KRISHNAPPA GOWDER KALYANASUNDARAM,COIMBATORE V. DCIT, CC-3, COIMBATORE

ITA 1905/CHNY/2024

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The case involves Shri Krishnappa Gowder Kalyanasundaram, the appellant, who contested the penalties imposed for the Assessment Years 2013-14 and 2014-15 following a search and seizure operation under section 153A of the Income Tax Act. The penalties were levied based on alleged undisclosed business income and other disallowances. The appellant argued that the income disclosed in the revised returns filed post-search should not attract penalties as they were accepted by the Assessing Officer. The Tribunal, referencing decisions from the Delhi High Court and Madras High Court, concluded that since the revised returns were accepted, the original returns did not hold relevance for penalty purposes, leading to the deletion of the penalties.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 360745 (ITAT-CHENNAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-05-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2014-2015
• Other Referred Cases: Neeraj Jindal (79 Taxmann.com 96), R.P. Darrmalingam (CRL O.P.No.28572 of 2018 & Crl. M.P.No.16630 of 2018 dated 09-11-2023)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. CLEMENT RAMESH KUMAR
• Assessee Lawyers: N. ARJUN RAJ LD
• Keywords: Business income; Revised return
• Section: 271(1)(c); 132; 153A; 139

Judgement Text

" आयकर अपीलीय अिधकरण “सी” \u000eा यपीठ चे\u0013ई म\u0016। IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH, CHENNAI मा ननीय \u0019ी मनोज क ुमा र अ वा ल ,लेखा सद\" एवं मा ननीय \u0019ी मनु क ुमा र िग&र, \u000eा ियक सद\" क े सम'। BEFORE HON’BLE SHRI MANOJ KUMAR AGGARWAL, AM AND HON’BLE SHRI MANU KUMAR GIRI, JM 1. आयकरअपील सं ./ ITA No.1904/Chny/2024 (िनधा (रण वष( / Assessment Year: 2013-14) & 2. आयकरअपील सं ./ ITA No.1905/Chny/2024 (िनधा (रण वष( / Assessment Year: 2014-15) Shri Krishnappa Gowder Kalyanasundaram 83/1, SMT Towers, Teacher’s Colony, Karamadai, Coimbatore-641104. बना म/ Vs. DCIT Central Circle-3 Coimbatore. \u0001थायीलेखासं./जीआइआरसं./PAN/TAN No. AFBPK-6901-Q (अपीलाथ\u001a/Appellant) : ( थ\u001a / Respondent) अपीलाथ\u001aकीओरसे/ Appellant by : Shri N. Arjun Raj (Advocate) – Ld.AR थ\u001aकीओरसे/Respondent by : Shri R. Clement Ramesh Kumar (CIT) - Ld. DR सुनवाईकीतारीख/Date of Hearing : 27-02-2025 घोषणाकीतारीख /Date of Pronouncement : 21-05-2025 आदेश / O R D E R Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid appeals by assessee assails levy of penalty u/s 271(1)(c) for Assessment Year (AY) 2013-14 and 2014-15. Facts leading to impugned penalty are quite identical in both the years. First, we take up appeal for AY 2013-14 which arises out of an order passed by learned Commissioner of Income Tax (Appeals), Chennai-20 [CIT(A)] on 25-06- 2024 in the matter of impugned penalty of Rs.48.33 Lacs as levied by 2 Ld. AO vide order dated 04-03-2022 in the matter of an assessment framed u/s 153A on 27-08-2021. 1.2 The Ld. AR advanced arguments on legal ground as well as on merits. Reliance has been placed on certain judicial decisions to support the same. The Ld. AR stated that the returned income has been accepted and further, the additions were made by Ld. AO merely on the basis of loose sheets. Having heard rival submissions and upon perusal of case records, our adjudication would be as under. Penalty Proceedings 2.1 Pursuant to search action on the assessee u/s 153A on 06-03- 2019, an assessment u/s 153A was framed on the assessee. The assessee returned income of Rs.7.12 Lacs which was revised to Rs.150.55 Lacs on 10-03-2021 which was substantially accepted by Ld. AO except for an addition of Rs.13 Lacs as undisclosed business income and disallowance u/s 40A for Rs.1.80 Lacs. Consequently, penalty proceedings were initiated u/s 271(1)(c) for concealment of income. 2.2 In response to penalty show-cause notice, the assessee opposed levy of penalty on the ground that there was no concealment of income. However, Ld. AO held that some loose sheets were found during search which had details of loans advanced by the assessee. These loans were not disclosed in the regular books prior to search. The assessee admitted additional income. There was shortage for Rs.13 Lacs which was further added along with disallowance u/s 40A. Therefore, in terms of Explanation 5A to Sec.271(1)(c), the assessee had concealed its income to the extent of Rs.151.80 Lacs and accordingly, penalty of Rs.48.33 Lacs was levied. 3 2.3 The Ld. CIT(A) noted that the assessee offered additional income of Rs.137 Lacs in return filed u/s 153A. An addition of Rs.13 Lacs was made for shortage of cash flows. The fact that the assessee did not offer additional income in regular return as filed u/s 139(1), the said offer could not be said to be voluntary disclosure. Distinguishing the case laws being relied upon by the assessee, impugned penalty was confirmed against which the assessee is in further appeal before us. Our findings and Adjudication 3. We find that the assessee was subjected to search action and notice u/s 153A was issued to the assessee. In response, the assessee filed return of income which was subsequently revised to Rs.150.55 Lacs which include additional income of Rs.137 Lacs as offered by the assessee to make up for the shortage of cash flows of cash loans. The Ld. AO has substantially accepted the same except for further addition of Rs.13 Lacs to make up for final deficit. The disallowance u/s 40A is a statutory disallowance only. In response to penalty show cause notice, the assessee submitted that no penalty could be levied if any income is voluntarily admitted in the return of income filed u/s 153A. On these facts, in our considered opinion, no case of concealment of income could be made out against the assessee as per the decision of Hon’ble Delhi High Court in the case of Neeraj Jindal (79 Taxmann.com 96). The Hon’ble Court, in para-21 of the decision, held that when Ld. AO accepted the revised return filed by the assessee u/s 153A, no occasion arises to refer to the previous return filed u/s 139 of the Act. For all purposes, including for the purpose of levying penalty under Section 271(1)(c) of the Act, the return that has to be looked at is the one filed under Section 153A. In fact, the second proviso to Section 153A(1) 4 provides that \"assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years referred to in this sub-section pending on the date of initiation of the search under Section 132 or making of requisition under Section 132A, as the case may be, shall abate.\" What is clear from this is that Section 153A is in the nature of a second chance given to the assessee, which incidentally gives him an opportunity to make good omission, if any, in the original return. Once the AO accepts the revised return filed under Section 153A, the original return under Section 139 abates and becomes non-est. Now, it is trite to say that the \"concealment\" has to be seen with reference to the return that it is filed by the assessee. Thus, for the purpose of levying penalty under Section 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee under Section 153A, and not vis-a vis the original return under Section 139. The ratio of this decision has been considered by Hon’ble High Court of Madras in the case of R.P. Darrmalingam (CRL O.P.No.28572 of 2018 & Crl. M.P.No.16630 of 2018 dated 09-11- 2023). In para 14 & 15 of this decision, the Hon’ble court has accepted the ratio of this decision. Considering the same, it has to be held that the concealment of income has to be in the return of income filed by the assessee which fact is substantially absent in the present case. Respectfully following these decisions, no case of concealment of income could be made out against the assessee. Accordingly, we delete the impugned penalty and allow the appeal of the assessee. Assessment Year 2014-15 5. It is admitted position that facts leading to levy of penalty in this year are quite identical as in AY 2013-14. The Ld. AO has substantially 5 accepted returned income but levied penalty of Rs.29.67 Lacs which has been confirmed by Ld. CIT(A) on similar lines. Facts being pari-materia the same, our adjudication as for AY 2013-14 shall mutatis-mutandis apply to this appeal also. The appeal stand allowed accordingly. 6. Both the appeals stand allowed. Order pronounced on 21st May, 2025 Sd/- (MANU KUMAR GIRI) \u000eा ियक सद\" / JUDICIAL MEMBER Sd/- (MANOJ KUMAR AGGARWAL) लेखा सद\" / ACCOUNTANT MEMBER चे1ई Chennai; िदनांक Dated : 21-05-2025 DS आदेशकीJितिलिपअ ेिषत/Copy of the Order forwarded to : 1. अपीलाथ\u001a/Assessee 2. थ\u001a/Revenue 3. आयकरआयु:/CIT Chennai/Madurai/Coimbatore 4. िवभागीय ितिनिध/DR 5. गाड?फाईल/GF "