Income Tax Act, 1961, Section 271(1)(c)

Penalty under section 271(1)(c)—Validity—Whether return filed pursuant to search under section 153A is on similar legal stand as section 139 return

Conclusion: Where assessee had filed return under section 153A, which was accepted by revenue, therefore, no penalty under section 271(1)(c) could be imposed for concealment of income because return filed under section 153A would be deemed to be return filed under section 139.

Assessee had filed return under section 153A pursuant to a search action, which was accepted by revenue. However, penalty under section 271(1)(c) was imposed for concealment of income. Assessee contended that as the income of return filed under section 153A and assessed income were the same, no penalty could be levied. Held: It was transpired from assessment order that assessee had filed the return for the first time under section 153A and no return was filed before initiation of search. Therefore, in terms of section 153A, return filed under section 153A would be deemed to be return filed under section 139 and all consequential provisions would apply. Revenue had not rebutted the said fact. Thus, penalty was ordered to be deleted.

Decision: In assessee’s favour.

 

IN THE ITAT, AHMEDABAD BENCH

KUL BHARAT, J.M.

Sureshbhai Gordhanbhai Prajapati v. DCIT

ITA No. 526, 527, 528/Ahd/2018

19 September, 2019

Appellant by: P.F. Jain, Authorised Representative

Respondent by: N.K. Goel, Sr. Departmental Representative

Kul Bharat, J.M.

These three appeals by three different assessees are directed against three different orders of the learned Commissioner (Appeals)-11, Ahmedabad, dated 2-1-2018, 20-12-2017 & 2-1-2018 respectively.

2. First I take up ITA No. 526/Ahd/2018. The assessee has raised following grounds of appeal :–

1. The learned Commissioner (Appeals) has erred in law and on facts in upholding penalty of Rs. 19,234 levied under section 271(1)(c) without properly appreciating the facts of the appellant.

2. The learned Commissioner (Appeals) has erred in law on facts in not considering the submission, dated 18-8-2015 and the decision of ITAT Delhi relied upon by the assessee in the case of Prem Arora and Pawenkumar Gupta and ignoring the fact that return income in response to notice under section 153A is the assessed income under section 153A(1)(b).

3. On the facts no such penalty under section 271(1)(c) ought to have been levied.

4. The appellant craves leave to add to alter and/or to modify any ground of appeal.

3. The only effective ground is against confirming the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’). At the outset, learned Counsel for the assessee submitted that the assessee had filed return under section 153A of the Act. Consequent to search under section 132 of the Act on 6-11-2012 the assessment orders were passed under section 143(3) read with section 153A(1)(b) of the Act assessing the same income as returned by the assessee without any variation. It was further contended that during the search, no documents pertaining to the additional income was found/seized.

Penalty proceedings have been initiated under section 271(1)(c) of the Act for concealment of income. He submitted that as the income of return filed under section 153A and assessed income are the same, no penalty can be levied and the case of the assessee is covered by the following decisions :–

1. The above appeals are covered by the order of ITAT, in their own case vide ITA No. 4, 5, 6/Ahd/2018 pronounced on 19-7-2019 by ITAT SMC Bench.

The facts are same.

2. Kirit Dahyabhai Patel (2017) 80 Taxman.com.162 (Gujarat)

3. Neeraj Jindal (2017) 79 Taxmann. Com. 96 (Delhi), (2017) 393 ITR 1 (Del) : 2017 TaxPub(DT) 816 (Del-HC) :–The Hon’ble High Court refered to decision of Gujarat High Court in the case of Kirit Dahyabhai Patel (Para.20)

In this case, the decision of Prem Arora v. Deputy CIT (2012) 149 TTJ (Delhi) 590 : 2012 TaxPub(DT) 3145 (Del-Trib) has also been mentioned at para-5. This case was relied upon by the assesses before lower authorities.

4. ITAT, Ahmedabad Bench-C ITA No. 2662/A/2017, 2669, 2670,2671/A/2017 assessment year 2009-10, 2010-11 and 2012-13, ITA No. 2663 to 2668/A/2017 assessment years 2007-08 to 2012-13 dtd. 8-4-2019–In this case, the decision of Delhi High Court in the case of Neeraj Jindal mentioned above and decision of ITAT Rajkot Bench in case of Mansukhbhai R. Sorathia & Ors. IT(SS)(A. No. 46/RJT/2014 were referred to and penalties were deleted.

4. Learned Departmental Representative opposed these submissions and supported the orders of the authorities below.

5. In rejoinder, learned Counsel for the assessee submitted that the issue is squarely covered in favour of the assessee.

6. I have heard the rival submissions, perused the materials available on record and gone through the orders of the authorities below. The Division bench of this Tribunal in the case of Vithalbhai Gordhanbhai Prajapati v. DCIT Central Circle-1(2), Ahmedabad for the assessment year 2008-09 in ITA No. 4/Ahd/2018, dated 19-7-2019 held as under :–

6. We have heard the rival contentions of both the parties and perused the materials available on record. The issue in the instant case arises whether there will be any penalty under section 271(1)(c) of the Act on the income declared by the assessee in return filed under section 153A of the Act.

6.1 From the preceding discussion and on perusal of the order of the authorities below, we note that there was no reference made to any incriminating document found during the search. Therefore, we re of the view that the addition of undisclosed income was based on the statement furnished under section 132(4) of the Act.

7. Further, reliance is placed on the judgment of the Hon’ble jurisdictional High Court rendered in the case of Kirit Dahyabhai Patel v. ACIT (2017) 80 taxamann.com 162 (Gujarat). The Hon’ble High Court has decided the issue as follows :–

13. Considering the facts and circumstances of the case and also considering the decisions relied upon by learned senior advocate for the appellant, we are of the considered opinion that the view taken by the Tribunal is erroneous. The Commissioner (Appeals) rightly held that it is not relevant whether any return of income was filed by the assessee prior to the date of search and whether any income was undisclosed in that return of income. In view of specific provision of section 153A of the Income Tax Act, the return of income filed in response to notice under section 153(a) of the Income Tax Act is to be considered as return filed under section 139 of the Act, as the assessing officer has made assessment on the said return and therefore, the return is to be considered for the purpose of penalty under section 271(1)(c) of the Income Tax Act and the penalty is to be levied on the income assessed over and above the income returned under section 153A, if any.

8. Further, reliance is placed on the judgment of the Hon’ble Delhi High Court rendered in the case of Pr. CIT-19 v. Neeraj Jindal (2017) 79 taxmann.com 96 (Delhi) : 2017 TaxPub(DT) 816 (Del-HC).

The Hon’ble High Court has decided the issue as follows :–

“19. The whole matter can be examined from a different perspective as well. Section 153 A provides the procedure for completion of assessment where a search is initiated under section 132 or books of account, or other documents or any assets are requisitioned under section 132A after 31-5-2003. In such cases, the assessing officer shall issue notice to such person requiring him to furnish, within such period as may be specified in the notice, return of income in respect of six assessment years immediately preceding the assessment year relevant to the previous year in which (he search was conducted under section 132 or requisition was made under section I32A. The assessing officer shall assess or reassess the total income of each of these six assessment years. Assessment or reassessment, if any, relating to any assessment year falling within the period of six assessment years pending on the date of initiation of the search under section 132 or requisition under section 132A, as the case may be, shall abate. (Ref to Memorandum accompanying the Finance Bill, 2003) section 153A opens with a non-obstante clause relating to normal assessment procedure covered by sections 139, 147, 148, 149, 151 and 153 in respect of searches made after 31-5-2003. The sections, so excluded, relate to returns, assessment and reassessment provisions. However, the provisions that are saved are those under section 153B and 153C, so that these three sections 153A, 153B and 153C are intended to be a complete code for post search assessments. Considering that the non-obstante clause under section. 153A excludes the application of, inter alia, section 139, it is clear that the revised return filed under section 153A takes the place of the original return under section 139, for the purposes of all other provisions of the Act. This is further buttressed by section 1 53 A (1)(a) which reads :–

“Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31-5-2003, the assessing officer shall–

1. Issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six assessment years referred to in clause (b), in the prescribed form and verified in the prescribed manner and setting forth such other particulars as may be prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139.”

9. The revenue has not brought any contrary binding precedent to our notice. It is transpired from the assessment order that the assessee has filed the return for the first time under section 153A of the Act and no return was filed before initiation of search. Therefore, in terms of section 153A of the Act, return filed under section 153A of the Act would be deemed to be return filed under section 139 of the Act and all consequential provisions would apply. The learned Departmental Representative has not rebutted this fact. I therefore, respectfully following judgment of Hon’ble Gujarat High Court rendered in the case of Kirit Dahyabhai Patel v. ACIT (supra) and other case laws as relied by the learned Counsel for the assessee, direct the assessing officer to delete the penalty. The appeal of the assessee is allowed.

10. Now I take up ITA No. 527/Ahd/2018 for the assessment year 2012-13 and the assessee has raised following grounds of appeal :–

1. The learned Commissioner (Appeals) has erred in law and on facts in upholding penalty of Rs. 51,290 levied under section 271(1)(c) without properly appreciating the facts of the appellant.

2. The learned Commissioner (Appeals) has erred in law and on facts in not considering the submission, dated 18-8-2015 and the decision of ITAT Delhi relied upon by the assessee in the case of Prem Arora and Pawerkumar Gupta and ignoring the fact that return income in response to notice under section 153A is the assessed income under section 153A(1)(b).

3. On the facts no such penalty under section 271(1)(c) ought to have been levied.

4. The appellant craves leave to add to alter and/or to modify any ground of appeal.

11. The facts and circumstances in this case are identical as were in that of ITA No. 526/Ahd/2018 for the assessment year 2012-13. Respective representatives have adopted the same argument as were in ITA No. 526/Ahd/2018, in which I have decided the issue in favour of the assessee. For the same reasoning grounds of appeal are allowed.

12. In view of the above, the appeal filed by the assessee is allowed.

13. Now I take up ITA No. 528/Ahd/2018 for the assessment year 2012-13 and the assessee has raised following grounds of appeal :–

1. The learned Commissioner (Appeals) has erred in law and on facts in upholding penalty of Rs. 1,46,160 levied under section 271(1)(c) without properly appreciating the facts of the appellant.

2. The learned Commissioner (Appeals) has erred in law and on facts in not considering the submission, dated 18-8-2015 and the decision of ITAT Delhi relied upon by the assessee in the case of Prem Arora and Pawerkumar Gupta and ignoring the fact that return income in response to notice under section 153A is the assessed income under section 153A(1)(b).

3. On the facts no such penalty under section 271(1)(c) ought to have been levied.

4. The appellant craves leave to add to alter and/or to modify any ground of appeal.

14. The facts and circumstances in this case are identical as were in that of ITA No. 526/Ahd/2018 for the assessment year 2012-13. Respective representatives have adopted the same argument as were in ITA No. 526/Ahd/2018, in which I have decided the issue in favour of the assessee. For the same reasoning grounds of appeal are allowed.

15. In view of the above, the appeal filed by the assessee is allowed.

16. In the result, the appeals filed by the assessees in ITA Nos. 526, 527 & 528/Ahd/2018 for the assessment year 2012-13 are allowed.