Mistry & Shah, Ahmedabad V. The ITO, Ward-4(2)(3), Ahmedabad

ITA 143/AHD/2021

AI Insights

The case involves Mistry & Shah, the appellant, who appealed against the penalty imposed by the Income Tax Officer, Ward-4(2)(3), Ahmedabad, which was confirmed by the Commissioner of Income Tax (Appeals)-4. The penalty of Rs. 3,15,000 was levied under Section 271(1)(c) for alleged concealment of income related to a donation claimed under Section 35(1)(ii) of the Income Tax Act. The Tribunal considered the circumstances under which the penalty was imposed, including the timing of the assessee's return filing in response to a notice under Section 148 and the status of the donation recipient's registration at the time of the donation.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 125384 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-09-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 22-08-2023
• Assessment Year: 2014-2015
• Appeal Filed On: 27-05-2021
• Other Referred Cases: Mak Data Pvt. Ltd. Vs. CIT, K.P. Madhusudhanan Vs. CIT, PC Joseph & Bros. Vs. CIT, Narain Das Suraj Bhan Vs. CST, Jai Palace Vs. CIT, CIT vs. Punjab Tyres
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Reopening of assessment; Tax effect
• Section: 147; 148; 271(1)(c); 133A; 251; 43

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, AHMEDABAD BEFORE SMT. ANNAPURNA GUPTA, ACCOUNTANT MEMBER & SHRI SIDDHARTHA NAUTIYAL, JUDICIAL MEMBER I .T .A . No .1 43 /A h d / 20 21 ( A s se ss m e nt Y e a r : 20 14- 15 ) M i str y & Sh ah , 8 t o 1 0 , B h a v an i C ha m be r s , N r . T i m es o f I nd ia , A s h r a m R o a d , A h m e d a b ad - 3 80 0 0 9 V s . In c o me Ta x Of f ic e r , War d- 4( 2 ) ( 3 ), Ah me da b ad [ P A N N o. A A H F K 8 3 7 1M ] (Appellant) .. (Respondent) Appellant by : Shri Sanjay R. Shah, A.R. Respondent by: Shri Ashok Kumar Suthar, Sr. D.R. D a t e of H ea r i ng 23.08.2023 D a t e of P r o no u n ce me nt 13.09.2023 O R D E R PER SIDDHARTHA NAUTIYAL - JUDICIAL MEMBER: This appeal has been filed by the Assessee against the order passed by the Ld. Commissioner of Income Tax(Appeals)-4, (in short “Ld. CIT(A)”), Ahmedabad in Appeal No. CIT(A)-4/10012/2018-19 vide order dated 07.05.2019 passed for Assessment Year 2014-15. 2. The assessee has taken the following grounds of appeal:- “1. The order passed by the learned Commissioner of Income-tax (Appeals) confirming the penalty u/s.271(1)(c) of the Act is bad in law and contrary to the provisions of law and facts. It be so held now and the order passed by the learned Assessing Officer levying penalty of Rs.3,15,000/- as confirmed by the Commissioner of Income-tax (Appeals) be quashed. 2. The learned Commissioner of Income-tax (Appeals) erred in law and on facts in confirming penalty u/s.271(1)(c) of the Act for a sum of ITA No. 143/Ahd/2021 Mistry & Shah vs. ITO Asst.Year –2014-15 - 2– Rs.3,15,000/- in spite of the facts that the donation made by the appellant was genuine, was made through the banking channel was made to a registered trust and was supported by evidences which cannot be rebutted. It is submitted that in the facts and circumstances of the case, said penalty of Rs.3,15,000/- should not have been confirmed by the learned Commissioner of Income-tax (Appeals) and the same be directed to be deleted. 3. The learned Commissioner of Income-tax (Appeals) erred in confirming penalty in spite of the fact that same kind of donations given to the trust to which appellant made donation was allowed by Income Tax Appellate Tribunal, Ahmedabad in so many cases in quantum proceedings and that appellant had offered the same for tax just to avoid litigation and buy peace. Under the circumstances, the Commissioner of Income-tax (Appeals) ought not to have confirmed penalty u/s.271(1)(c). It is submitted that it be so held now and penalty of Rs.3,15,000/- confirmed be deleted. 4. Your appellant prays for leave to add, alter and/or amend all or any of the grounds of appeal.” 3. At the outset, we observe that the appeal is time barred by 684 days. Before us, the Counsel for the assessee submitted that there are two reasons for delay in filing of the present appeal. Firstly, an affidavit has been filed stating that the delay in filing of appeal was owning to mistake of the accountant-cum- clerk working in the office of M/s. Minesh & Sanjay, C.A., who was assigned the relevant papers relating to filing of appeal of the present case. Mr. Gaurang Chandrakant Trivedi, accountant-cum-clerk submitted that the said From No. 36 and grounds of appeal relating to the present appeal were misplaced by him inadvertently. Further, during the month of March 2021, when the Vivad Se Vishwas Scheme was to come to an end, the assessee ITA No. 143/Ahd/2021 Mistry & Shah vs. ITO Asst.Year –2014-15 - 3– required about the possibility of settlement of said appeal before ITAT to be covered under the VSV Scheme on the belief that appeal is pending before ITAT Ahmedabad. However, it was only then that it was discovered that there had been a lapse in filing of the present appeal by Shri Gaurang C. Trivedi and thereafter, appeal was filed with immediate effect before ITAT Ahmedabad. Looking into the facts leading to delay in filing of the present appeal, we are of the considered view that delay in filing of the present appeal has been on account of inadverting mistake made by the Officer Clerk of the Chartered Accountant who was vested with the responsibility of the filing of the present appeal. Affidavit of the office clerk i.e. Mr. Gaurang C. Trivedi has been placed on record before us. Accordingly, looking into the facts of the instant case we are hereby condoning the delay in filing of the present appeal. 4. The brief facts of the case are that original return of income was filed for A.Y. 2014-15 on 30.09.2014 declaring total income at Rs. 4,63,168/-. In the original return, deduction under Section 35(1) of the Act was claimed by the assessee amounting to Rs. 10,50,000/-. Subsequently, notice under Section 148 of the Act was issued to the assessee, in response to which, the assessee filed return of income on 04.04.2017 declaring total income at Rs. 15,13,168/-. In the subsequent return filed by the assessee, the assessee withdrew the claim of deduction under Section 35 of the Act amounting to Rs. 10,50,000/- as claimed by the assessee in the original return of income filed on 30.09.2014. Accordingly, penalty proceedings under Section 271(1)(c) of the Act were initiated against the assessee on the ground that the assessee had filed revised return after issuance of notice under Section 148 of the Act after specific query was raised regarding the claim of deduction under Section 35 of the Act. The revised return of income thus cannot be considered to have been voluntarily ITA No. 143/Ahd/2021 Mistry & Shah vs. ITO Asst.Year –2014-15 - 4– filed by the assessee. Accordingly, the Assessing Officer held that the assessee had furnished inaccurate particulars of his income and thereby concealed income of Rs. 10,50,000/- to evade legitimate tax. Accordingly, penalty amounting to Rs. 3,15,000/- being 100 % of tax on income concealed of Rs. 10,50,000/- was levied on the assessee. The appeal against the 271(1)(c) order passed by Assessing Officer, was upheld by the CIT(A) with the following observations:- “In instant case, there is specific finding by the A.O. as much as notice u/s.148 was issued, the findings having wide tax effect. In a recent judgment dated 31.10.2013 in the case of Mak Data Pvt. Ltd. Vs. CIT, 38 TAxmann.Com 448 (SC), the Hon’ble Supreme Court has ruled, “Voluntary disclosure does not absolve assessee, bonafide explanation of income required”. The facts of the case also make it amenable to the judgment against it in the case of K.P. Madhusudhanan Vs. CIT 251 ITR 99 (SC). Further, Additional income is response to notice u/s. 148, penalty on additional income confirmed in the case laws. PC Joseph & Bros. Vs. CIT 2443 ITR 818 (Ker.) Narain Das Suraj Bhan Vs. CST 21 STC 104 (SC)” 5. The assessee is in appeal before us against the aforesaid order passed by CIT(A) upholding the levy of penalty under Section 271(1)(c) of the Act. 6. Before us, the Counsel for the assessee drew our attention to Page 3 of the assessment order in which, the Assessing Officer has observed that the notice under Section 148 of the Act was issued on 07.03.2017 in response to which, the assessee filed return of income on 04.04.2017 declaring total ITA No. 143/Ahd/2021 Mistry & Shah vs. ITO Asst.Year –2014-15 - 5– income of Rs. 15,13,168/-. Further, the Assessing Officer observed that reasons recorded for re-opening of the case under Section 147 of the Act were provided to the assessee on 19.04.2017. Accordingly, the Counsel for the assessee submitted that the assessee had filed its return of income prior to the date of receipt of reasons recorded for re-opening the case under Section 147 of the Act. Therefore, clearly it cannot be said that in the instant facts, the assessee had knowledge of the reasons on the basis of which the re-assessment proceedings had been initiated against the assessee. The Counsel for the assessee submitted that the assessee had forgone the claim of deduction under Section 35 of the Act amounting to Rs. 10,50,000/- only in order to buy peace and looking into the instant facts, it cannot be said that such disclosure was not voluntary in the instant facts since the assessee was not in receipt of reasons for re-opening of assessment at the time when the return of income was filed on 04.04.2017. The second contention put forth by the Counsel for the assessee before us is that at the time when the claim of deduction under Section 35 of the Act was made by the assessee on account of donation given by the assessee to M/s. Herbicure Healthcare Bio-Herbal Research Foundation (HHBRF), the registration granted under Section 35(1)(iii) of the Act in respect of the above Institute i.e. HHBRF was valid. It was only subsequently that a survey action under Section 133A of the Act was carried out by the Investigation Wing, Kolkata on 27.01.2015 and it was held that the aforesaid institute i.e. HHBRF was engaged in bogus donation under Section 35(1)(ii) of the Act through various brokers in lieu of commission. However, during the impugned year under consideration, the registration held by the aforesaid institute i.e. HHBRF was still in place and hence there was no concealment on part of the assessee, so far as the impugned assessment year is concerned. ITA No. 143/Ahd/2021 Mistry & Shah vs. ITO Asst.Year –2014-15 - 6– Accordingly, it was submitted that looking into the facts of the instant case, it is a fit case for deletion of levy of penalty under Section 271(1)(c) of the Act. 7. In response, the Ld. D.R. placed reliance on the observations made by the Assessing Officer and CIT(A) in their respective orders confirming the levy of penalty under Section 271(1)(c) of the Act. 8. We have heard the rival contentions and perused the material on record. Looking into the instant facts we are of the considered view that penalty is liable to be deleted looking into the instant facts. This for the reason that first at the time when deduction was claimed by the assessee, the registration certificate granted to HHBRF under Section 35(1)(ii) of the Act was still in place during the impugned assessment year. Secondly, the return was filed by the assessee in response to notice under Section 147/148 of the Act on 04.04.2017 whereas the reasons recorded for reopening of assessment under Section 147 of the Act were provided to the assessee on 19.04.2017. Therefore, it cannot be presumed that the reasons for reopening of assessment were known to the assessee at the time when return was filed by the assessee in response to notice under Section 147 of the Act withdrawing the claim of deduction under Section 35(1)(ii) of the Act. We observe that the ITAT Ahmedabad in the case of S. G. Vat Care Pvt. Ltd. in ITA No. 1943/Ahd/2017 vide order dated 15.01.2019 has held that assessee is eligible for deduction under Section 35 of the Act in respect of donation given to M/s. Herbicure Health Care Bio Herbal Research Foundation since the donations were given by the assessee on 25.03.2014 and at that point of time, the donee was identified as an eligible institute and fell within the statutory eligibility criteria. The ITAT further observed that the certificate for receiving donation was cancelled only on 05.09.2016 in respect of HHBFR and therefore, the ITA No. 143/Ahd/2021 Mistry & Shah vs. ITO Asst.Year –2014-15 - 7– claim of deduction could not be disallowed in the hands of the assessee for A.Y. 2014-15, when the registration for receiving donation was still in existence. Further, again, in the case of Bipin Prabhudas Shah-HUF in ITA No. 1148/Ahd/2018, similar findings were made by ITAT Ahmedabad in respect of donations given to HHBRF under Section 35(1)(ii) of the Act. Further, we observe that ITAT Mumbai in the case of Marathon Nextgen Reality & Textiles Ltd. 36 taxmann.com 3 (Mumbai-Trib.) observed as under:- “Where assessee offered amount in question as additional income to buy peace and to avoid prolonged litigation, addition made on basis of such offer of assessee did not call for levy of penalty under section 271(1)(c).” The ITAT Chandigarh Bench in the case of Narindera Industries 85 taxmann.com 241 (Chandigarh-Tirb.) held that:- “Where addition to income of assessee was made solely on basis of surrender made by assessee, there being no adverse material available on record it was not a fit case for levy of penalty under section 271(1)(c) of the Act.” The Hon’ble Allahabad High Court in the case of Jai Palace 51 taxmann.com 462 (Allahabad) held that:- “Where assessee voluntarily surrendered a sum pertaining to cash credit in revised return to purchase peace and to avoid litigation, penalty was to be deleted.” ITA No. 143/Ahd/2021 Mistry & Shah vs. ITO Asst.Year –2014-15 - 8– The Hon’ble Madhya Pradesh High Court in the case of CIT vs. Punjab Tyres 162 ITR 517 (Madhya Pradesh) the High Court held that when an amount is surrendered to purchase peace, or for other similar reason, such surrender cannot amount to admission, constituting evidence of concealment in penalty proceedings. The High Court held that unless there is any evidence showing that assessee had consciously concealed particulars of his income, any admission made by him surrendering the said particular amount as his income would not by itself justify imposition of penalty. 9. Accordingly, in light of the facts of the instant case and judicial precedents on the subject, we are hereby directing deletion of levy of penalty under Section 271(1)(c) of the Act. 10. In the result, the appeal of the assessee is allowed. This Order pronounced in Open Court on 13/09/2023 Sd/- Sd/- (ANNAPURNA GUPTA) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 13/09/2023 TANMAY, Sr. PS TRUE COPY आदेश क त ल प अ े षत/ Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad