Income Tax Appellate Tribunal - Jaipur
Farooque Ahmad, Saudi Arabia vs Dcit, Circle (Int. Tax), Jaipur, Jaipur on 13 February, 2024
1
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IN THE INCOME TAX APPELLATE TRIBUNAL,
JAIPUR BENCHES,"B" JAIPUR
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BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM
vk;djvihy la-@IT(IT)A No. 15 & 16/JP/2023
fu/kZkj.ko"kZ@AssessmentYear : 2011-12 & 2015-16
Farooq Ahmad cuke The DCIT
3C, Egmah Enclave Vs. Circle (Int. Tax)
Near Rahat Nursing Home, Bariatu Road, Jaipur
Bariatu, Ranchi - 834 009 (Jharkhand)
LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABQPA 2179 M
vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksjls@Assesseeby : Shri Tanuj Agarwal, Advocate
jktLo dh vksjls@Revenue by: Shri Ajay Malik, CIT
lquokbZ dh rkjh[k@Date of Hearing : 10/01/2024
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 13 /02/2024
vkns'k@ORDER
PER BENCH:
Both these appeals have been filed by the assessee against two different orders of the ld CIT(A), Delhi-42 dated 02-06-2023 for the assessment years 2011- 12 and 2015-16 respectively. The grounds of appeal raised by the assessee in respective appeals are as under:-2
IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR IT(IT)A No 15/JP/2023 - A.Y. 2011-12 ''That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining penalty of Rs.1,92,439/- levied u/s 271(1)(c) of the Income Tax Act, 1961 thereby ignoring the reasonable cause of the appellant.
IT(IT)A No 16/JP/2023 - A.Y. 2015-16 ''That on the facts and circumstances of the case and in law, the ld. CIT(A) grossly erred in sustaining penalty of Rs.2,53.750/- levied u/s 271(1)(c) of the Income Tax Act, 1961 thereby ignoring the reasonable cause of the appellant.
2.1 First of all, we take up the appeal of the assessee for the assessment year 2011 wherein brief facts of the case are that the AO had information in his possession that the assessee had made investment in FDR of Rs. 98,00,284/- and had received interest income of Rs. 17,39,319/-. As no regular return had been filed by the assessee, the AO recorded reasons for re-opening and obtained statutory approval of PCIT and issued notice u/s 148. In response no return of income was filed. No reply was filed in response to notices issued u/s 142(1).
Therefore, the AO finalized the assessment u/s 147 r.w.s 144 on 17.12.2018 at a total income of Rs. 1,15,39,600/- Penalty proceedings u/s 271(1)(c) were also initiated for concealment of income. To this effect, the assessee filed appeal before CIT(A) who decided the appeal vide order dated 24.07.2019 in which the addition of FDR was deleted but the addition of interest income of Rs. 17,39,319/- was confirmed. Subsequently, the AO took up the penalty proceedings and issued show cause notice u/s 271(1)(c) r.w.s. 274 of the Act. In response, the assessee 3 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR contended before the AO that he was a non-resident not well versed with the income tax law in India and return was not field due to bona fide ignorance of law.
The AO was not satisfied with the reply. He imposed minimum penalty of Rs.
1,92,439/- for concealment of income u/s 271(1)(c) read with Explanation 1.
2.2 Aggrieved by the order of the AO as to concealment of penalty of Rs.1,92,439/- u/s 271(1)© of the Act on the assessee, the assessee carried the matter before the ld CIT(A) who concluded that this is a fit case for levy of penalty u/s 271(1)(c) of the Act read with Explanation 1 and thus confirmed the penalty by observing as under:-
''6. I have carefully considered the facts of the case, penalty order and written submissions of the appellant.
7. The written submission in this regard is reproduced below:
"The appellant is a Non Resident and is not well versed with the intricacies of the Indian Income tax laws. He shifted to Saudi Arabia for employment long ago in 2007 and is eaming his bread and butter there since then. Before leaving India he was employed in an Indian company and used to live at a rented premises of Flat No.204 Vijay Laxmi Aptts, Bhaskar Marg, Bani Park, Jaipur. He had parked his Indian savings in fixed deposits and mutual funds which continued during the years under consideration. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income and due to his stay outside India. The learned Assessing Officer invoked the provisions of section 147 on the allegation that the NRI appellant has made unexplained investments in fixed deposits in India amounting to Rs. 98,00,284/- and further eamed interest income of Rs. 17,39,319/- on which TDS of Rs.1,73,001/- has been deducted which is reflected in 26AS. Notice 4 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR u/s 148 was issued at old rented premises at Flat No.204 Vijay Laxmi Aptts, Bhaskar Marg Bani Park, Jaipur which the appellant had already left long ago. The assessment was finalized by treating the investments as unexplained. Receipts as per Form 26AS were also added without allowing corresponding TDS credit. All these proceedings/orders came to the knowledge of appellant very late otherwise ho could have visited India to resolve the issues. That appellant was not in touch with any legal counsel in India and it is only after it came to his knowledge that certain assessment orders have been passed against him, he contacted a legal expert in this field and took his services and filed appeals. Moreover, all pending tax dues for all assessment years were duly deposited with interest and return of income was also filed for the assessment year 2018-19 and thereafter regularly, as the window for other assessment years were closed on the income-tax e-filing portal, however all remaining tax with interest was deposited.
The Id. CIT(A)-42, New Delhi, vide order dated 24.07.2019 in appeal no 123/2018-19/CIT(A)-42, deleted the addition of Rs.98,00,284/- in respect of unexplained investments in FDR. The addition of Rs.17,39,319/- on account of interest income on which TDS of Rs. 1,73,001/- had been deducted which was reflected in 26AS was however sustained as this ground was not pressed by the appellant. During penalty proceedings, the appellant submitted before the Id. A.O. that the appellant is not well versed with the intricacies of complex Indian income tax laws. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income and due to his stay outside India. Penalty was levied by the Id. A.O on interest income of Rs. 17,39,319-on which TDS of Rs. 1,73,001/- was deducted which is also reflect in Form No. 26AS Being aggrieved, the appellant has preferred this present appeal in order to get justice. It is most respectfully submitted that the penalty proceedings are independent of assessment proceedings and any addition made in the assessment proceedings need not necessarily imply that penalty has to be Imposed. He did not file his income tax 5 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR returns due to bonafide ignorance that tax has already been deducted by the bank on interest income.
In this regard, attention of the Hon'ble Bench is most respectfully invited to the following judgments:-
S.No. Particulars Hon'ble Court Held / Our humble submissions Non-acquaintance with the provisions of law can be considered as a reasonable cause under taxation laws. Motilal Padampat Sugar There is no presumption that every person knows the law. It Mills Co. Ltd. Vs. State 1 is often said that everyone is presumed to know the law, but of U.P. (1979) 118 ITR that is not a correct statement. There is no such maxim 326 (Supreme Court) known to the law.
An order imposing penalty for failure to carry out a statutory Hindustan Steel Ltd. Vs. obligation is the result of quasi judicial proceedings and State of Orissa (1972) penalty for failure will not ordinarily be imposed unless the 2 83 ITR 26 party obliged, either acted deliberately in defiance of law or (Supreme Court) was guilty of conduct contumacious.
AO has to be fair & objective while imposing penalty. Dilip N. Shroff Vs. JCIT Imposition of penalty is not automatic but discretionary.
3 (2007) 291 ITR 519 Mere omission or negligence would not constitute a (Supreme Court) deliberate act of suppression.
Hon'ble Supreme Court in the case of Price Waterhouse Coopers Pvt. Ltd. Vs CIT (2012) 348 ITR 306 (Supreme Court) deleted the penalty on account of failure of reputed assessee having great expertise in tax matters, in non- disallowance of an expenditure which was to be disallowed as duly mentioned its tax audit report. It was held that the assessee should have been careful cannot be doubted but absence of due care does not mean that assessee has furnished Inaccurate particulars of its income or has concealed its income. This was a human error which we all are prone to make. Copy of judgment is enclosed herewith for you'r honours kind consideration.
Reliance is also being placed on recent judgment (copy enclosed) of Hon'ble ITAT, Ahmedabad Bench in the case of Vijaybhal Dashrathbal Patel Vs. ACIT in ITA No. 2622/Ahd/2017 recently decided on 25.02.2022 wherein it was held at para no. 8 as under:-
6IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR "We note that the facts in the above cases support the proposition that if on facts the assessee is able to demonstrate that he has a reasonable cause for not filing return of income, then the assessee cannot be subject matter of penalty urs 271(1)(c) of the Act. In order to invoke Explanation 3 to s.271(1)(c) of the Act, the assessing officer has to establish that there was no reasonable cause on part of the assessee for non-filing of return of income. However, if from the facts of the case, it seems that assessee did not file returm of income under a bona-fide mistake, then uniess the Ld. AO brings anything further to the record, it is not a fit case of levy of penalty u/s 271(1)(c) of the Act. In our considered view in the instant set of facts, the assessee had earned interest income (being the only source of income for the captioned year) on which taxes had been duly withheld by the payer. Therefore, the assessee is conscious of the fact that the income Tax Department is aware about his having earned income, but was of the mistaken view that once taxes have been deducted on this income, the assessee was not required to be filed return of income. Therefore, in our view, this is not a fit case for levy of penalty since the assessee in the instant set of facts had reasonable cause for not filing return of income. We therefore cancel trider Imposing penalty and allow the appeal of the assessee."
In view of the above judgments, it is most respectfully submitted that the harsh penalty levied on the humble appellant ignoring the provisions of law may kindly be deleted. It is further submitted that at para no. 6 of the penalty order the Id A.O. has mentioned that notice was issued on 16.12.2021 request the assessee to fumish reply by 20.12.2021 but no reply was furnished the assessee. This observation of the Id. A.O. is totally erroneous as the appellant has submitted reply on the income tax portal on 18.12.2021 (before the due date of 20.12.2021) which is evident from the screenshot of the income tax portal enclosed herewith as the copy of acknowledgement of reply generated times the Income tax portal which is also enclosed herewith. The penalty levied A.O. without considering the reply filed by the assessee is illegal and unjustified. In the aforesaid circumstances and in the interest of justice, it is most respectfully requested that the appeal may kindly be allowed thereby deleting the harsh and unjustified penalty levied."7
IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR
8. Through multiple grounds of appeal, the levy of penalty has been challenged.
9. It is undisputed that the appellant did not file regular return of income though he had taxable interest income of Rs. 17,39,319/-.
10. It is contended that the appellant did not file his income tax returns due to bonafide ignorance as he stays outside India. It is argued that in respect of such interest income, all tax dues along-with interest has been duly deposited which proves his innocence.
11. The case laws cited by the appellant in its support are distinguishable on facts and are not applicable to the case at hand.
12. The appellant is a man of substantial means which is established by the fact that he has FDRs of about Rs. 1 crore. Therefore, he cannot take the alibi of ignorance of Indian laws. Therefore, this ground is not acceptable on facts.
13. The legal aspect of defense of ignorance of laws is also examined hereunder.
13.1 It is trite law that ignorance of law is no excuse. Ignorantia juris non excusat or Ignorantia legis neminem excusat (Latin for "ignorance of the law excuses not and "ignorance of law excuses no one"
respectively) is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely by being unaware of its content. The rationale of the doctrine is that if ignorance were an excuse, a person charged with criminal offenses or a subject of a civil lawsuit would merely claim that one was unaware of the law in question to avoid liability, even if that person really does know what the law in question is. Thus, the law imputes knowledge of all laws to all persons within the Jurisdiction. Even though it would be impossible, even for someone with substantial legal training, to be aware of every law in operation in every aspect of a state's activities, this is the price paid to ensure that willful blindness cannot become the basis of exculpation. Thus, it is well settled that persons engaged in any undertakings outside what is common for a normal person will make themselves aware of the laws necessary to engage in that undertaking. If they do not, they cannot complain if they incur liability.8
IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR 13.2 The Hon'ble jurisdictional High Court of Delhi in All India J.D. Educational Society v. DGIT(E) [2011] 198 Taxman 443 (Delhi) has held that ignorance of law cannot be treated as an excuse for statutory compliance.
13.3 The Hon'ble Kerala High Court in Fathima Educational & Charitable Trust v. CIT [WP(C).No. 31709 of 2016), in similar circumstances the court held that it is trite that ignorance of law is not an excuse and lack of understanding would also be akin to ignorance; which cannot validly be taken up.
13.4 Hon'ble Madras High Court in Viswanathan Silk Centre v. CIT [1994] 72 ΤΑΧΜΑΝ 300 (MAD.) was dealing with ignorance of law pleaded as the ground for claiming condonation of delay. It held that ignorance of law is no excuse and that the appellants have failed to satisfactorily explain the cause of delay and the order of Commissioner to refuse condonation, in absence of proper explanation for the delay, was upheld.
13.5 In CIT vs M/S. Indian Gospel Fellowship, Tax Case (Appeal) No.477 of 2010, the High Court of Madras reiterated the well settled principle of law that ignorance of law cannot be a ground for condonation of statutory compliance.
13.6 The Hon'ble ITAT Delhi in Mewat Grit Udyog Vs PCIT [2017- TIOL-607-ITAT-DEL] held that an assessee cannot claim ignorance of law for condoning the fallure of legal compliance, and there was no plausible reasons for such condonation.
13.7 The Hon'ble ITAT Pune has in Nandkishor Education Society v. CIT [2017-TIOL- 451-ITAT-PUNE) held that ignorance of law is no excuse for condoning failure in attending legal compliances.
13.8 In view of the above discussion, the defense of 'ignorance of law', is not acceptable on facts and in law, in this case.
14. The appellant has argued that he had bonafide reasons in not filing return and had no malafide intention. This argument is untenable in law. The Hon'ble Supreme Court has laid down the law in Chairman, SEBI v. Shriram Mutual Fund [2006] 131 Comp Cas 591 (SC); [2006] 9 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR 5 SCC 361 on penalty prescribed for a breach of a civil law such as tax laws is that the breach of civil obligation which attracts a penalty under the provisions of an Act would immediately attract the levy of penalty irrespective of the fact whether the contravention was made by the defaulter with any willfully or guilty intention or not. This view has been reiterated by the Hon'ble Supreme Court in their decision dated 29.9.2008 in the case Union of India vs. Dharmendra Textile Processors (2008) 306 ITR 277 (SC) holding that levy of penalty is only a civil liability and willful concealment is not an essential ingredient to be established before levy of penalty for concealment. This argument is therefore, rejected.
15. It is trite that admission of concealment after the same is discovered by AO cannot absolve an assessee from the penalty provision under Section 271(1)(C) for concealment of Income as decided by the Hon. Supreme Court in MAK Data Private Limited V. CIT (2013) 358 ITR 593 (SC). In this case, the assessee company filed its return of Income for the AY 2014-15. The case was selected for scrutiny and notices were issued under section 143(2) and section 142(1). During the course of the assessment proceedings, AO noticed that certain documents were found under survey proceedings under section 133A in the case of sister concern of the assessee. The AO issued a show cause notice seeking the information for certain documents found in the survey. In reply to the show cause notice, the assessee made an offer to surrender a certain sum by way of voluntary disclosure without admitting any concealment of income and subject to non-initiation of penalty proceedings and prosecution. However, the AO levied penalty for the same for concealment of incomev and for not furnishing true particulars. The Apex Court held that it is the statutory duty of the assessee to record all its transactions in the books of accounts, to explain the source of payments made by it and to declare its true income in the ROI filed by it. The Court was of the view that the surrender of Income by the assessee in this case is not voluntary, in the sense, that the offer of surrender was made in view of detection by the AO in the survey conducted in the sister concern of the assessee. The Apex Court, therefore, concluded that the levy of penalty is correct in law. It held:
"We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of 10 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of association of companies, affidavits, copies of Income Tax Returns and assessment orders and blank share transfer deeds duly signed, have been impounded in the course of survey proceedings under Section 133A conducted on 16.12.2003, in the case of a sister concern of the assessee. The survey was conducted more than 10 months before the assessee filed its return of income. Had it been the intention of the assessee to make full and true disclosure of its income, it would have filed the return declaring an income inclusive of the amount which was surrendered later during the course of the assessment proceedings. Consequently, it is clear that the assessee had no intention to declare its true income. It is the statutory duty of the assessee to record all its transactions in the books of account, to explain the source of payments made by it and to declare its true income in the return of income filed by it from year to year."
16. It is settled law that the act of concealment or furnishing of particulars of income is committed while filing original return, the revised return by itself would not mitigate the default. Reliance in this regard is placed on 171 ITR 390 All, 163 ITR 440 Raj, 32 ITR 677 Bom, 84 STC 271 Del, 96 STC 6 MP, 178 ITR 643 Pb,178 ITR 430 Ker, and 186 ITR 571 SC. It is observed that in this case there was no original return filed.
16.1 Hon. Supreme Court, in the case of G. C. Agarwal Vs. CIT (186 ITR 571) has held that when the assessee has filed revised return showing much higher income then disclosed in the original return but was unable to discharge the burden of proof, the A. O. is justified in imposing penalty u/s. 271(c).
16.2 In the case of Suresh Chander Mittal 241 ITR 124 MP, disclosure was made in revised return in pursuance of notice u/s 148 after search. The revised returns were filed just to avoid litigation. The HC, following SC decision in the case of Sir Shadilal 168 ITR 705, held that penalty was not leviable. This judgment has been affirmed by SC 11 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR by passing a short order (251 ITR 9). The Apex Court in the case of K.P.Madhusudan 251 ITR 99 has held that decision in Shadilal's case is no more good law after insertion of Expl-1 since the Explanation would apply automatically. The decision in Madhusudan case has therefore made it express that these cases would have to be seen with reference to the Explanation to Section 271(1)(c). It is therefore abundantly clear that in view of the Explanation to Section 271(1)(c), the burden of proving the bonafides is on the assessee. This decision therefore gives the Important test for such cases and requires that it would depend how the assessee has discharged his burden of proving his bonafides.
16.3 The case at hand is at much weaker footing as in this case, not even a revise return was filed,
17. In view of the overall discussion made above, it is concluded that this was a fit case for levy of penalty u/s 271(1)(c) read with Explanation 1. The penalty imposed is confirmed. All grounds of appeal are dismissed.
18. In the result, the appeal is dismissed.
2.3 Now the assessee has carried the matter against the order of the ld. CIT(A) as to sustaining the penalty before this Bench and prayed that the appeal may kindly be allowed thereby deleting the harsh and unjustified penalty levied u/s 271(1)(c) of the Act for which the ld. AR has filed the detailed written submission as under:-
12IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR ''Brief Facts & Submissions : The appellant is a Non Resident and is not well versed with the intricacies of the Indian Income tax laws. He shifted to Saudi Arabia for employment long ago in 2007 and is earning his bread and butter there since then. Before leaving India, he was employed in an Indian company and used to live at a rented premises at Flat No.204 Vijay Laxmi Aptts, Bhaskar Marg, Bani Park, Jaipur. He had parked his Indian savings in fixed deposits and mutual funds which continued during the years under consideration. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income and due to his stay outside India.
The learned Assessing Officer invoked the provisions of section 147 on the allegation that the NRI appellant has made unexplained investments in fixed deposits in India amounting to Rs.98,00,284/- and further earned interest income of Rs.17,39,319/- on which TDS of Rs.1,73,001/- has been deducted which is reflected in 26AS. Notice u/s 148 was issued at old rented premises at Flat No.204 Vijay Laxmi Aptts, Bhaskar Marg, Bani Park, Jaipur which the appellant had already left long ago. The assessment was finalized by treating the investments as unexplained. Receipts as per Form 26AS were also added without allowing corresponding TDS credit. All these proceedings/orders came to the knowledge of appellant very late otherwise he could have visited India to resolve the issues.
That appellant was not in touch with any legal counsel in India and it is only after it came to his knowledge that certain assessment orders have been passed against him, he contacted a legal expert in this field and took his services and filed appeals. Moreover, all pending tax dues for all assessment years were duly deposited with interest and return of income was also filed for the assessment year 2018-19 and thereafter regularly, as the window for other assessment years were closed on the income-tax e-filing portal, however all remaining tax with interest was deposited.
The ld. CIT(A)-42, New Delhi, vide order dated 24.07.2019 in appeal no. 123/2018-19/CIT(A)-42, deleted the addition of Rs.98,00,284/- in respect of unexplained investments in FDR. The addition of Rs.17,39,319/- on account of interest income on which TDS of Rs.1,73,001/- had been deducted which was reflected in 26AS was however sustained as this ground was not pressed by the appellant.
During penalty proceedings, the appellant submitted before the ld. A.O. that the appellant is not well versed with the intricacies of complex Indian income tax laws. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income and due to his stay outside India. Penalty was levied by the ld. A.O. on interest income of Rs.17,39,319/- on which TDS of Rs.1,73,001/- was deducted which is also reflect in Form No. 26AS. The ld. CIT(A) confirmed the penalty.13
IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR Being aggrieved, the appellant has preferred this present appeal in order to get justice. It is most respectfully submitted that the penalty proceedings are independent of assessment proceedings and any addition made in the assessment proceedings need not necessarily imply that penalty has to be imposed. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income.
In this regard, attention of the Hon'ble Bench is most respectfully invited to the following judgments:-
S.No. Particulars Hon'ble Court Held / Our humble submissions Non-acquaintance with the provisions of law can be considered as a reasonable cause under taxation laws. Motilal Padampat Sugar There is no presumption that every person knows the law. It Mills Co. Ltd. Vs. State 1 is often said that everyone is presumed to know the law, but of U.P. (1979) 118 ITR that is not a correct statement. There is no such maxim 326 (Supreme Court) known to the law.
An order imposing penalty for failure to carry out a statutory Hindustan Steel Ltd. Vs. obligation is the result of quasi judicial proceedings and State of Orissa (1972) penalty for failure will not ordinarily be imposed unless the 2 83 ITR 26 party obliged, either acted deliberately in defiance of law or (Supreme Court) was guilty of conduct contumacious.
AO has to be fair & objective while imposing penalty. Dilip N. Shroff Vs. JCIT Imposition of penalty is not automatic but discretionary.
3 (2007) 291 ITR 519 Mere omission or negligence would not constitute a
(Supreme Court) deliberate act of suppression.
Hon'ble Supreme Court deleted the penalty on account of failure of reputed assessee having great expertise in tax matters, in non-disallowance of an expenditure which was to be disallowed as duly mentioned in its tax Price Waterhouse audit report. It was held that the assessee should have Coopers Pvt. Ltd. Vs. 4 been careful cannot be doubted but absence of due CIT (2012) 348 ITR care does not mean that assessee has furnished 306 (Supreme Court) inaccurate particulars of its income or has concealed its income. This was a human error which we all are prone to make. Copy of judgment is enclosed herewith for you'r honours kind consideration.
The ld. CIT(A) upheld the penalty by relying on the case of Mak Data Pvt. Ltd. Vs. CIT 358 ITR 593 (SC). However, the facts in the case of Mak Data Pvt. Ltd. case were entirely different from the present appellant's case as in that case surrender of income in view of detection made by AO in search conducted in sister concern of assessee and 14 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR that too not in the return of income filed 10 months after survey date but during the assessment proceedings. Hon'ble Madras High Court in the case of CIT Vs. Gem Granites 2013 (11) TMI 1375 (Madras) (Copy enclosed) considered the judgments of Hon'ble Supreme Court in the case of Union of India vs. Rajasthan Spinning and Weaving Mills reported in (2009) 13 SCC 448; Union of India and Ors vs. Dharmendra Textiles Processors & Ors., reported in [2008] 306 ITR 277 (SC) as well as Commissioner of Income Tax vs. Reliance Petroproducts Pvt., Ltd., reported in [2010] 322 ITR 158 (SC) and distinguished the case of Hon'ble Supreme Court in the case of Mak Data Pvt. Ltd. and upheld deletion of penalty by holding at para 11 as under:-
"11. In a recent decision of the Hon'ble Supreme Court in Civil Appeal No.9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs. Commissioner of Income Tax-II), the Hon'ble Supreme Court while considering the Explanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise. Factually, we find that the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was on the department to prove that there was concealment of particulars of income or furnishing inaccurate particulars of income. In the instant case, such onus which shifted on the department has not been discharged. In the circumstances, we do not find that there is any ground for this Court to substitute our interfere with the finding of the Tribunal on the aspect of the bonafides of the conduct of the assessee."
Reliance is also being placed on recent judgment (copy enclosed) of Hon'ble ITAT, Ahmedabad Bench in the case of Vijaybhai Dashrathbai Patel Vs. ACIT in ITA No. 2622/Ahd/2017 recently decided on 25.02.2022 wherein it was held at para no. 8 as under :-
"We note that the facts in the above cases support the proposition that if on facts, the assessee is able to demonstrate that he has a reasonable cause for not filing return of income, then the assessee cannot be subject matter of penalty u/s 271(1)(c) of the Act. In order to invoke Explanation 3 to s.271(1)(c) of the Act, the assessing officer has to establish that there was no 'reasonable cause' on part of the assessee for non-filing of return of income. However, if from the facts of the case, it seems that assessee did not file return of income under a bona-fide mistake, then unless the Ld. AO brings anything further to the record, it is not a fit case of levy of penalty u/s 271(1)(c) of the Act. In our considered view, in the instant set of facts, the assessee had earned interest income (being the only 15 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR source of income for the captioned year) on which taxes had been duly withheld by the payer. Therefore, the assessee is conscious of the fact that the Income Tax Department is aware about his having earned income, but was of the mistaken view that once taxes have been deducted on this income, the assessee was not required to be filed return of income. Therefore, in our view, this is not a fit case for levy of penalty since the assessee in the instant set of facts had reasonable cause for not filing return of income. We therefore cancel the order imposing penalty and allow the appeal of the assessee."
In view of the above judgments, it is most respectfully submitted that the harsh penalty levied on the humble appellant ignoring the provisions of law may kindly be deleted. It is further submitted that at para no. 6 of the penalty order the ld. A.O. has mentioned that notice was issued on 16.12.2021 requesting the assessee to furnish reply by 20.12.2021 but no reply was furnished by the assessee. This observation of the ld. A.O. is totally erroneous as the appellant has submitted reply on the income tax portal on 18.12.2021 (before the due date of 20.12.2021) which is evident from the screenshot of the income tax portal enclosed herewith as the copy of acknowledgement of reply generated from the income tax portal which is also enclosed herewith. The penalty levied by the ld. A.O. without considering the reply filed by the assessee is illegal and unjustified and deserves to be deleted.
In the aforesaid circumstances and in the interest of justice, it is most respectfully requested that the appeal may kindly be allowed thereby deleting the harsh and unjustified penalty levied. '' 2.4 On the other hand, the ld. DR supported the order of the ld. CIT(A).
2.5 We have heard both the parties and perused the materials available on record. In this case, it is noted that the AO had information in his possession that the assessee had made investment in FDR of Rs. 98,00,284/- and had received interest income of Rs. 17,39,319/-. As no regular return had been filed by the assessee, the AO recorded reasons for re-opening and obtained statutory approval of PCIT and issued notice u/s 148. In response, no return of income was filed. No reply was filed in response to notices issued u/s 142(1). Therefore, the AO finalized the assessment u/s 147 r.w.s 144 on 17.12.2018 at a total income of Rs.
16IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR 1,15,39,600/- Penalty proceedings u/s 271(1)(c) were also initiated for concealment of income. To this effect, the assessee filed appeal before CIT(A) who decided the appeal vide order dated 24.07.2019 in which the addition of FDR was deleted but the addition of interest income of Rs. 17,39,319/- was confirmed.
Subsequently, the AO took up the penalty proceedings and issued show cause notice u/s 271(1)(c) r.w.s. 274 of the Act. In response, the assessee contended before the AO that he was a non-resident not well versed with the income tax law in India and return was not field due to bonafide ignorance of law. The AO was not satisfied with the reply. He imposed minimum penalty of Rs. 1,92,439/- for concealment of income u/s 271(1)(c) read with Explanation 1. The assessee carried the matter before the ld. CIT(A) who has confirmed the imposition of penalty of Rs.1,92,439/- u/s 271(1)(c)of the Act read with Explanation 1 and thus dismissed the appeal of the assessee with following narration ''17. In view of the overall discussion made above, it is concluded that this was a fit case for levy of penalty u/s 271(1)(c) read with Explanation 1. The penalty imposed is confirmed. All grounds of appeal are dismissed.
18. In the result, the appeal is dismissed.
The Bench further noted from the submissions of the assessee that the AO at para 6 of the penalty order had mentioned that the notice was issued on 16-12-2021 requesting the assessee to furnish reply by 20-12-2021 but no reply was furnished 17 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR by the assessee. The observation of the AO is totally erroneous as the assessee had submitted the reply on the income tax portal on 18-12-2021 (i.e. before the due date) which is evident from the screen shot of the income tax portal and thus penalty levied by the AO is without considering the reply filed by the assessee and it is unjustified and thus deserves to be deleted. It is noted that the assessee before leaving India, was employed in Indian Company and used to live at a rented premises at Flat No.204,Vijay Laxmi Aptt. Bhaskar Marg, Bani Park,Jaipur. He had parked his Indian Savings fixed deposits and mutual funds which continued during the year under consideration. The asseessee did not file his income tax returns due to bona fide ignorance that tax has already been deducted by the Bank on interest income and due to his stay outside India. Thus the penalty was levied by the AO on interest income of Rs.17,39,319/- on which TDS of Rs.1,73,001/-
was deducted which is also reflected in Form No. 26AS. The Bench noted that similar issue was decided by the Ahemdabad Bench (SMC) vide its order dated 25- 02-2022 in the case of Vijaybhai Dashrathbhi Patel vs ACIT, Circle 7(1), Ahemdabad (ITA No. 2622/Ahd/2017 for the assessment year 2008-09 with following observations:
''8 We note from the facts in the above case support the proposition that if on facts, the assessee is able to demonstrate that he has a reasonable cause for not filing return of income then the assessee cannot be subject matter of penalty u/s 271(1)© of the Act. In order to invoke Explanation 3 to Section 271(1)© of the Act, the assessing 18 IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR officer has to establish that there was no 'reasonable cause' on part of the assessee for non-fling of return of income. However, if from the facts of the case, it seems that assessee did not file return of income under a bona fide mistake, then unless the ld. AO brings anything further on record, it is not a fit case of levy of penalty u/s 271(1)© of the Act. In our considered view, in the instant set of acts, the assessee had earned interest income (being the only source of income for the captioned year), on which taxes had been duly withheld by the payer. Therefore, the assessee is conscious of the fact that the Income Tax Department is aware about his having income, but was of the mistaken view that once taxes have been deducted on this income, the assessee was not required to be filed return of income. Therefore, in our view, this is not a fit case for levy of penalty since the assessee in the instant set of facts had reasonable cause for not filing of return of income. We, therefore, cancel the order imposing penalty and allow the appeal of the assessee Keeping in view the above facts, circumstances of the case and also the decision of ITAT Ahemdabad in the case Vijaybhai Dashrathbhi Patel vs ACIT, Circle 7(1), Ahemdabads, we do not concur with the order of the ld. CIT(A) and thus the appeal of the assessee is allowed.
3.1 Now we take up the appeal of the assessee for the assessment year 2015-16 wherein the AO had imposed the penalty of Rs.2,53,750/- vide his order dated 31-
01-2022 and the same was confirmed by the ld. CIT(A) with following narration.
19IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR ''16. In view of the overall discussion made above, it is concluded that this was a fit case for levy of penalty u/s 271(1)(c) read with Explanation 1. The penalty imposed is confirmed. All grounds of appeal are dismissed.
17. In the result, the appeal is dismissed.
It is noteworthy to mention that the order of the ld. CIT(A) is stereotyped as made in the case of the assessee for the assessment year 2011-12 and thus dismissed the appeal of the assessee. Further, it is also noteworthy to mention that the written submission as made by the ld. AR of the assessee for the assessment year 2015-16 is also stereotyped except the penalty amount of Rs.2,53,750/- u/s 271(1)(c) of the Act.
4.1 After hearing both the parties and perusing the materials available on record, the Bench found that the facts, circumstances of the assesse's case are similar except change in penalty amount and the issue has been decided in favour of the assessee taking into consideration the decision of ITAT Ahemdabad in the case Vijaybhai Dashrathbhi Patel vs ACIT, Circle 7(1), Ahemdabad. Since the appeal of the assessee in IT(T)A No.15/JP/2023 is decided in favour of the assessee, therefore the decision taken therein shall apply mutatis mutandis in the case of the assessee in IT(T)A No.16/JP/2023 being similar facts and reasonings. Thus the appeal of the asseessee is allowed.
20IT(IT)A NO. 15 & 16/JP/2023 FAROOQ AHMAD VS DCIT, CIRCLE(INT. TAX), JAIPUR 5.0 In the result both the appeals of the assessee are allowed.
Order pronounced in the open court on 13/02/2024. Sd/- Sd/- ¼ jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Rathod Kamlesh Jayantbhai) (Sandeep Gosain) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member Tk;iqj@Jaipur fnukad@Dated:- 13/02/2024 *Mishra
vkns'k dh izfrfyfivxzsf'kr@Copy of the order forwarded to:
1. The Appellant- Shri Farooq Ahmad, Jaipur
2. izR;FkhZ@ The Respondent- The DCIT, Circle (Int. Tax), Jaipur
3. vk;djvk;qDr@ The ld CIT
4. foHkkxh; izfrfuf/k] vk;djvihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur
5. xkMZQkbZy@ Guard File (IT(T)A No.15/JP/2023) vkns'kkuqlkj@ By order, lgk;diathdkj@Asstt. Registrar