CIT(A) by merely observing that the appellant was a regular tax payer.
8.2 The authorities below forgot that there could have also been a situation where the assessee could have agitated the addition to be made in his hand alone and could have requested the authorities below to issue summon u/s 131 or to make enquiry u/s 133(6) from the other joint holders. In fact, the assessee, being a tax payer, was aware of the harassment, hence, in the larger interest it was better to show the additional income as against, dragging the other 2 brothers also in to the fire of litigation.
8.3 Therefore, the allegation of the CIT(A) at page 11 that had it not been for the detection in the AIR information and investigation by the department, the assessee would not have disclosed the said account, is completely baseless and a purported misreading of the fact which suited the department only.
9. Supporting case laws on detection:
14 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO 9.1 In the case of CIT v/s Agrawal Round Rolling Mills Limited(2013) 85 CCH 0510 (Chatt) (DPB 1-4), it was held that:
"Penalty-Penalty u/s 271(1)(c)-Concealment of income-Addition of share application money-Assessee, a company manufacturing iron and steel re-rolled products filed its return showing loss-Subsequently, notice u/s 143(2) was issued and query was asked regarding share application money received by Assessee-Assessee filed its reply mentioning therein that it had received share application money through cheques and drafts which was cleared by banks-However, in case of 12 applicants for which detailed list was separately enclosed, necessary documents were not there and as such a sum representing the share application money of those 12 applicants was surrendered with a request not to initiate any penalty proceedings-AO passed an order u/s 143(3) adding the surrendered amount u/s 68 and also ordered for initiation of penalty proceedings and imposed penalty at 150% of tax sought to be evaded by assessee-CIT(A) and ITAT both ruled in favour of assessee-Held, it is not disputed by the Department that the sum which was added u/s 68 was one which was surrendered by Assessee itself-Both the authorities below had recorded finding that there was neither any detection nor any information in the possession of Department except for the amount surrendered by Assessee and in these circumstances it cannot be said that there was any concealment- This is a finding of fact-There is no illegality in same-The tax case has no merit and hence dismissed."
In that case also, a notice u/s 143(2) was issued asking the assessee regarding share application money and the same was agitated also, by the assessee but later on he made a surrender w.r.t 12 share applicants. But it appears, no enquiry was made by the AO prior thereto. Thus, all the facts of our case are similar to the said case.
9.2 In the case of CIT v/s Shankerlal Nebhumal Uttamchandani (2009) 311 ITR 0327 (Guj) (DPB 5-9), it was held that:
"Penalty under s. 271(1)(c)--Concealment--Revised return filed before detection of concealment--Tribunal has found that though certain queries were raised and put to the assessee, no particular item of 15 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO concealed income was specifically pinpointed--As a matter of fact the process of detection was not complete till the date when the assessee filed revised returns surrendering the amounts reflected in various bank accounts in the names of his family members as his own income from undisclosed sources--There is no material on record to indicate that the aforesaid finding of the Tribunal is incorrect in any manner whatsoever--Further, Tribunal has also found that very same amounts have already been assessed along with interest in the hands of the family members and those family members have never admitted that they were benamidars of the assessee--Hence, even the Department is not certain, as to who is the right person assessable to tax qua the said income--Therefore, penalty under s. 271(1)(c) is not leviable."
9.3 Also kindly refer Late Shri Babu Bhai v/s ACIT in ITA No. 633/Jp/2015 for A.Y. 2006-07 on dated 28.06.2016.
9.4 CIT vs Suresh Chandra mittal (2001) 251 ITR 9 (SC), CIT vs. SAS pharmaceuticals (2011) 335 ITR 0259 (Del) and CIT vs. Pushpendra Surana (2013) 96 DTR 0231 (Raj).
10 Supporting general case laws:
10.1 The word "concealment" inherently carried with it the element of mensrea. To impose a penalty u/s 271(1)(c), it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. The said principle has been reiterated in Virtual Soft Systems Ltd. vs. CIT (2007) 207 CTR (SC) 733: (2007) 289 ITR 83 (SC) held that "24. Sec.271 of the Act is a penal provision and there are well established principles for the interpretation of such a penal provision.
Such a provision has to be construed strictly and narrowly and not widely or with the object of advancing the object and intention of the legislature."
10.2 In the peculiar facts this case, the decision in the case of CIT v/s Reliance Petroproducts (P) Ltd. (2010) 322 ITR 158 (SC)is quite useful in as much as in that case it was held that w.r.t. return 16 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO "Penalty under s. 271(1)(c)--Concealment--Disallowance of claim for deduction--In order to attract the provisions of s. 271(1)(c), there has to be concealment of income or furnishing of inaccurate particulars of his income by the assessee--In the instant case, assessee claimed deduction of interest on loans taken by it for purchase of shares--AO disallowed such interest--Admittedly, no information given in the return was found to be incorrect or inaccurate--Hence, the assessee cannot be held guilty of furnishing inaccurate particulars--Making an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars--Merely because the assessee claimed deduction which has not been accepted by the Revenue, penalty under s. 271(1)(c) is not attracted--If the contention of the Revenue is accepted, the assessee would be liable for penalty under s. 271(1)(c) in every case where the claim made by the assessee is not accepted by the AO for any reason--That is clearly not the intendment of the legislature. "
Applying this ratio on the present case, it will be found that the appellant had already disclosed the subjected income in the ROI filed on dated 15.10.2012and the assessed income when compared with this returned income, there is no occasion for a difference and imposition of penalty.
11 No satisfaction recorded hence no jurisdiction: It is pertinent to note that in the entire assessment order, the AO has not at all whispered a single word that in the peculiar facts of the present case , and w.r.t the subjected addition, it was the assessee who committed the default of furnishing of inaccurate particulars or concealed the income. The AO has not at all applied his mind that once he found the bank a/c to be joint bank a/c, he didn't make further inquiry from the other a/c holders to conclusively establish that such deposits and interest were the exclusive income of the assessee only. Such a satisfaction of the AO, though a condition precedent, is not at all discernible from the assessment order. Hence, it can't be said that the AO derived satisfaction as to the charge of concealment/ furnishing inaccurate particulars w.r.t. the impugned
17 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO additions so made w.r.t. the assessee. Hence, the impugned penalty was without jurisdiction.
Kindly refer Ms. Madhushree Gupta v/s Union of India &Anr. (2009) 225 CTR 1/317 ITR 0107 (Del) (DPB 35),Subhash Gupta v/s DCIT (2003) 78 TTJ 692 (JP) (TM), CIT v/s Ram Commercial Enterprises Pvt. Ltd. (2000) 246 ITR 568 (Del), CIT(A) Vs. Munish Iron Store 263 ITR 484 (P&H). The Hon'ble Jodhpur Bench of ITAT also had taken a similar view in the case of Shri Devendra Tank 27 TW 305 (JD). Hence, the impugned penalty may kindly be deleted in full.
12. It may be clarified that the facts of Mak Data were completely different being that there was a survey carried out at the place of sister concern where some blank share transfer form and other papers were found, indicating undisclosed income relating to the assessee. However, despite this the return was filed without disclosing any additional income but it is only when asked by the AO, the assessee without explaining anything, straight forward made a surrender with a view to buy peace and to avoid litigation. The AO held such surrender as not voluntary and imposed penalty under Explanation 1 to Sec.271 (1)(c) which was upheld by SC.
However, the above case is not applicable in our case for the reasons that firstly, there was no documentary evidence referred by AO which could indicate the subjected income to the concealed income of the assessee alone as repeatedly stated herein above. Secondly, the assessee certainly tendered a detailed plausible explanation in response to SCN u/s 274 filed before the AO (PB 2-3). The following cases support the contention that MAK data is not always applicable - CIT v/s Gem Granites (2013) 86 CCH 0160 18 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO (Chen), CIT v/s Chennupati Tyre& Rubber Products(2014) 90 CCH 0181 (AP) & Shri Chand Saini v/s ITO (2016) 56 TW 0012 (Jp).
13. Penalty not valid based on deficient SCN:
13.1.1 The Hon'ble Karnataka High Court in the case of CIT &Anr. v.
Manjunatha Cotton and Ginning Factory 359 ITR 565 (Karn), has held that notice u/s 274 of the Act should specifically state as to whether penalty is being proposed to be imposed for concealment of particulars of income or for furnishing inaccurate particulars of income. The Hon'ble High court has further laid down that certain printed form where all the grounds given in Sec. 271 are given would not satisfy the requirement of law.
In the said case in para 59 it was held that:
"NOTICE UNDER SEC. 274
59. As the provision stands, the penalty proceedings can be initiated on various ground set out therein. If the order passed by the Authority categorically records a finding regarding the existence of any said grounds mentioned therein and then penalty proceedings is initiated, in the notice to be issued under Section 274, they could conveniently refer to the said order which contains the satisfaction of the authority which has passed the order. However, if the existence of the conditions could not be discerned from the said order and if it is a case of relying on deeming provision contained in Explanation-1 or in Explanation-1(B), then though penalty proceedings are in the nature of civil liability, in fact, it is penal in nature. In either event, the person who is accused of the conditions mentioned in Section 271 should be made known about the grounds on which they intend imposing penalty on him as the Section 274 makes it clear that assessee has a right to contest such proceedings and should have full opportunity to meet the case of the Department and show that the conditions stipulated in Section 271(1)(c) do not exist as such he is not liable to pay penalty. The practice of the Department sending a printed farm where all the ground mentioned in Section 271 are mentioned would not satisfy requirement of law when the consequences of the assessee not 19 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO rebutting the initial presumption is serious in nature and he had to pay penalty from 100% to 300% of the tax liability. As the said provisions have to be held to be strictly construed, notice issued under Section 274 should satisfy the grounds which he has to meet specifically. Otherwise, principles of natural justice is offended if the show cause notice is vague. On the basis of such proceedings, no penalty could be imposed on the assessee."
The Hon'ble court also held that initiating penalty proceedings on one limb and find the assessee guilty on another limb is bad in law. it was held that "Thus once the proceedings are initiated on one ground, the penalty should also be imposed on the same ground. Where the basis of the initiation of penalty proceedings is not identical with the ground on which the penalty was imposed, the imposition of penalty is not valid."
13.1.2 The above decision was followed in the case of Suvaprasanna Bhattacharya vs. ACIT ITA No. 1303/Kol/2010 dated 06.10.2015 (DPB 1-20).
13.1.3 Further in the case of New Sorathia Engineering Co. vs. CIT (2006) 282 ITR 0642 (Guj), it was held that "In the absence of any specific finding in the penalty order or the order of the CIT(A) as to whether there was concealment of income of furnishing of inaccurate particulars by the assessee, impugned order of the Tribunal upholding penalty u/s 271(1)(c) is not sustainable."
13.1.4 Covered issue: This aspect of the matter is now directly covered by the Shri Prakash Joy vs. ACIT ITA No. 585/JP/2013 vide order dated 24.02.2016 (DPB 21-41) in para 7.6 thereof, wherein the earlier two decisions i.e. Manjunatha (Supra) and Suvaprasanna Bhattacharya (Supra) have been followed.
Also kindly refer Radha Mohan Maheshwari vs. DCIT in ITA No. 773/JP/13 vide order dated 18.03.2016for AY 2005-06, 20 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO PrashantTholia vs. ITO in ITA No. 391/JP/2015 dated 13.06.2016 (DPB 42-46) and Abhimanyu Singh vs.ITO in ITA No. 187/JP/2013 dated 21.06.2016 (DPB 47-60) which have taken a similar view.
13.1.5 Also kindly refer Parinee Developers Pvt ltd. Vs. ACIT (2015) 174 TTJ 0137 (Mum), SatyanandaAchariya Biswas vs. DCIT (2015) 45 CCH 0328 (KolTrib), Uma Shankar Agarwal vs. DCIT (2016) 46 CCH 57 (koltrib), Shri Samson Perinchery (ITA Nos. 4625 to 4630/M/2013), dated 11.10.2013, M/s. Ittina Properties Pvt Ltd (ITA No.36/Bang/2014), dated 21.11.2014 (Bang), Dharini Developers (ITA No.1848 to 1851/M/2012), dated 7.1.2015 (Mum).
13.1.6 Also Kindly refer CIT v/s Shri Samson Perinchery in ITA No. 1154, 953, 1097, 1226/2014 on dated 05.01.2017(DPB 10-21).
13.1.7 Recently in the case of CIT & Anr. v/s M/s SSA's Emerald Meadows in CC No. 11485/2016 on dated 05.08.2016 (DPB 22-26), it was held that "3. The Tribunal has allowed the appeal filed by the assessee holding the notice issued by the Assessing Officer under Section 274 read with Section 271(1)(c) of the Income Tax Act, 1961 (for short 'the Act') to be bad in law as it did not specify which limb of Section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e., whether for concealment of particulars of income or furnishing of inaccurate particulars of income. The Tribunal, while allowing the appeal of the assessee, has relied on the decision of the Division Bench of this Court rendered in the case of CIT v/s Manjunatha Cotton and Ginning Factory (2013) 359 ITR 565."
It is submitted that in the above decisions the onlystress was upon the notice only wherein only, the occasion arise for the first time for the assessee to reply towards the Show Cause as to why penalty be not imposed w.r.t one or w.r.t both the offences. But by not becoming specific in inviting a reply from the assessee, it is a gross 21 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO violation of the principles of natural justice and therefore the Hon'ble Courts have treated such a notice to be vague and nullity and consequently the impugned penalty based thereon, has also been held to be without jurisdiction.(Kindly ref. DPB 25 Q3,58 Pr. 6 & 39).
On the other hand however, at the time of the completion of the assessment, it is only the initiation by the AO in the assessment order, when the assessee is not called upon to show cause against the very initiation hence, whether the penalty was initiated on one limb or the other or both the limbs, is irrelevant. Otherwise also, no appeal lay against the very initiation.
Therefore, the law which is now well settled, is only and only w.r.t the vagueness in the SCN and there is no reference at all to the findings recorded or the initiation of the penalty proceeding in the assessment order. Therefore, to refer the initiation in the assessment order by the authorities to justify the imposition of penalty is complete misreading and misinterpretation of law of the land.
13.1.8 Recently the Hon'ble Raj. HC in the case of Sheveta Construction Co. Pvt. Ltd. v/s ITO in DBITA No. 534/2008 vide their order dated 06.12.2016 (DPB 27-31),it was held that:
"Taking into consideration the decision of the Andhra Pradesh High Court which virtually considered the subsequent law and the law which was prevailing on the date the decision was rendered on 27.08.2012. In view of the observations made in the said judgment, we are of the opinion that the contention raised by the appellant is required to be accepted and in the finding of Assessing Officer in the assessment order it is held that the AO, has to give a notice as to whether he proposes to levy penalty for concealment of income or furnishing inaccurate particulars. He cannot have both the conditions and if it is 22 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO so he has to say so in the notice and record a finding in the penalty order."
In the present case the AO though initiated proceedings in the assessment order w.r.t. both the offences however, in the SCN, he did not make clear which of the two he choose to ask the assessee and similarly, in the impugned penalty order also he imposed the penalty w.r.t. inaccurate particulars only and not on both the aspects. However, on these facts the impugned penalty was illegal and unjustified in view of the above decision of the Hon'ble High Court which directly applies on the present case. Use of "and/or"
has further confirmed confusion.
14. Pertinently, there is no difference between the income declared by the assessee in the ROI filed on 15.10.2012 wherein, the additional income of Rs.14,21,230/- was included and the finally assessed income at Rs.15,91,060/- through the impugned assessment order wherein also, the same amount of the additional income of Rs.14,21,030/- (last page of the AO), were again added. In other words, whatever additional income was declared by the assessee in the revised ROI, the ld. AO accepted the same as it is. Keeping in mind the ration laid in the Reliance Petro (Supra), there being no difference between these two, no penalty was warranted.
15. Recently in Gopibai Foundation vs. ACIT57 Taxworld 1 (JP) (ITA No. 760/JP/2016 dated 29/12/2016)
16. Cases cited by Revenue are completely distinguishable: The AO also relied upon various decisions. However, all those cases were based on the peculiar facts available in those cases only which are not obtaining in the present case. They were rendered in different legal factual context and therefore hence are not at all applicable being 23 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO completely distinguishable and hence kindly be ignored. On the contrary the binding decision of Hon'ble Rajasthan HC and SC has to be applied."
6. On the other hand, the ld DR has relied on the orders of the authorities below.
7. The Bench have heard both the sides on this issue. We have also considered the facts recorded by the Assessing Officer for making the addition and the circumstances in which the revised return was filed by the assessee. The Assessing Officer was in possession of information that the assessee was having bank account, which is not disclosed in the original return of income. The A.O. asked to file details of bank account other than the account disclosed. The A.O. also issued notice U/s 133(6) of the Act to the Bank of Baroda on 24/8/2012 with specific details of bank account No. 10222700000225 and cash amount of Rs. 16,50,500/-
deposited therein. The Assessing Officer received reply from the bank on 27/8/2012. Thus the revised return filed by the assessee was not a voluntary return but it was for the reason that the Assessing Officer was having specific information regarding undisclosed bank account of assessee with the Bank of Baroda wherein the assessee has deposited unaccounted cash and has also earned interest and the same was not disclosed in the original return of income filed for the assessment year 24 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO under consideration. Thus, the assessee knowingly concealed the income in the undisclosed bank account and filed inaccurate particulars of income of his income in the original return. The Assessing Officer recorded the satisfaction that the assessee has concealed the income of Rs. 14,21,230/- by way of furnishing inaccurate particulars of income as discussed in the assessment order and the notice was issued for concealment and furnishing inaccurate particulars of income. Thus, the plea of the assessee that limb is not clear under which the notice was issued for levy of penalty is completely baseless and against the fact on record. The assessee himself was very well aware regarding the bank account maintained with the Bank of Baroda and cash deposited therein.
The assessee also earned interest of Rs. 43,361/- The assessee knowingly and deliberately did not disclose this bank account in the original return of income. He was also well aware about the fact that unaccounted cash has been deposited by him in this bank account and the interest has also been earned thereon. The Assessing Officer was in possession of specific information that the assessee has undisclosed bank account and unaccounted income has been deposited in cash and interest have been earned, then only assessee has filed the so called revised return of income which was not at all a voluntary return. Further from the explanation for not disclosing the bank account, unaccounted 25 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO income deposited therein and interest earned thereon, it is clearly established beyond any doubt that the assessee has faulted in terms of Section 271(1)(c) of the Act, therefore, we are of the view that surrender of income in the revised return was not a voluntary one for the reason that the revised return was made only in view of the detection by the revenue that the assessee have undisclosed bank account and has not disclosed the income deposited therein and earned income thereon, in the original return of income. Considering the totality of the facts and circumstances of the case, the Bench is of the view that the assessee has miserably failed to prove that there was reasonable cause for such failure. Hence, the order of the ld. CIT(A) is affirmed.
8. In the result, appeal of the assessee is dismissed.
Order pronounced in the open court on 26/02/2018.
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vkns'k dh izfrfyfi vxzsf'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- Shri Rajendra Kumar Sharda, Kota.
2. izR;FkhZ@ The Respondent- The ITO, Ward 2(3), Kota.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr¼vihy½@The CIT(A) 26 ITA 150/JP/2016_ Rajendra Kumar Sharda Vs ITO
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
6. xkMZ QkbZy@ Guard File (ITA No. 150/JP/2016) vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar