Hasmukhbhai Dahyabhai Patel, Vapi V. Dy. Commissioner of Income Tax, Vapi Circle, Vapi

ITA 115/SRT/2023

AI Insights

The case involves Hasmukbhai Dahyabhai Patel, the appellant, who contested a penalty imposed by the Deputy Commissioner of Income-tax, Vapi Circle, under section 271(1)(c) for concealing income. The penalty arose from an assessment where the appellant's declared income was significantly lower than the assessed income, leading to a penalty for concealment of income. The appellant argued that the penalty notice was defective as it did not clearly specify the grounds for the penalty. The Tribunal agreed with the appellant, citing precedents that require clarity in penalty notices, and quashed the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 301771 (ITAT-SURAT)
• Duration Of Justice: 7 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-07-2023
• Assessment Year: 2012-2013
• Appeal Filed On: 14-02-2023
• Other Referred Cases: Dilip N Shroff vs. JCIT & Anr., Principal Commissioner of Income-tax (Central), Bengaluru vs. Goa Coastal Resorts and Recreation (P.) Ltd., Samson Perinchery vs. CIT, New Era Sova Mine vs. CIT, Mohd. Farhan A Shaikh vs. Deputy Commissioner of Income-tax, Central Circle-1, Belgaum
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Initiation of penalty proceedings; Reasonable cause; Capital Gains
• Section: 148; 271(1)(c); 143(3); 274; 113

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JM & DR. A. L. SAINI, AM आयकर अपील सं./ITA No.115/SRT/2023 (Ǔनधा[रणवष[ / Assessment Years: (2012-13) (Virtual Court Hearing) Hasmukbhai Dahyabhai Patel Kevdi Fadiya, Vapi Chala- 396191 Vs. Dy. Commissioner of Income- tax, Vapi Circle, Vapi, Income Tax Office, Vapi, 8 th Floor, Fortune Square-II, Above TBZ, Chala, Vapi-396191 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: ABTPP 6530 G (अपीलाथŎ /Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Appellant by : Shri Bandish Soparkar, Advocate राजˢ की ओर से/Revenue by : Shri Vinod Kumar, Sr- DR स ु नवाई कȧ तारȣख/ Date of Hearing : 25/07/2023 घोषणा कȧ तारȣख/Date of Pronouncement : 19/09/2023 आदेश / O R D E R PER DR. A. L. SAINI, ACCOUNTANT MEMBER: Captioned appeal filed by the assessee, pertaining to Assessment Year (AY) 2012-13, is directed against the order passed by National Faceless Appeal Centre, Delhi [in short, “NFAC/Ld. CIT(A)”] dated 04.01.2023 which in turn arises out of a penalty order passed by the DCIT, Vapi Circle / Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 (in short ‘the Act’), dated 27.03.2019. 2. Grounds of appeal raised by the assessee are as follows: “1. Ld. CIT(A) erred in law and on facts in confirming penalty u/s 271(1)(c) taking concealed income at Rs.2,81,36,170/- ignoring submission and bona fide of the appellant. 2. Ld. CIT(A) erred in law and on facts in holding that there was a deliberate attempt on the part of the assessee to conceal the income when the appellant had revised the income on his own and the reasons for reopening were completely different. 3. Ld. CIT(A) erred in law and on facts in confirming part of the penalty levied while no penalty is leviable. Page | 2 ITA No115/SRT/2023 A. Y. 2012-13 Hasmukbhai D Patel 4. Ld. CIT(A) ought to have considered the fact that appellant has furnished all the relevant material necessary for the purpose of assessment to draw the correct conclusion and accordingly, appellant is not liable for penalty.” 3. The relevant material facts, as culled out from the material on record, are as follows. The assessee has filed his return of income on 22.09.2012 declaring total returned income of Rs.36,84,580/- and assessment was completed u/s 143(3) of the Act on 30.03.2016, assessing total income at Rs.4,64,57,000/- as against the returned income of Rs.36,84,580/-.The Assessing Officer also initiated penalty proceedings u/s 271(1)(c) of the Act for concealing particulars of income. 4. Subsequently, Assessing Officer issued a show cause notice u/s 274 r.w.s. 271(1)(c) of the Act on 30.03.2016. In response to the show cause notice u/s 274 r.w.s. 271(1)(c) of the Act, the assessee did not submit any reply. The Assessing Officer observed that assessee filed an appeal before the Ld. CIT(A), against the assessment order u/s 143(3) r.w.s. 147 of the Act, on 30.03.2016. The appeal filed by the assessee, before Ld. CIT(A), was decided by him vide order dated 24.07.2017, wherein Ld. CIT(A) partly allowed the appeal and upheld the addition to the extent of Rs.2,97,79,023/- on account of long term capital gains made by the Assessing Officer in the assessment order dated 30.03.2016. During assessment proceedings, additions on the following issues were made by the Assessing Officer which have been partly confirmed by Ld. CIT(A). A show cause notice u/s 274 r.w.s. 271(1)(c) dated 18.03.2019 was also issued and duly served on the assessee on 20.03.2019, the assessee was requested to show cause as to why an order levying penalty u/s 271(1)(c) of the Act, should not be passed in his case. In response to the show cause notice dated 18.03.2019, the assessee has submitted his reply on 26.03.2019. In reply the assessee has stated that the issue of addition was on account of opinion of the registered valuer in respect of valuation of property which was sold by the assessee during the year. The Page | 3 ITA No115/SRT/2023 A. Y. 2012-13 Hasmukbhai D Patel assessee also relied on the judgment Hon'ble Supreme Court in the case of Dilip N Shroff vs. JCIT & Anr. (2007) 281 ITR 519 (SC). 5. However, the Assessing Officer rejected the contention of the assessee and observed that Ld. CIT(A) has given partial relief to the assessee stating the report of the DVO cannot be disputed by the Assessing Officer and directed to re-compute the capital gains. Accordingly, the income was determined at Rs.3,34,63,600/- after giving effect to the order of Ld. CIT(A). The Assessing Officer observed that the original return of income was field on 22.09.2012 declaring total returned income of Rs.36,84,580/-. The return was revised on 22.09.2012 declaring income of Rs.36,84,580/-. However, in both these return of income, the capital gains from sale of land was not offered for taxation. It was only when the case was reopened on this specific issue and notice u/s 148 was issued to the assessee, then the assessee filed his return of income in response to the notice declaring income of Rs.3,18,21,050/-. This amount of Rs.3,18,21,050/- includes the capital gains on sale of land which formed part of the reasons recorded for reopening the case. This shows that there was a deliberate attempt, on the part of the assessee, to conceal the income on capital gains and only when the escapement of income came to the notice of Income Tax Department, the assessee offered such income for taxation. Thus Explanation-3 to Section 271(1)(c) are clearly applicable and it is deemed that the assessee had concealed his particulars of income. In view of above, the Assessing Officer held that assessee has without any reasonable cause ‘concealed his income’ to the extent of Rs.2,97,79,023/- and evaded the tax thereon within the meaning of u/s 271(1)(c) of the Act. Therefore, Assessing Officer levied penalty u/s 271(1)(c) of the Act of Rs.61,34,478/-. Page | 4 ITA No115/SRT/2023 A. Y. 2012-13 Hasmukbhai D Patel 6. Aggrieved by the order of Assessing Officer, the assessee carried the matter in appeal before NFAC/Ld. CIT(A), who has directed the Assessing Officer to recompute the penalty u/s 271(1)(c) of the Act, by taking the concealed income of Rs.2,81,36,170/- in place of Rs.2,97,79,023/-. Therefore, ld CIT(A) provided proportionate relief to the assessee. Feeling aggrieved and dissatisfied with the impugned order of NFAC/ld CIT(A), the assessee is in further appeal before us. 7. Shri Bandish Soparkar, Learned Counsel for the assessee, begins by pointing out that penalty notice issued by the Assessing Officer u/s 271(1)(c) of the Act, is defective. The Ld. Counsel took us through paper book pages, 66, wherein notice issued by the Assessing Officer u/s 271(1)(c) of the Act is placed. The Ld. Counsel contended that Assessing Officer does not strike off the irrelevant portion and even did not tick the relevant portion of the notice therefore assessee does not know that on what account the penalty u/s271(1)(c) of the Act was initiated against him. That is, the penalty is on ‘account of concealment of income’ or on account of ‘furnishing inaccurate particulars of income’ is not clear from the penalty notice therefore the penalty so levied, is vitiated. 8. On merit, Ld. Counsel for the assessee argued that assessee has submitted entire details and documents, during assessment proceedings and penalty proceedings therefore penalty should not be levied. Besides, assessee has shown in his revised computation of income, the sale consideration of Rs.4,73,00,000/- and paid taxes thereon. During assessment proceedings, assessee also submitted his reply before Assessing Officer, which is placed at paper book 117 and contended that everything was disclosed before Assessing Officer therefore penalty should not be imposed on assessee. Page | 5 ITA No115/SRT/2023 A. Y. 2012-13 Hasmukbhai D Patel 9. On the other hand, Ld. Sr-DR for the Revenue submitted that Assessing Officer issued notice u/s 271(1)(c) of the Act along with assessment order, therefore merely because a particular limb of the penalty notice was not strike off does not mean that Assessing Officer cannot levy penalty. The intention of the Assessing Officer, during the assessment proceedings was clear to levy the penalty, therefore, merely because notice is defective, does not vitiate the penalty proceedings. No such ground of appeal is raised by assessee. 10. On merit, ld DR stated that Assessing Officer has made out the clear case for initiation of penalty u/s 271(1)(c) of the Act, on account of concealment of income while passing assessment order. Therefore penalty should be imposed on the assessee on account of concealment of income. Besides, Ld. Sr.DR for the Revenue has primarily reiterated the stand taken by the Assessing Officer, which we have already noted in our earlier para and is not being repeated for the sake of brevity. 11. We have heard the rival parties and have gone through the material placed on record. For the sake of clarity and also being pertinent, we reproduce the notice u/s 271(1)(c) of the Act, as follows: Page | 6 ITA No115/SRT/2023 A. Y. 2012-13 Hasmukbhai D Patel 12. From the above notice u/s 271(1)(c) of the Act, it is vivid that penalty has been initiated on account of “concealment of income” and “furnishing inaccurate particulars of income”, that is on both the limbs. However, we note that Assessing Officer has initiated penalty on account of “concealment of income” only. We note that the Assessing Officer has not strike off the irrelevant portion of “furnishing inaccurate particulars of income”. From the Notice itself, one can see that Assessing Officer has issued notice for “concealment of particulars of income” as well as “furnishing inaccurate particulars of income”, whereas the penalty proceedings initially, at assessment stage, was on account of “concealment of income”. Hence, penalty levied by the Assessing Officer is bad-in-law and for that Page | 7 ITA No115/SRT/2023 A. Y. 2012-13 Hasmukbhai D Patel we rely on the judgment of Hon'ble Bombay High Court in the case of Principal Commissioner of Income-tax (Central), Bengaluru vs. Goa Coastal Resorts and Recreation (P.) Ltd. [2020] 113 taxmann.com 574 (Bom)/[2020] 272 Taxman 157 (Bom) [11-11-2019], wherein it was held as follows: “4. Mr. Rao, learned Advocate for the assessee points out that there is absolutely no finding as regards concealment or furnishing of inaccurate particulars. He further points out that in the notice issued to the assessee on 30/09/2016, the Deputy Commissioner had not even bothered to strike down the relevant portion of the printed form in order to indicate whether the satisfaction is based upon the concealment of particulars or furnishing of inaccurate particulars. He relies on CIT v. Samson Perinchery [2017] 88 taxmann.com 413/392 ITR 4 (Bom.) and CIT vs. New Era Sova Mine [2019] SCC online Bom.1032 to submit that on the basis of such a defective notice, award of penalty can never be sustained. 5. We have carefully examined the record as well as duly considered the rival contentions. Both the Commissioner (Appeals) as well as the ITAT have categorically held that in the present case, there is no record of satisfaction by the Assessing Officer that there was any concealment of income or that any inaccurate particulars were furnished by the assessee. This being a sine qua non for initiation of penalty proceedings, in the absence of such petition, the two authorities have quite correctly ordered the dropping of penalty proceedings against the petitioner. 6. Besides, we note that the Division Bench of this Court in Samson Preinchery (supra) as well as in New Era Sova Mine (supra) has held that the notice which is issued to the assessee msut indicate whether the Assessing Officer is satisfied that the case of the assessee involves concealment of particulars of income or furnishing of inaccurate particulars of income or both, with clarity. If the notice is issued in the printed form, then, the necessary portions which are not applicable are required to be struck off, so as to indicate with clarity the nature of the satisfaction recorded. In both Samson Perinchery and New Era Sova Mine (supra), the notices issued had not struck of the portion which were inapplicable. From this, the Division Bench concluded that there was no proper record of satisfaction or proper application of mind in matter of initiation of penalty proceedings. 7. In the present case, as well if the notice dated 30/09/16 (at page 3) is perused, it is apparent that the relevant portions have not been struck off. This coupled with the fact adverted to in paragraph (5) of this order, leaves no ground for interference with the impugned order. The impugned order are quite consistent by the law laid down in the case of Samson Perinchery and New Era Sova Mine (supra) and therefore, warrant no interference. 8. The contention based upon MAK Data (P.) Ltd. (supra) also does not appeal to us in the peculiar facts of the present case. The notice in the present case is itself is defective and further, there is no finding or satisfaction recorded in relation to concealment or furnishing of inaccurate particulars. 9.For the aforesaid reasons, we hold that no substantial questions of law arises in this appeal. Consequently, this appeal is dismissed.” Page | 8 ITA No115/SRT/2023 A. Y. 2012-13 Hasmukbhai D Patel 13. We note that Hon'ble Bombay High Court in the case of Mohd. Farhan A Shaikh vs. Deputy Commissioner of Income-tax, Central Circle-1, Belgaum [2021] 125 taxmann.com 253 (Bom)/[2021] wherein the penalty u/s 271(1)(c) was deleted on account of defective penalty notice u/s 271(1)(c) of the Act. Therefore, we note that since the penalty notice issued by the Assessing Officer is defective, hence, penalty initiated by the Assessing Officer is bad-in-law and therefore we quash the penalty order u/s 271(1) (c) of the Act. 14. As the penalty order u/s 271(1)(c) of the Act, is itself quashed, therefore all other issues on merits of the additions, in the impugned penalty proceedings, are rendered academic and infructuous therefore, we do not adjudicate them. 15. In the result, appeal filed by the assessee is allowed. Order is pronounced on 19/09/2023 by placing result on notice board. Sd/- Sd/- (PAWAN SINGH) (Dr. A.L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER lwjr /Surat / Ǒदनांक/ Date: 19/09/2023 Dkp Outsourcing Sr.P.S. Copy of the Order forwarded to: 1. The Assessee 2. The Respondent 3. The CIT(A) 4. Pr.CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Sr. Private Secretary/Private Secretary/ Assistant Registrar, ITAT, Surat