Section 271(1)(c) unjustified on Voluntary Income Disclosure

Ajoy Sharma Vs DCIT (ITAT Jaipur)

The Income Tax Appellate Tribunal (ITAT) in Jaipur recently delivered a significant judgment in the case of Ajoy Sharma vs. Deputy Commissioner of Income Tax (DCIT). The case revolves around the assessment year 2012-13, where Ajoy Sharma filed his return of income on 18th July 2014, declaring a total income of Rs. 13,87,801. However, after deductions under various sections like 80C, 80CCF, 80D, 80DD, and 80G, and claiming a loss under “Income from House Property,” the net taxable income stood at Rs. 10,58,800, with a refund claim of Rs. 54,810.

The return was filed after the prescribed time limit under Section 139(4) and was thus considered invalid. Upon receiving information about illegitimate deductions, the Revenue issued a notice under Section 148 on 26th March 2018. In response, Ajoy Sharma filed his income return on 9th June 2018, declaring an income of Rs. 14,09,150, which matched the assessment completed on 23rd August 2018. Despite this, penalty proceedings under Section 271(1)(c) were initiated, and a penalty of Rs. 2,16,520 was levied for allegedly concealing and furnishing inaccurate particulars of income.

In the first appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] upheld the penalty but reduced it from 200% to 100%. Ajoy Sharma challenged this decision, arguing that there was no difference between the returned and assessed income, and hence, no grounds for penalty.

The ITAT Jaipur referenced the Rajasthan High Court’s ruling in CIT vs. Pushpendra Surana and the Gujarat High Court’s judgment in Cheldas Khushalas Patel. Both cases emphasized that when an assessee voluntarily discloses income and the assessment is based on this disclosure without any changes, imposing a penalty under Section 271(1)(c) is unjustified.

Consequently, the ITAT quashed the penalty imposed on Ajoy Sharma, stating that since the returned and assessed incomes were identical, and the tax along with interest was duly paid, no concealment or inaccurate particulars were furnished. This judgment also applied to Ajoy Sharma’s cases for the assessment years 2013-14 to 2016-17, as they were based on similar facts and grounds.

This landmark ruling underscores the importance of voluntary disclosure and accurate tax filings, reinforcing the notion that penalties should not be imposed in the absence of deliberate concealment or inaccuracies. The appeal was allowed, and the order was pronounced in open court on 22nd July 2024.

FULL TEXT OF THE ORDER OF ITAT JAIPUR

These bunch of five appeals filed by assessee are arising out of the order of the National Faceless Appeal Centre, Delhi dated 26/02/2024 [here in after ‘NFAC’) ] for assessment years 2012-13 to 2016-17 which in turn arise from the order dated 12.12.2018 passed under section 271(1)(c) of the Income Tax Act [ here in after as Act ] , by DCIT/ACIT, Circle-01, BTD.

2. Since the issues involved in these appeals are almost identical on facts and are almost common, except the difference in figure disputed in each year, therefore, these appeals were heard together with the agreement of both the parties and are being disposed off by this consolidated order.

3. At the outset, the ld. AR has submitted that the matter in ITA No. 543/JPR/2024 may be taken as a lead case for discussions as the issues involved in the lead case are common and inextricably interlinked or in fact interwoven and the facts and circumstances of other cases are identical except the difference in the amount of penalty disputed. The ld. DR did not raise any specific objection against taking that case as a lead case. Therefore, for the purpose of the present discussions, the case of ITA No. 543/JP/2024 is taken as a lead case.

4. Before moving towards the facts of the case we would like to mention that the assessee has assailed the appeal in ITA No. 543/JP/2024 on the following grounds;

“1. The impugned penalty order u/s 271(1)(c) dated 12.12.2018 is bad in law and on facts of the case, for want of jurisdiction and various other reasons and hence the same kindly be quashed.

2. Rs. 1,08,258/-: The ld. CIT(A) erred in law as well as on the facts of the case in confirming the penalty imposed by the AO u/s 271(1)(c) of Rs.1,08,258/-. The penalty so imposed and confirmed by the CIT(A) being totally contrary to the provisions of law and facts kindly be deleted in full.

3. The impugned show cause notice issued u/s 274 r.w.s 271(1)(c) of the Act, is quite vague. The impugned penalty based on such a notice being contrary to the provisions of law and facts kindly be quashed.

4. The appellant prays your honor to add, amend or alter any of the grounds of the appeal on or before the date of hearing.”

5. The fact as culled out from the records is that the assessee e-filed his return of income for assessment year 2012-13 on 18-07-2014 declaring gross income of Rs. 13,87,801/- before claiming deductions under sections 80C, 80CCF, 80D, 80DD and 80G to the tune of Rs. 1,00,000/-, 20,000, Rs 15,000/- Rs 1,00,000/- and Rs. 24,000/- respectively and further claiming loss under the head Income from House Property at Rs 70,000/-thereby declaring net taxable income of Rs. 10,58,800/- wherein the assessee claimed refund of Rs 54,810/- out of the prepaid taxes. The return was filed after time limit prescribed u/s 139(4) of the Act and was invalid return. Thereafter, on an information in possession of the Revenue that in respect of erroneous and illegitimate deductions account of deductions under Chapter VIA of the Act, it was considered after due application of mind that income to the tune of Rs. 13,87,801/- had escaped assessment on account of non filing of return and on account of such erroneous and illegitimate deduction. To bring this amount of income to tax, proceedings u/s 147 of the Act were initiated in the case by recording reasons and after obtaining prior approval of the Principal Commissioner of Income Tax, Bathinda.

5.1 A notice under section 148 of the Act was issued to the assessee on26. 03.2018, which was duly served upon the assessee on the same day. In response to the notices u/s 148, the assessee filed return of income on 09.06.2018 for the assessment year 2012-13. It is pertinent to mention here that in the return filed in response to notice u/s 148 of the Act for A.Y. 2012­13 filed by the assessee, taxable income has been declared at Rs. 14,09,150/- after declaring income from other sources at Rs 1,80,097/-, without claiming loss of Rs 70,000/- from house property and after claiming deduction under u/s80C at Rs. 1,00,000/-.

5.2 During the course of assessment proceedings for the assessment year 2012-13 had been completed under section 143(3)/148 on 23.08.2018 at an income of Rs. 14,09,150/-. While framing assessment, penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of income to the extent of wrong claim of deductions amounting to Rs 1,59,000/- under Chapter-VIA of the income-tax Act, wrong claim of loss of Rs 70,000/- under the head house property income and for concealing particulars of income to the extent of Rs 1,21,350/- on account of non declaration of income from other sources were initiated. Noticed u/s 274 read with section 271(1)(c) of the Income-tax Act dated 23.08.2018 was issued and served upon the assessee in which the assessee was required to explain as to why penalty u/s 271(1)(c) of the Act may not be imposed in the case for furnishing inaccurate particulars of income on account of excessive claim of deduction amounting to Rs. 1,59,000/- under chapter VIA of the Income-tax Act, for wrong claim of loss of Rs. 70,000/-under the head house property income and for concealing particulars of income to the extent of Rs. 1,21,350/- on account of non declaration of income from other sources. The assessee submitted the reply to this show cause notice. The replies furnished by the assessee was considered but was not accepted because the assessee claimed deduction under Chapter VIA of the Act year after year, which were withdrawn while filing returns of income in response to notices issued u/s 148 of the Act for the A Ys 2012­13 to 2016-17. Similarly, the assessee claimed deduction of loss under the head ‘Income from house property at Rs 70,000/-. However, after initiation of enquiries by the Department u/s 133(6) of the Act on 12.03.2018 and after issue of notice u/s 148 of the Act on 26.03.2018, the assessee filed his return of income and paid the due tax. In the return filed in response to notice u/s 148, the assessee filed return of income, in which, no deduction on account of loss under the head ‘Income from house property at Rs 70,000/- was claimed. It is pertinent to mention here that the assessee claimed deduction on account of loss under the head ‘Income from house property’ year after year, which were withdrawn while filing returns of income in response to notices issued u/s 148 of the Act for the A Ys 2012­13 to 2016-17. He also noted that a bonafide mistake cannot occur in every year. This is clearly an attempt to evade payment of tax by reducing the taxable income through claiming wrong deduction under Chapter VIA of the Act. Moreover, in the case of a salaried employee, the employee is required to submit a declaration to the Drawing and Disbursing officer every year before the close of year in which all the documents are required to be submitted in respect of legitimate claim of deduction to be made from taxable income. As it is held in the assessment proceeding that the assessee made excessive claim on account of deduction of Rs. 1,59,000/-under Chapter VIA of the Act and loss from House property at Rs 70,000/-which lead to furnishing of inaccurate particulars of income. Further, the assessee failed to disclose interest income of Rs 1,21,350/- in the original return, which lead to concealing particulars of income. Had the Revenue not initiated any action under section 133(6) of the Act to make inquiries about claim of illegitimate and erroneous deduction of Rs. 1,59,000/- under Chapter VIA of the Act, loss from House property at Rs 70,000/- and non disclosure of interest income of Rs 1,21,350/-, the facts could never be brought on record. Thereby the assessee would have gone Scot free. Moreover, the assessee has failed to furnish any satisfactory explanation for furnishing inaccurate as well concealing particulars of income either during the assessment proceedings or during the penalty proceedings. It is therefore the ld. AO held that the assessee failed to declared his accurate income and further in the course of proceedings failed to offer any satisfactory explanation regarding furnishing of inaccurate particulars of income to the tune of Rs. 1,59,000/- under Chapter VIA of the Act and loss from House property at Rs 70,000 as well as concealing of particulars of interest income of Rs 1,21,350/-. In the instant case the assessee has also made a deliberate attempt by making a claim of excessive deduction as discussed above and held not allowable at all as prescribed under the Law. Accordingly, the assessee is held to be in default u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income of Rs 1,59,000/-and Rs 70,000/-and for concealing of particulars of income of Rs 1,21,350/-. The assessee has knowingly, intentionally and fraudulently claimed this wrong deduction year after year and thus the conduct of the assessee is abnormal. Considering this fact the penalty is levied at 200% as against the minimum penalty of 100%. Accordingly, a penalty of Rs. 2,16,520/- was imposed upon the assessee under section 271(1)(c) of the Act, which is imposable i.e. 200% of the tax sought to be evaded, as computed below:

The amount of penalty is being worked out as under:

Tax on assessed income	Rs. 2,82,987/-
Tax that would have been chargeable	Rs. 1,74,729/-
Tax Sought to be evaded	Rs. 1,08,258/-
Minimum penalty @ 100%	Rs. 1,08,258/-
Maximum penalty @ 300%	R s. 3,24,774/-

Penalty u/s 271(1)(c) of the Act is imposed at Rs. 2,16,520/- for furnishing inaccurate particulars of income of Rs. 1,59,000/- and Rs. 70,000/- and for concealing of particulars of income of Rs. 1,21,350/-.

6. Aggrieved from the order of the ld. AO levying penalty, assessee preferred an appeal before the ld. CIT(A). Apropos to the grounds so raised by the assessee, the relevant finding of the ld. CIT(A) is reiterated here in below:

“6.2 I have gone through the facts of the case, the penalty order and the submissions filed by the appellant. As per information available on record, during the year under consideration, the appellant claimed deductions under sections under sections 80C, 80CCF, 80D, 80DD and 80G to the tune of Rs. 1,00,000/-, 20,000, Rs. 15,000/-, Rs. 1,00,000/- and Rs. 24,000/- respectively totaling to Rs. 2,59,000/- in the original return filed on 18.07.2014. However, in the return filed in response to notice u/s 148,deduction under Chapter VIA of the Act have been claimed at Rs 1,00,000/- only, u/s 80C and no other deduction has been claimed. It is pertinent to mention here that the assessee claimed deduction under Chapter VIA of the Act year after year, which were withdrawn while filing returns of income in response to notices issued u/s 148 of the Act for the A Ys 2012-13 to 2016-17. Similarly, the assessee claimed deduction of loss under the head ‘Income from house property at Rs 70,000/-. However, after initiation of enquiries by the Department u/s 133(6) of the Act on 12.03.2018 and after issue of notice u/s 148 of the Act on 26.03.2018, the assessee filed his return of income and paid the due tax. Further, the assessee declared income from other sources at Rs 1,80,097/- in the retum filed in response to notice u/s 148, whereas Rs 58,747/-was declared in the return filed, which was invalid return of income.

6.3 The appellant has claimed that his wife was misguided by some unscrupulous elements who prepared the returns and made his wife invoke incorrect deductions to claim the refunds. His wife was ignorant that these deductions were not applicable to him and this process continued since appellant was not able to scrutinize the returns before filing. On receipt of Notice from the Department, appellant came to know that wrong deductions have been claimed in returns. The incorrect returns were revised by the appellant on his own account after hiring the services of a Chartered Accountant without waiting for any directive to pay the outstanding tax from the IT dept. Taxes as applicable have been deducted at source and paid up front. The Assessee is an honest taxpayer and there was no deliberate intention on part of the assessee to conceal any amount of tax. It was not a deliberate error and was rectified by the appellant on his own will and initiative.

6.4 1 do not concur with the appellant’s contention the ENT because of sheer ignorance wrong deductions were claimed. The appellant has claimed deductions for continuous five years and a bonafide mistake cannot occur in every year. This is clearly an attempt to evade payment of tax by reducing the taxable income through claiming wrong deduction under Chapter VIA of the Act. The assessing officer has correctly pointed out that in the case of a salaried employee, the employee is required to submit a declaration to the Drawing and Disbursing officer every year before the close of year in which all the documents are required to be submitted in respect of legitimate claim of deduction to be made out of taxable income. After due verification, the DDO issues the form No. 16 to every employee. In the case of the assessee, the assessee did never submit any documentary evidence to his DDO, claiming therein deductions under Chapter VIA of the Act and the DDO made deduction of tax out of the taxable income as the assessee was required to pay. This shows intentions of the assessee that he had not declared complete statement of facts before the DDO but preferred to make such erroneous and illegitimate deductions at the time of filing of return of income and claimed substantial amount of refund. The action of the assessee in respect of claim of such illegitimate deduction shows willful attempt of the assessee to conceal particulars of income and to evade tax.

6.5 Following are the deduction claimed wrongly by the appellant for which he was not eligible and which was withdrawn by filing revised return in pursuance to the notice issued u/s 148:-

Section	deduction	Amount claimed
80CCF	saving benefits for taxpayers who invest in government-approved infrastructure bonds. The maximum deduction amount that can be claimed under this section is Rs. 20,000 for an assessment year.	Rs 20,000/-
80D	Section 80D offers tax deductions of up to Rs 25,000 on health insurance premiums paid in a financial year.	Rs 15,000/-
80DD	income tax deductions can be claimed by an individual who belongs to a Hindu Undivided Family, as well as any other individual taking care of a disabled person in the family.	Rs 1,00,000/-
and 80G	allowed for amount paid by the taxpayer as donation to any fund or institution or charitable Trust.	Rs 24,000/-
Loss on house property		RS 70,000/-

6.6 The bare perusal of section makes it clear that who is eligible of claiming such deduction. Thus when the language of statute is clear and unambiguous and, in such circumstances, the expert’s opinion may not be used as a shelter to avoid penalty, as the explanation of the assessee is not bonafide. The appellant can’t claim that by mistake such deductions were claimed and cannot avoid paying penalty for claiming false deduction on grounds that its claim was supported by advice from a some person.

6.7 The appellant has also contended that he revised his return and withdrawn the wrong claimed deduction suo-moto. I do not agree with the appellant’s contention because for five years in a row he claimed these deductionsHad the Revenue not initiated any action under section 133(6) of the Act to make inquiries about claim of deduction under Chapter VIA of the Act, the original return, which was invalid, would have attained finality and after lapse of maximum time limit to initiate any action under the Income Tax Act, 1961, no action could have been taken leaving the Department at total loss of revenue claimed by the assessee by way of erroneous and illegitimate deductions under Chapter VIA of the Act. Thus only after initiation of enquiries by the Department u/s 133(6) of the Act on 12.03.2018 and after issue of notice u/s 148 of the Act on 26.03.2018 appellant has revised his return 09.06.2018.

6.8. Thus in view of above, The action of the assessee in respect of claim of such illegitimate deduction, loss under the head income from house property and non­disclosure of interest income show willful attempt of the assessee to furnish inaccurate particulars of income as well as to conceal particulars of income and to evade tax. Thus penalty levied by the assessing officer is upheld.

6.9 Through grounds of appeal, the appellant has raised his contention against the levy of penalty at 200%. I have perused the order and it is observed that the Assessing Officer has levied the penalty at 200% without citing any reasons .Thus I find it reasonable that minimum penalty at 100% is to be levied. Thus Assessing Officer is directed to recalculate the penalty at 100%.

7. The appeal of the appellant is partly allowed. ”

7. Feeling dissatisfied from the finding of the ld. CIT(A), assessee preferred the present appeal on the grounds as stated here in above. In support of the grounds so raised by the assessee the ld. AR of the assessee, he has relied upon the following written submission :

“Facts: The assessee e-filed his return of income for assessment year 2012-13 on 18-07-2014 declaring gross income of Rs. 13,87,801/- before claiming deductions under sections 80C, 80CCF, 80D, 80DD and 80G to the tune of Rs. 1,00,000/-, Rs. 20,000, Rs 15,000/-, Rs 1,00,000/- and Rs. 24,000/- respectively and further claiming loss under the head “Income from House Property” at Rs 70,000/-thereby declaring net taxable income of Rs. 10,58,800/- and refund of Rs 54,810/- was claimed. The return was filed after time limit prescribed u/s 139(4) of the Act and was invalid return. Thereafter, on an information in possession of the Revenue in respect of erroneous and illegitimate deductions account of deductions under Chapter VIA of the Act, it was considered after due application of mind that income to the tune of Rs. 13,87,801/- had escaped assessment on account of non-filing of return and on account of such erroneous and illegitimate deduction. To bring this amount of income to tax, proceedings u/s 147 of the Act were initiated in the case by recording reasons and after obtaining prior approval of the Principal Commissioner of Income Tax, Bathinda.

A notice under section 148 of the Act was issued to the assessee on 26.03.2018, which was duly served upon the assessee on the same day. In response to the notice’s u/s 148, the assessee filed return of income on 09.06.2018 for the assessment year 2012-13. It is pertinent to mention here that in the return filed in response to notice u/s 148 of the Act for A.Y. 2012-13 filed by the assessee, taxable income has been declared at Rs. 14,09,150/- after declaring income from other sources at Rs 1,80,097/-, without claiming loss of Rs 70,000/- from house property and after claiming deduction under u/s 80C at Rs. 1,00,000/-. Assessment proceedings for the assessment year 2012-13 had been completed under section 143(3)/148 on 23.08.2018 at an income of Rs. 14,09,150/-. While framing assessment, penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars of income to the extent of wrong claim of deductions amounting to Rs 1,59,000/- under Chapter-VIA of the income-tax Act, wrong claim of loss of Rs 70,000/- under the head house property income and for concealing particulars of income to the extent of Rs.1,21,350/- on account of non-declaration of income from other sources were initiated. Noticed u/s 274 read with section 271(1)(c) of the Income-tax Act dated 23.08.2018 was issued (PB 9) and served upon the assessee in which the assessee was required to explain as to why penalty u/s 271(1)(c) of the Act may not be imposed in the case for furnishing inaccurate particulars of income on account of excessive claim of deduction amounting to Rs 1,59,000/- under Chapter-VIA of the income-tax Act, for wrong claim of loss of Rs 70,000/- under the head house property income and for concealing particulars of income to the extent of Rs 1,21,350/- on account of non-declaration of income from other sources.

In response, the assessee filed written submission dated 08.09.2018 and 03.11.2018 reproduced at Pg.2 of Penalty Order dated 12.12.2018. Feeling dissatisfied, the ld. AO finally imposed the penalty @200% holding as under:

“6. In view of the above facts, it is held that assessee made excessive claim on account of deduction of Rs. 1,59,000/- under Chapter VIA of the Act and loss from House property at Rs 70,000/- which lead to furnishing of inaccurate particulars of income. Further, the assessee failed to disclose interest income of Rs 1,21,350/- in the original return, which lead to concealing particulars of income. Had the Revenue not initiated any action under section 133(6) of the Act to make inquiries about claim of illegitimate and erroneous deduction of Rs. 1,59,000/- under Chapter VIA of the Act, loss from House property at Rs 70,000/-and non-disclosure of interest income of Rs 1,21,350/, the facts could never be brought on record. Thereby the assessee would have gone scot free. Moreover, the assessee has failed to furnish any satisfactory explanation for furnishing inaccurate particular as well concealing particulars of income either during the assessment proceedings or during the penalty proceedings. It is therefore, held that the assessee failed to declared his accurate income and further in the course of proceedings failed to offer any satisfactory explanation regarding furnishing of inaccurate particulars of income to the tune of Rs. 1,59,000/- under Chapter VIA of the Act and loss from House property at Rs 70,000 as well as concealing of particulars of interest income of Rs 1,21,350/-. In the instant case the assessee has also made a deliberate attempt by making claim of excessive deduction as discussed above and held not allowable at all as prescribed under the Law. Accordingly, the assessee is held to be in default u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income of Rs 1,59,000/- and Rs 70,000/- and for concealing of particulars of income of Rs 1,21,350/-. The assessee has knowingly, intentionally and fraudulently claimed this wrong deduction year after year and thus the conduct of the assessee is abnormal. Considering this fact, the penalty is levied at 200% as against the minimum penalty of 100%. Accordingly, a penalty of Rs. 2,16,520/- is hereby imposed upon the assessee under section 271(I)(c) of the Act, which is imposable i.e. 200% of the tax sought to be evaded, as computed below:”

In the first appeal, the ld. CIT(A) also upheld the penalty so imposed however, it was reduced from 200% to 100%, holding as under:

“6.4 I do not concur with the appellant’s contention that because of sheer ignorance wrong deductions were claimed. The appellant has claimed deductions for continuous five years and a bonafide mistake cannot occur in every year. This is clearly an attempt to evade payment of tax by reducing the taxable income through claiming wrong deduction under Chapter VIA of the Act. The assessing officer has correctly pointed out that in the case of a salaried employee, the employee is required to submit a declaration to the Drawing and Disbursing officer every year before the close of year in which all the documents are required to be submitted in respect of legitimate claim of deduction to be made out of taxable income. After due verification, the DDO issues the form No. 16 to every employee. In the case of the assessee, the assessee did never submit any documentary evidence to his DDO, claiming therein deductions under Chapter VIA of the Act and the DDO made deduction of tax out of the taxable income as the assessee was required to pay. This shows intentions of the assessee that he had not declared complete statement of facts before the DDO but preferred to make such erroneous and illegitimate deductions at the time of filing of return of income and claimed substantial amount of refund. The action of the assessee in respect of claim of such illegitimate deduction shows wilful attempt of the assessee to conceal particulars of income and to evade tax.

6.5 Following are the deduction claimed wrongly by the appellant for which he was not eligible and which was withdrawn by filing revised return in pursuance to the notice issued u/s 148:

X X X X

6.6 The bare perusal of section makes it clear that who is eligible of claiming such deduction. Thus When the language of statute is clear and unambiguous and, in such circumstances, the expert’s opinion may not be used as a shelter to avoid penalty, as the explanation of the assessee is not bonafide. The appellant can’t claim that by mistake such deductions were claimed and cannot avoid paying penalty for claiming false deduction on grounds that its claim was supported by advice from some person.

6.7 The appellant has also contended that he revised his return and withdrawn the wrong claimed deduction suo-moto. I do not agree with the appellant’s contention because for five years in a row he claimed these deductions had the Revenue not initiated any action under section 133(6) of the Act to make inquiries about claim of deduction under Chapter VIA of the Act, the original return, which was invalid, would have attained finality and after lapse of maximum time limit to initiate any action under the Income Tax Act, 1961, no action could have been taken leaving the Department at total loss of revenue claimed by the assessee by way of erroneous and illegitimate deductions under Chapter VIA of the Act. Thus only after initiation of enquiries by the Department u/s 133(6) of the Act on 12.03.2018 and after issue of notice u/s 148 of the Act on 26.03.2018 appellant has revised his return 09.06.2018.

6.8 Thus in view of above, the action of the assessee in respect of claim of such illegitimate deduction, loss under the head income from house property and nondisclosure of interest income show wilful attempt of the assessee to furnish inaccurate particulars of income as well as to conceal particulars of income and to evade tax. Thus penalty levied by the assessing officer is upheld.

6.9 Through grounds of appeal, the appellant has raised his contention against the levy of penalty at 200%. I have perused the order and it is observed that the Assessing officer has levied the penalty at 200% without citing any reasons. Thus I find it reasonable that minimum penalty at 100% is to be levied. Thus Assessing officer is directed to recalculate the penalty at 100%.

7. The appeal of the appellant is partly allowed.”

Feeling aggrieved, hence this appeal.

Submissions:

1. Assessment and penalty – separate proceedings: It is pertinent to note that the AO has levied the penalty for concealment of income only & only on the basis of findings recorded by the AO in the assessment order. It is settled that assessment and penalty proceedings are separate and distinct from each other. Kindly refer Durga Kamal Rice Mills v/s CIT (2004) 265 ITR 25 (Cal.), CIT & Anr. v/s Anwar Ali (1970) 76 ITR 696 (SC), CIT v/s Ishtiaq Hussain (1998) 232 ITR 673 (All). In the case of CIT & Anr. v. Manjunatha Cotton and Ginning Factory 359 ITR 565 (Karn), the Hon’ble court has summarized the legal position after taking note of various decisions. However, the AO merely alleged but failed to bring any material whatsoever by making independent inquiries to support the finding of concealment of income. His ignorance of (revised) ROI u/s 148 (PB 5-8) was merely not legally justified.

2. No prior detection nor any mala fide intention of the assessee:

It is vehemently submitted that totality of the facts & circumstances if considered fairly and honestly, clearly suggest that it is not at all a case of deliberate attempt with a mala fide intention to suppress the income repeatedly but wrongly alleged in as much as the assessee holds a very senior position in the Indian Army as he has been serving as Brigadier for last several years. He has been an honest taxpayer since last 30 years. It is only in this particular period that because of the peculiar circumstances which were not known/were beyond his control, some bona fide mistakes occurred unintendedly which were, very fairly and honestly admitted immediately and even correcting the mistake, ROI were filed showing true income paying the full taxes applicable thereon. An honest consideration of the chronological events, stated herein below, shall establish that the assessee acted bonafidely without having any intention of suppressing its income.

2.1 Very firstly, while getting salary from the DDO the assessee neither made a declaration claiming the deductions u/s 80CCF, 80D, 80DD and 80G of the Act (which are the incorrect claims), nor he claimed any loss from the house property hence there was no question of submitting of any document in support thereof before the DDO. Notably the DDO also allowed only correct and legitimate deductions u/s 80C of Rs. 1,00,000/- (based on EPF deductions) as evident from form 16 (PB 10-11) therefore, the inference and allegations of the AO that the appellant did not declare complete statement of facts and did not submit any documentary evidence to his DDO towards claiming of deductions under Chapter VI A, is rather misleading. Interestingly, the AO very cunningly skipped to mention the fact as to whether such declaration was actually filed and if yes, whether such declaration contained the claim of wrong deductions (under consideration). Since this was a matter between the DDO and the assessee hence, no mistakes were committed and the DDO made tax deductions at source (TDS) on correct income and hence, no action is reported against the DDO under the relevant TDS provisions. Pertinently thus, tax was already deducted/paid initially.

2.2 A notice u/s 133(6) dated 12.03.2018 (PB 2) was issued to the assessee whereby, certain information in support of the deduction claimed u/s 80U was required from the assessee (but, there is no mention of deductions claimed u/s 80CCF, 80D, 80DD and 80G etc.). However, the given notice u/s 133(6) in no manner shows (or alleges) that some wrong claim was made by the assessee with a view to conceal and/or to furnish inaccurate particulars. The notice simply required the assessee to provide certain information related to! in support of the deductions claimed. It is not the case of the AO that some information (TEP) came to his possession that the appellant intendedly made wrong claims of deductions. He did not raise any specific query w.r.t the wrong declaration of loss from house property.

While responding (vide letter dated 18.03.2018 PB 3), to the surprise of the assessee, it came to his notice that some mistakes have been committed inadvertently in as much as deductions even though not applicable, could be claimed therein. Therefore, the assessee in all truthfulness and simplicity, straightforwardly and voluntarily admitted that some deductions could be wrongly claimed even though not applicable and whatever tax becomes payable would be deposited. He also requested the authorities to quantify the tax (intimate to the assessee) which would have been paid promptly, had it been informed. Unfortunately, however the AO, as a usual practice, instead of guiding and cooperating with an honest military man considered and grabbed as a best available opportunity to capitalize the mistake so committed and therefore, immediately notices u!s 148 in all the years were issued on 26.03.2018 (PB 4).

3. A point worth consideration arise here is that had it been a case of a smart taxpayer, duly assisted by a regular tax consultant, he instead of immediately responding to the notices u!s 133(6) (PB 2), would have paid the entire tax and filed the revised ROI and as per the usual practice, the AO would have issued notices u/s 148 pursuant to such material coming to the record. However, in absence of any specific provisions, the poor appellant was not able to take corrective measures. He was unaware that notice u/s 148 may be issued.

4. It must be appreciated that the assessee very promptly and within the short period of 18 days only from the receipt of the said notice u!s 133(6), filed returns of income on 30.03.2018 u/s 148 (when issued on 26.03.2018 for all the years) (PB 4). The entire tax which became payable with interest was paid and there is no dispute on that aspect.

5A. Very pertinently notice u!s 133(6) was issued only & only in AY 2016-17 yet the assessee filed the ROI in all other years. The AO intently avoided this fact.

5B. Human probabilities, the surrounding circumstances also plays an important role in the income tax proceedings as held in the case of Sumati Dayal v. CIT [1995] 80 Taxman 89 (SC). In this case, as stated, the assessee who is a military man since last 30 years and holding senior positions, can it be believed that a person of such stretcher would have been involved in such petty and minor wrong claim made in the ROI. As a matter of common knowledge normally a military man who is serving the nation at the border, is considered to be an honest and law abiding citizen. The AO miserably failed to rebut this general presumption by bringing strong cogent evidence against the assessee.

6. Supporting case laws on detection:

6.1 CIT vs. Pushpendra Surana (2013) 96 DTR 0231 (Raj) (DC 8-9)

6.2 In the case of CIT v/s Agrawal Round Rolling Mills Limited (2013) 85 CCH 0510 (Chatt) (DC 1-2), it was held that:

“Penalty-Penalty u/s 271(1)(c)-Concealment of income-Addition of share application money-Assessee, a company manufacturing iron and steel re-rolled products filed its return showing loss-Subsequently, notice u/s 143(2) was issued and query was asked regarding share application money received by Assessee-Assessee filed its reply mentioning therein that it had received share application money through cheques and drafts which was cleared by banks-However, in case of 12 applicants for which detailed list was separately enclosed, necessary documents were not there and as such a sum representing the share application money of those 12 applicants was surrendered with a request not to initiate any penalty proceedings-AO passed an order u/s 143(3) adding the surrendered amount u/s 68 and also ordered for initiation of penalty proceedings and imposed penalty at 150% of tax sought to be evaded by assessee-CIT(A) and ITAT both ruled in favour of assessee-Held, it is not disputed by the Department that the sum which was added u/s 68 was one which was surrendered by Assessee itself-Both the authorities below had recorded finding that there was neither any detection nor any information in the possession of Department except for the amount surrendered by Assessee and in these circumstances it cannot be said that there was any concealment-This is a finding of fact There is no illegality in same-The tax case has no merit and hence dismissed.”

Even though notice u/s 143(2) was issued asking the assessee regarding share application money. Later, the assessee made a surrender w.r.t 12 share applicants. Yet however, it was not held as a case of prior detection. Present case is on much stronger footing because here even prior to issue of 148 notice itself, the assessee made the disclosure/voluntarily admitted inadvertent wrong claim made by it and offered to pay tax thereon. Thus, the present case supports the assessee.

6.3 In the case of CIT v/s Shankerlal Nebhumal Uttamchandani (2009) 311 ITR 0327 (Guj) (DC 3-5), it was held that:

“Penalty under s. 271(1)(c)—Concealment—Revised return filed before detection of concealment— Tribunal has found that though certain queries were raised and put to the assessee, no particular item of concealed income was specifically pinpointed—As a matter of fact the process of detection was not complete till the date when the assessee filed revised returns surrendering the amounts reflected in various bank accounts in the names of his family members as his own income from undisclosed sources—There is no material on record to indicate that the aforesaid finding of the Tribunal is incorrect in any manner whatsoever—Further, Tribunal has also found that very same amounts have already been assessed along with interest in the hands of the family members and those family members have never admitted that they were benamidars of the assessee—Hence, even the Department is not certain, as to who is the right person assessable to tax qua the said income— Therefore, penalty under s. 271(1)(c) is not leviable.”

6.4 PCIT vs. Trisha Krishnan [2019] 111 taxmann.com 97 (SC) (DC 10-11)

“Section 4, read with section 271(1)(c), of the Income-tax Act, 1961 – Income – Chargeable as (Advances) – Assessment year 2010-11 – Assessee was a Cine artist – For relevant year, assessee filed her return declaring certain taxable income – Subsequently, assessee filed a revised return admitting additional income – Difference between income originally declared and total income admitted in revised return represented advance received by assessee in said assessment year from various cinema producers towards work to be done by her – In course of assessment, Assessing Officer opined that assessee filed revised returns only after revenue issued notice under section 143 and, therefore, it should be construed that assessee was guilty of deliberate concealment of income – Assessing Officer further noted that assessee had made payments of audit fee, professional charges and commission etc. on which tax was deducted at source but no proof of remittance of same into Government account was produced – He, thus, disallowed said payments – Assessing Officer also passed penalty order under section 271(1)(c) in respect of aforesaid two issues – As regards amount received by assessee as advance, Tribunal found that since said amount had been shown in balance sheet annexed to original return, there was no intention on part of assessee to conceal – With regard to disallowance qua TDS on account of non-deposit of same with Government, Tribunal opined that it was an inadvertent error on part of accountant – Tribunal, thus, set aside impugned penalty order – High Court by impugned order held that, on facts, no substantial question of law arose from Tribunal’s order and, thus, same deserved to be upheld – Whether Special leave petition filed against impugned order was to be dismissed – Held, yes [Paras 3 and 4] [In favour of assessee].”

6.5 CIT vs Suresh Chandra Mittal (2001) 251 ITR 9 (SC) (DC 6-7).

7.1 The reason behind such unintended mistake was that at the relevant point of time (between the period from 2011-2016), the assessee was posted at Ladakh, and as the said period was quite hectic for him because of considerable movement at the border. Being at a very remote place, without proper internet connectivity in those days, the assessee asked his wife, who was staying at a separated family accommodation in Hyderabad at that point of time, to take care of filing of his income tax returns and to observe these statutory obligations in a timely manner. In absence of a regular tax consultant, to the misfortune of the assessee and his wife, some deductions (even though not applicable) could be wrongly claimed. Wife being quite ignorant of the complex tax laws, was not able to understand what was going on. On the other hand, the assessee remaining at the border and almost disconnected with the day-to-day developments, had no occasion even to have a look upon the computation of total income which were required and filed. Further the returns were filed in paper forms and there was no provision of e-verification at that time so the assessee was not at a position to verify the contents of the computation. All the defective returns were bearing mobile no. and email address of his wife only. ROI filed u/s 148 were prepared & filed by the CA only.

7.2 The totality of facts & circumstances being the adverse operating condition of the assessee during his posting at the border and hilly area like Ladakh, his inability to scrutinize the returns due to the circumstances beyond his control, his wife a layman preparing the computation without the aid of a regular tax consultant followed by immediate acceptance and withdrawal of the mistaken claim at the first occasion itself i.e. in response to notice u/s 133(6) which was even prior to the serving of the notice u/s 148, resultantly it could not be a case of prior detection nor could be a case of intended wrong claim with a view to suppress the income or to evade taxes.

7.3. It must be appreciated that there has been no such allegations in the entire period of 30 years prior to or after this block period of AY 2012-13 to 2016-17.

7.4. Interestingly the AO has himself admitted that the assessee did not claim any deduction from the DDO. However, instead of giving credit to this crucial fact he rather misused and misinterpreted these facts to his favor.

7.5 There is no substance in the allegation that the assessee has been claiming such wrong declarations year after year without appreciating the totality of facts & circumstances and the crucial fact that most of the time he remained at Ladakh, almost disconnected with the family and the circumstances narrated here in above in detail. AO wrongly alleged non-showing of income form O.S.

7.6 Covered by direct decision on facts:

7.6.1 It is submitted that almost in a similar factual situation the Hon’ble Kerala High Court in the case of Pr.CIT v. Ambadi Krishna Menon (2024) 163 taxmann.com 141 (Kerala) (Pr.8) (DC 21-28) quashed a penalty-imposed u/s 271(1)(c) holding that:

“Section 271(1)(c) of the Income Tax Act, 1961 – Penalty – For concealment of income – Assessment year 2011-12 – Assessee filed return for AY 2011-12, declaring income and capital gains, which was processed under Section 143(1) – Revenue, suspecting suppression of capital gains, issued a summons. Assessee admitted a mistake In computation and declared additional income – Thereafter, a notice under Section 148 was issued for reassessment – Assessee filed a fresh return and paid differential tax and interest – Assessment was completed with no addition to disclosed income – However, Revenue imposed a penalty under Section 271(1)(c), alleging concealment of income or furnishing inaccurate particulars of income – First Appellate Authority cancelled penalty due to lack of established concealment of income – Tribunal dismissed revenue’s appeal on technical grounds, noting that penalty notice did not specify exact grounds for penalty – It was noted that assessee had disclosed error before notice under Section 148 was issued, thus preventing concealment of income – Further, explanation offered by assessee was accepted by Revenue during assessment and moreover, penalty notice was defective as it failed to specify grounds for imposing penalties – Whether honesty of assessee in disclosing mistake and paying differential tax before assessment would not attract penalty provisions under Section 271(1)(c) – Held, yes – Whether thus, imposition of penalty for AY 2011-12 couldn’t be legally sustained due to lack of essential pre-conditions and procedural defects in penalty notice – Held, yes [Para 9][In favour of assessee]”

In that case also, after filing ROI the revenue suspected suppression of capital gain and therefore, initiated inquiry by issuing summons u/s 131 and the assessee while preparing the details for onward submissions, realised that he committed an inadvertent mistake (while preparing the reply) and on the review of the return initially filed therefore, offered to pay the differential amount of the capital gain which was offered vide letter dated 13.06.2014. Pursuant to the said letter, the department issued notice u/s 148 on 03.07.2014 in response to which the assessee offered correct income and also paid the tax, additional tax interest etc. The assessment was completed later on without making any addition as compared to ROI filed u/s 148.

7.6.2 Price Waterhouse Coopers Pvt. Ltd. vs CIT (2012) 348 ITR 306 (SC) held that:

“19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income.

20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars”

7.6.3 Anandamoy Bhattacharjee vs. ITO [2007] 107 TTJ 671 (Kol.)

“Section 271(1)(c) of the Income-tax Act, 1961 – Penalty – For concealment of income – Assessment year 1995-96 – Assessee, ex-Chief Justice of High Court, having income from salary and royalty, failed to file his return for assessment year under consideration – Since assessment was due to be barred by limitation, assessment under section 144/147 was completed – Assessing Officer also imposed penalty on assessee under section 271(1)(c), holding that assessee did not voluntarily file his return disclosing income from various sources and had deliberately concealed particulars of income – Commissioner (Appeals) upheld penalty imposed on assessee – Assessee contended that matter of filing returns did not come to his mind, as for last 20 years as a Judge, his returns used to be taken care of by his office staff, accounts officer, etc., and thereafter, he was confined to bed and could not file his return – Whether since revenue could not controvert assessee’s plea and further assessee had paid TDS on salary and advance tax on his royalty income and after adjusting same, balance amount of tax along with interest was also deposited, it could be held that assessee had not concealed particulars of his income – Held, yes – Whether therefore, penalty imposed on assessee was to be deleted – Held, yes”

8. Penalty so imposed being totally contrary to the provisions of law:

8.1 The order imposing penalty is quasi-criminal in nature and, thus, heavy burden lies on the department to establish that the assessee had concealed his income. Since the burden of proof in penalty proceeding varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income or that a deduction has wrongly been claimed, cannot automatically be adopted, though a finding in the assessment proceedings constitutes good evidence in the penalty proceeding. In the penalty proceedings, thus, the AO is required to bring positive material showing intentional concealment. However, in this case the AO failed to bring any positive evidence on record to show that the assessee really intended to conceal the subjected items of income. The AO accepted what the assessee declared in the revised ROI and without any variation the AO even assessed the same. Therefore, the onus lay upon the AO has not been discharged.

8.2 The word “concealment” inherently carried with it the element of mens rea. To impose a penalty u/s 271(1)(c), it must be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income. The said principle has been reiterated in Virtual Soft Systems Ltd. vs. CIT (2007) 207 CTR (SC) 733: (2007) 289 ITR 83 (SC) held that:

“24. Sec.271 of the Act is a penal provision and there are well established principles for the interpretation of such a penal provision. Such a provision has to be construed strictly and narrowly and not widely or with the object of advancing the object and intention of the legislature.”

8.3 The present case is also supported by decision of this Hon’ble bench in this case of Suresh Mal Lodha vs. ACIT in ITA no. 968/JPR/2019 dated 12.01.2023 wherein, it was held that:

“3.5 We have heard both the parties and perused the materials available on record. In this case, initially return of income was filed at a total income of Rs. Rs.80,56,970/-, however thereafter, a revised return of income was filed on 31.03.2011 declaring total income of Rs. 1,03,90,410/- wherein additional income of Rs. 23,33,440/- was declared being income from house property of Rs.11,19,700/-, interest from FDRs of Rs.10,43,740/- and consultancy fee of Rs.1,70,000/-. The authorities below however rejected the revised return saying 13 ITA NO. 968/JP/2019 SURESH MAL LODHA VS ACIT, CIRCLE-6, JAIPUR that the original return of income was not filed u/s 139(1). Moreover, it was not a case of voluntary disclosure but it was only after issuance of notice u/s 143(2), the assessee came forward and declared the additional income. However, we did not find ourselves in agreement with such contentions raised by the department in as much as the notice u/s 142(1) along with query letters were issued on 06.09.2011 whereas the revised return was already filed on 31.03.2011, showing the additional income. The notice u/s 143(2) is normally a formal notice showing the selection of the case for scrutiny and to comply with the limitation provision. Nothing was brought on record by the revenue if the assessee was specifically asked or investigation was made with reference to all the three items of income additionally declared. Otherwise also, the revenue may be technically correct in not considering the later return of income as a revised return but it cannot be denied that additional income was shown by the assessee himself and it is not the case of the revenue that they unearthed the additional income by carrying out investigations. In addition, we find force in the contention by the Ld. AR that there were justified reasons behind delayed declaration of additional income from these sources. Hence, it was not improbable if the original return could have been filed beyond the due date of Section 139(1) waiting for the correct and complete information of income to be included, necessitating an upward revision of income. Further had the assessee woke up only after issuance of notice u/s 143(2), he could have filed the revised return immediately but not after a long gap of 5 months i.e. on 31.03.2011. Undisputedly, the assessee is aged 61 years mainly deriving salary income and stationed at Mumbai whereas his chartered accountant was situated at Jaipur. It was a period when there was less or no automation and the department also could not bring on record that every income suffering TDS was being shown through form 26AS in time nor it is shown that Form 16A if issued by all those parties providing income to the assessee, were timely given to the assessee. The contention of the revenue that additional income suffered TDS and, therefore, the assessee should have declared for the income in the original return itself, is far from the ground realities which prevailed at the relevant point of time. It was a quite usual practice for the deductor to issue certificate in form 16A or to upload the same in form 26AS lately. It cannot be denied that the assessee must have been under a bona fide impression that all such incomes were subjected to TDS and therefore, he is not concealing any income from the department. The decisions cited in the penalty order do not help the revenue being rendered in different factual context. In the past also, the income from all the three sources have never been to this extent. The consultancy income was for the first time. The rental income was maximum upto Rs.2,00,000/- till A.Y 2008-09 and first time only this went upto Rs. 11,19,700/- (net). The interest on FDR which was additionally declared at Rs. 10,43,740/- was maximum upto Rs. 2,21,000/- in AY 08-09. It is 15 ITA NO. 968/JP/2019 SURESH MAL LODHA VS ACIT, CIRCLE-6, JAIPUR noticed that Lakshmi Vilas Bank Ltd earlier reported the interest payment to the assessee in form 26AS dated 10.08.2013 at Rs. 7,72,571/73 as against the correct amount of Rs. 56,491/67 only (copy placed at page 23 of assessee’s paper book) however, later on, the same very bank accepting this mistake of wrongly showing much higher amount, admitted the correct amount of income at Rs. 56,491/67 only as per form 26AS uploaded till 20.03.2020 at page 45 of the assessee’s paper book. This was agreed by the bank also vide its letter dated 21.10.2011 copy of which is available on record. Though the ld. AR contented that the assessee also accordingly wrongly declared the FDR interest at Rs. 10.43 lacs as an additional income (included in Rs. 23.33 lacs) as against the correct interest of Rs. 54,491/67 only however, this not being subject matter of appeal, before us, we are unable to deal with such contention and grant relief but, prima facie the assessee appears to have wrongly paid tax on such excess income. Also it is evident that there as chances of incorrect reporting by the deductor and therefore, the assessee cannot be held responsible for not showing income correctly and timely. There is no difference between the assessed income and the income declared in the revised return. It is not denied that the additional income from all the three sources, was subjected to TDS and we find force in the contention of the ld. AR that once the additional income has suffered TDS it cannot be said to be undisclosed income of the assessee. We have gone through the decisions cited by the ld. AR and find that 16 ITA NO. 968/JP/2019 SURESH MAL LODHA VS ACIT, CIRCLE-6, JAIPUR they support the case of the assessee. A cumulative consideration of all the facts and circumstances clearly establish that it was not a case of concealment of income with respect to the declaration of the additional income It is well settled principle of interpretation of penal provisions that the same has to be construed strictly and no penalty cannot be imposed unless the case strictly fall within the legal parameters. We, therefore, direct the AO to delete the penalty imposed u/s 271(1)(c) under challenge.”

9.1. The CBDT, long back through a binding Circular no.14(XL-35), dated 11.04.1995 (DC 50-51) has directed the subordinate authorities not to take advantage of assessee’s ignorance rather they are supposed to guide taxpayers. Unfortunately, however in this case despite the assessee specifically asking the AO at the very beginning, unfortunately there was no response given on the contrary, the AO took full advantage of the situation as stated earlier.

9.2 Time and again the Hon’ble Apex Court came down heavily on the Income Tax Department stating that the Department is not there just to punish the tax payers for their bonafide mistakes. An assessee cannot be denied his claim on a mere technicality when the assessee is legally otherwise entitled to the deduction, which has been demonstrated in various judgements listed below: (a) ITO v. S. Venkataiah [2013] 1 ITR (Trib)-OL 256 (Hyd) in I.T.A. No. 984/Hyd/2011, (b) CIT v. Smt. Minalben S. Parikh [1995] 215 ITR 81 (Guj), (c) CIT v. Ratlam Coal Ash Co. [1988] 171 ITR 141 (MP) & (d) CIT v. Arvind Jewellers [2003] 259 ITR 502 (Guj).

10.1 No penalty is legally possible where ROI is held invalid (only for AY 2012­13, AY 2013-14 & AY 2015-16):

The undisputed facts available on record are that the Assessee initially filed ROI (PB 1) on 18.07.2014 (wherein the deductions u/s 80CCF, 80D, 80DD and 80G were wrongly claimed and further loss from house property was also claimed), showing total income of Rs.10,58,800/-. Since, this return was filed after the limits prescribed u/s 139(4) of the Act, hence it was held to be an invalid return. Kindly refer para 1 of the impugned penalty order and also held so by the AO in the subjected Assessment Order dated 23.08.2018 u/s 143/147 at Pg.1 Pr.1, stating that “the return was filed after time limit prescribed u/s 139(4) of the Act and was invalid return.” This fact has been repeated and it has been so held even by the CIT(A). (kindly refer Pg.16 Para 6.7). Although the ROI was filed beyond the prescribed time limit for AY 2013-14 and AY 2015-16. The legal implications flowing from holding of a return invalid is that there is no return at all in the eyes of law because such ROI is non-est. No one can take cognizance or act upon such invalid ROI. The law presupposes the existence of a valid return, which contained concealment/inaccurate particulars. In present case, however, as admitted, no valid return at all was there in existence. It is in this background only, the AO issued notice u/s 148 on 26.03.2018, pursuant to which, the Assessee filed ROI on 09.06.2018 at total income of Rs. 1,49,150/, wherein, neither such deduction was claimed nor loss from house property was claimed, as noted by the AO at pg. 3 para 4 of the impugned penalty order. This was the only ROI acted upon by the AO for making the assessment. Having held the ROI filed earlier as non-est, he could not fall back on an invalid ROI. It is not legally possible that for making assessment the ROI filed u/s 148 is considered whereas the imposition of penalty, the ROI filed earlier u/s 139(4) even though an invalid return, is considered, which is an inherent contradiction in the approach of the AO.

10.2 Supporting Case Laws:

10.2.1 In the case of Navbharat Enterprises Pvt. Ltd vs ACIT (2009) 118 ITD 8 (Hyd) (DC 29-35), it was held as under:

“12. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the assessee filed return on 1-10-2004 showing a loss of Rs. 1,01,79,983, which comprises of business loss of Rs. 16,16,157 and depreciation loss of Rs. 85,63,826. While making the assessment, it was observed by the Assessing Officer that the loss claimed in the return of income relates to depreciation and miscellaneous expenditure. In the absence of any business done, as admitted by the assessee, the expenditure claimed cannot be allowed and depreciation is also not admissible and hence not allowed to be carried forward and accordingly completed the assessment at ‘nil’ income ignoring the loss returned by the assessee. We further find that the Assessing Officer without initiating any penalty proceedings during the course of assessment proceedings-initiated penalty proceedings u/s 271(1) (c) of the Act. At this stage, the ld. Departmental Representative submits that treating the return as non-est tantamounts to recording of satisfaction and initiation of penalty proceedings u/s 271(1) (c). However, we find that the literal meaning of non-est is ‘it is notç absent, wanting.’ Since the Assessing Officer has treated the returns filed by the assessee as belated i.e., beyond the time allowed u/s 139(4) of the Act, therefore, the same are no returns in the eye of law and, therefore, no penalty can be levied on the assessee u/s 271(1) (c) of the Act. This view finds support from the decision of the Tribunal in ITO v. Bombaywala Readymade Stores [2004] 91 ITD 225 (Ahd.) (TM) wherein Honourable President, ITAT while relying on the decisions in Thoppil Kutti Eroor v. CIT [1958] 34 ITR 850 (Ker.), S. Narayanappa & Bros. v. CIT [1961] 41 ITR 125 (Mys.) and S. Santhosa Nadar v. First Addl. ITO [1962] 46 ITR 411 (Mad.) held as a Third Member, at page 13 as under:

“I have carefully considered the submissions of both the parties. It is clear from the above quoted case law that the matter in issue is not res integra but is covered by three decisions of the High Courts. No decision taking a contrary view was cited on behalf of the revenue. In the light of the above discussion I hold that no penalty can be levied on the assessee u/s 271(1) (c) where no return of income is submitted. I concur with the view taken by the learned Judicial Member.”

10.2.2 There are various other provisions under the Act where non filing of a return within the permissible time limit render the return invalid/non-est resulting in different legal consequences.

10.2.3 Kindly refer the case of ACIT vs. VN Devadoss (2013) 32 Taxmann.com 133 and Mehthan Ispat Ltd vs. DCIT (2015) 55 Taxmann.com 444 (Kolkata Trib.)

11. No difference between the returned and assessed income hence no penalty leviable:

11.1 Only the last ROI acted upon can be a basis for penalty:

Needless to say that in the cases of penalty of concealment/furnishing inaccurate particular, the very starting point is the last return of income filed by the assessee which has been acted upon by the assessing officer and it is the income so returned and the income finally assessed by the AO, which invites imposition of penalty. In a case where however, there is no such difference, there cannot be any question of imposition of penalty. The AO has not only accepted the figures mentioned in the (revised) return of income u/s 148 but also assessed the same. It is not disputed that the entire amount of the tax becoming payable on such a revision was duly deposited by way of the Self-assessment tax and TDS and was duly accepted by the AO as well. Admittedly, there is no upward variation made by the AO in the declared income.

11.2 The subsequent validly filed ROI substitutes the earlier one:

It is well settled that if ROI has been filed u/s 139 within the permissible time limit, it can be revised u/s 139(5) and once so revised, the revised ROI substitutes the original one. It is only the revised ROI, which is a valid legal document for all intent and practical purposes and the AO having accepted such revised ROI, cannot look back/fall back on the initially filed ROI u/s 139(1). Similar is the legal position with reference to the ROI filed u/s 148, which substitutes the ROI, filed if any, prior thereto in as much as the ROI filed u/s 148 not only consisted of the originally returned income but also the additional income, if any. Thus, here also, the ROI filed u/s 148 is the last legal document, wherein the assessee has committed himself to a particular amount of income and the facts narrated therein. In the peculiar facts of the present case where the initially filed ROI u/s 139(4) was held invalid and thus, was a non-existing document, it was only a ROI filed u/s 148, which alone could be considered for the purposes of penalty u/s 271(1)(c). The AO, therefore seriously erred in ignoring the ROI filed u/s 148, making no claim of deductions (except the correct one u/s 80C) and showing no loss from house property for the purpose of penalty u/s 271(1)(c).

11.3 Supporting case laws:

11.3.1 A useful reference on this aspect can be made to the decision in ACIT vs. Shri A.N. Annamalaisamy, 87 DTR 202 (Chnn. Trib) (DC 36-37) also supports the contention. The relevant part in para 7 is reproduced as under:

“7. We find that the Assessing Officer was carried away by the original return filed by the assessee, wherein originally the income admitted in the course of search was not returned by it. But the fact is that the assessee had filed a revised return before completing the assessment. When that is the case, the first return filed by the assessee is a non est. The only valid return is the revised return filed by the assessee. In that return, the amount admitted by the assessee at the time of search was offered for taxation. The assessee has paid the tax; he has paid the interest. He has not preferred any quantum appeal. He has also explained about the business and stated that the jewellery was acquired over a period of time. When all the pieces are put together, we find that the Commissioner of Income-tax(Appeals) is justified in holding that there is no ground to levy penalty in the present case under sec.271AAA. Accordingly, the order passed by the Commissioner of Income-tax (Appeals) is upheld.”

11.3.2 In Pr. CIT vs. Neeraj Jindal 2017 393 ITR 0001 (Delhi) (DC 38-49), it was held that:

“Thus, it is clear that when the A.O. has 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 u/s 271(1)(c) of the Act, the return that has to be looked at is the one filed u/s 153A. In fact, the second proviso to Section 153A(1) 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 u/s 132 or making of requisition u/s 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 A.O. accepts the revised return filed u/s 153A, the original return u/s 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 u/s 271(1)(c), what has to be seen is whether there is any concealment in the return filed by the assessee u/s 153A, and not vis-a vis the original return u/s 139”

11.3.4 Prem Arora vs. DCIT (2012) 78 DTR 91 (Delhi) (Trib) wherein, it was held as under:

“Section 271(1)(c), read with section 153A, of the Income-tax Act, 1961 – Penalty – For concealment of income – Assessment year 2004-05 – Whether for purpose of imposition of penalty u/s 271(1)(c) resulting as a result of search assessments made u/s 153A, original return of income filed u/s 139 cannot be considered – Held, yes – Whether concealment of income has to be seen with reference to additional income brought to tax over and above income returned by assessee in response to notice issued u/s 153A and, therefore, once returned income u/s 153A is accepted by Assessing Officer, it can neither be a case of concealment of income nor furnishing of inaccurate particulars of such income – Held, yes – Search was conducted on 22-11-2006 and cash was found from possession of assessee – Assessee had drawn cash flow statement for entire period of six years in order to determine undisclosed income based on seized material for each of six assessment years – Whether penalty u/s 271(1)(c) cannot be imposed by invoking Explanation 5 in assessment year 2004-05 in respect of cash found in previous year relevant to assessment year 2007-08, merely on presumption that assessee might have been in possession of cash throughout period covered by search assessments – Held, yes [In favour of assessee]

12. Cases cited by revenue are not applicable, being based on peculiar facts in those cases.

The facts and circumstances in all the other years are identical with AY 2012-13 except some minor changes and hence, our written submissions made in AY 2012-13 are strongly relied upon for other years (except as indicated).

In view of the above submissions, the impugned penalty may kindly be deleted in full.”

8. Further, ld. AR of the assessee, he has relied upon the following written submission on 11.07.2024 as under:-

1.1 At the outset, for better appreciation of facts, we have to first understand the factual background. For this, we may first discuss the facts of the case of wife of the assessee – Smt. Himani Sharma. The case of the wife is similar to that of the assessee in as much as since the ROI were been filed by the same deputed person, erroneous claim of deductions under Chapter VI A of the Act had been claimed in her case also. Pertinently, the DCIT – Mr. Arvind Bansal are also the same. Moreover, in her case also, notice u/s 133(6) was issued w.r.t deduction claimed u/s 80E of the Act. Thereafter, notice u/s 148 was issued, wherein the assessee filed her revised return and duly paid all the taxes. Even then penalty u/s 271(1)(c) was initiated. Importantly, thereafter, in her case the dept. went on to lodge prosecution complaint u/s 276C(1)/276C(2)/ 276CC and 277 of the Act. The said prosecution order consists of some very pertinent and crucial facts. Kindly refer ld. Chief Judicial Magistrate’s order dated 21.08.2023 in the case of DCIT 1-, Bhatinda vs. Himani Sharma (CPB dated 03.07.2024 – Pg. 20- 43), wherein the ld. Chief Judicial Magistrate has recorded the following facts :

a. That notice u/s 133(6) dated 07.07.2017 (CPB- Pg. 17) seeking information w.r.t deduction u/s 80E was sought (however, no mention of deduction u/s 80C, 80D,80DD, 80DDB, 80GG) was issued to Smt. Himani Sharma. The said information was sought by the said AO on his personal email id i.e [email protected] instead of using his official id.

b. That the said ITO – Shri M.P. Singh used to call Smt. Himani Sharma at least 10 times per day, apart from letters, showing lapses and discrepancies on the part of the said ITO.

c. Thereafter, notice u/s 133(6) on dated 31.01.2018 was issued calling for information w.r.t. deductions claimed u/s 80C, 80D, 80DD, 80DDB, 80GG of the Act.

[Note 1: When the 1st notice u/s 133(6) was issued, the said ITO had no idea that Smt. Himani Sharma had claimed erroneous deductions under various provision of Chapter VI A. However, after issuance of the said notice u/s 133(6) dated July 2017, the ITO contacts her over call, wherein she explained the entire situation. The ITO, taking advantage of the said fault, and with depictive intent showing her that he is actually helping her, issued another notice u/s 133(6) dated Jan 2018, wherein he enquired w.r.t all the deductions claimed, and not just deduction u/s 80E.

Note 2 : The ITO having issued 1st notice u/s 133(6) dated 2017 w.r.t 80E could not have on gained the information on his own that Smt. Himani Sharma had wrongly claimed the deduction u/s 80C, 80D,80DD, 80DDB, 80GG also. The ITO gained such knowledge since she herself voluntarily and straightforwardly intimated the ITO about the same.]

d. Refer Para 23 : The ld. Judge has specifically noted the fact that “a careful analysis of the allegations levelled by complainant, when seen and compared in the light of rules applicable under Income Tax Act, 1961, then the facts are found to be otherwise. The cross- examination of CW-1 Sh. Arvind Bansal, Deputy Commissioner, Circle I, Bathinda, has dented the entire case as set up by assessing officer with his admissions supporting the defence pleas raised before this court.”

e. Refer Para 25 : The complaint stated that notice u/s 148 dated 14.03.2018 was issued upon that to the assessee. However, during the cross examination of DCIT-I, Bhatinda admitted that notice u/s 148 itself was not in the file and further the fact w.r.t the service of notice u/s 148 is incorrect, in as much as no such notice u/s 148 was either sent either by speed post or by email (and postal receipt of some other notice was attached with the prosecution complaint – Refer Para 27). Importantly, the said DCIT – I is the same officer who had passed the impugned penalty order u/s 271(1)(c) in the case of the present assessee.

f. Refer Para 26 : Notice u/s 148 was issued for A.Y. 2014-15 by the said ITO. The Ld. Court has specifically noted that the said notice u/s 148 was barred by limitation as per S. 149 and further, there was no satisfaction of the competent authority u/s 151.

g. Refer Para 11 : The said judgment notes that “Accused has taken the plea that as in consequent of filing of returns due to her lack of knowledge and ignorance. She was subjected to ab-latent extortion attempt by her assessing officer ITO Bathinda and when she did not comply to extortion demand and aired her grievances on the IT Web portal, a malicious vandata was launched against her by ITO Mr. M.P. Singh and DCIT Mr. Arvind Bansal depicting the nexus existing at Bathinda IT office and instead of initiating disciplinary action against M.P. Singh, ITO Bathinda a hurried steps were taken for launching prosecution against her.”

h. Refer Para 29 : The ld. CJM has categorically observed that “It has become amply clear that entire procedure adopted by assessing officer/ITO Bathinda was not as per the rules provided under Income Tax Act rather it is found that the procedure was hijacked to prejudice the accused Himani Sharma in a double zeopardy manner by crossing/jumping over all the mandatory bars as provided under the above discussed sections of Income Tax Act, 1961.”

1.2 Further, the instant assessee also went on to file a complaint on dated 24.03.2023 before the Additional Director General – Vigilance (North Zone), Delhi against the said ITO – Bathinda and other officials of Income Tax Office, Bathinda w.r.t their extortion activities and malicious vendetta (Refer CPB – Pg 19). The same is reproduced hereinbelow for ready reference :

“1. Please refer DGIT (Vig)/FCR-B/Gr.B/11/19/449 dated 15 April 2019 vide which an initial complaint was filed against Mr. Mohinder Pal Singh, ITO Ward-1(2), Bathinda.

2. My wife Himani Goyal Sharma was subjected to a malicious Extortion Attempt and Vendetta by ITO Mr. Mohinder Pal Singhof Bathinda IT Office consequent to errors in claims of deductions made by her.

3. The earlier complaint did not have adequate supporting documents. The complete facts of the case including a brief summary, Modus Operandi being followed by Mr. MP Singh for Extortion Activities, Chronological Sequences of Events as they manifested upon Himani and Supporting Enclosures are now submitted along-with (Pages Numbered 1-20 and Enclosures Numbered 1 to 34) in a comprehensive manner. These facts throw new light upon the case and clearly bring out the Extortion Attempt and subsequent Vendetta inflicted upon Himani.

4. It is requested that the actions and conduct of Mr. MP Singh and other conniving officials of Bathinda IT Office may please be investigated and suitable measures be instituted so that no honest tax payer undergoes the same harassment as Himani.

5. It is also requested that if the incorrect practices are established upon enquiry, then the vindictive and unjust prosecution proceedings against Himani may please to be dropped.”

2. The above facts show how the wife of the assessee was subjected to ab- latent extortion and malicious vendetta by the concerned ITO Bathinda and DCIT Mr. Arvind Bansal and also how the entire procedure adopted was not as per the rules provided under Income Tax Act rather it is found that the procedure was hijacked to prejudice Smt. Himani Sharma in a double jeopardy manner by crossing/jumping over all the mandatory bars as provided under the Act.

3.1 Consider the above facts, and keeping in mind that (1) the Assessing Officer – ITO Bathinda and his superior DCIT – Mr. Arvind Bansal were the same (2) The wife of assessee had already disclosed the said ITO in response to notice u/s 133(6) dated July 2017 w.r.t the erroneous deduction u/c VI A of the Act (3) the ITO was regularly contacting the wife of the assessee – in the starting of the proceedings with depictive intent showing her that he is actually helping her.

3.2 The ITO Bathinda – Mr. M.P. Singh already knew the fact that the present assessee had also wrongly claim of deduction (just like in his wife’s case). Thus, with a malicious vendetta and depictive intent to extort money later, he ill-advised the assessee.

3.3 Now, kindly refer the date chart below :

S.No.	Date	Events	Facts	Remark
1.	31.01.2018	Notice u/s 133(6) in the case of Smt. Himani Sharma	–	–
2.	12.03.2018	Notice u/s 133(6) (PB 2)	This notice was issued for A.Y. 2016-17 only wherein information was sought regarding deduction claimed u/s 80U only.	Notice u/s 133(6) only w.r.t A.Y.2016-17 (& not other years)
3.	18.03.2018	Reply to Notice u/s 133(6) (PB 3)	In reply, the assessee informed the AO that deductions (except u/s 80CCE & 80G), have been claimed erroneously. He also requested for guidance w.r.t the refunded, with a voluntary affirmation to promptly refund the said amount.	Thus, the assessee himself voluntarily disclosed that erroneous claim of deductions have been made in the ROI, in as much as a general enquiry was carried out w.r.t deduction u/s 80U only. At the very moment, there was no requirement upon the assessee to point out the erroneous claim of deductions made w.r.t the other sections.This clearly shows the assessee honesty and intent to voluntary disclosure.

4. Judgment of Hon’ble Supreme Court in the case of Mak Data P. Ltd. Vs. CIT not applicable / Distinguishable :

4.1 Facts Distinguished :

(i) Firstly, In Mak Data case, the AO had issued a Show Cause Notice seeking specific information and in reply to said SCN, the assessee filed made an offer to surrender the concerned amount. Thus, in that case, assessment proceedings were initiated and further notices u/s 143(2) and 142(1) were also issued and thereafter, the said SCN was issued.

However, in the present case, the assessee even during the issuance of enquiry notice u/s 133(6), i.e much before issuance of notice u/s 148, voluntary and straightforwardly disclosed that few deductions have wrongly been claimed u/s 80C, 80D,80DD, 80DDB, 80GG, even when the said notice u/s 133(6) was solely issued seeking information regarding deduction claimed u/s 80U only.

(ii) Secondly, in Mak Data case, neither during the survey proceedings and nor the filling of return of income, surrender was made. The subjected surrender was made much later, while replying to a SCN.

However, in the present case, as already stated above, the assessee voluntarily disclosed the entire issue and deduction amount to the AO during the pre-assessment enquiry proceedings itself. Further, the assessee thereafter, while filing the ROI in response to notice u/s 148, filed the correct return, thereby not claiming the subjected deductions which were earlier claimed erroneously by the deputed person.

4.2. Explanation 1 to Section 271(1)(c) – not applicable:

4.1.1 The said explanation states that where a person fails to offer an explanation or offers an explanation which is found to be false then it shall be deemed that particulars have been concealed.

4.1.2 However, in the present case, the issue of failure on the part of the assessee does not even arise in as much as (kindly refer the table above) the assessee has with all truthfulness and simplicity, straightforwardly and voluntarily admitted that some deductions had been wrongly claimed, even before the notice could be issued. In this regard, notice u/s 133(6) (PB-3) was issued seeking information regarding deduction claimed u/s 80U only (however, no mention of deduction u/s 80C, 80D,80DD, 80DDB, 80GG). Still the assessee voluntarily choose to disclose the fact of erroneous claim of deduction u/s 80C, 80D,80DD, 80DDB, 80GG. Hence, the assessee cannot be said to have failed to offer explanation when no notice in that regard had been issued.

5. Supporting Case Laws – Distinguishing the judgment of Mak Data P. Ltd. vs CIT :

5.1 Covered Issue : Recent judgment of PCIT vs Ambady Krishna Menon[2024] 163 taxmann.com 141 (Kerala), wherein the relevant fact are that the assessee filed a return on 30.07.2011 for A.Y. 2011-12, which was processed under Section 143(1) on 28.12.2012. Later, the Dept. suspected suppression of capital gains and issued a summons under Section 131 on 19.05.2014, to which the assessee responded by 13.06.2014, admitting his mistake in the computation of capital gains and thereupon agreed to the differential tax. Upon admission of the assessee, notice u/s 148 was issued on 03.07.2014 for reassessment, and the assessee filed a fresh return, paying the differential tax and interest. The Hon’ble Division Bench, considering the above facts, held as under :

“8. On a consideration of the facts and circumstances of the case and the submissions made across the bar, we find that it is not in dispute that in the original return filed by the respondent/assessee, only a lesser figure was returned both in respect of the total income as also capital gains earned by the respondent/assessee. It is also not in dispute that but for the investigation initiated by the Revenue, the differential income might have escaped assessment to tax. What is significant however is that it was during the course of the investigation initiated by the Revenue, but well before any conclusion could be arrived at by the Revenue as regards suppression/concealment of income, that the assessee in the instant case came forward and admitted before the Revenue authorities that he was convinced of the mistake occasioned at the time of filing the original return, and that he was ready and willing to pay the differential amount of tax computed by him based on a revised computation of the capital gains earned by him. We further find from the records that the differential tax, together with interest thereon, was subsequently paid by the respondent/assessee when he was afforded an opportunity of doing so by filing the necessary returns pursuant to the notice issued to him under Section 148 of the I.T. Act. In our view, on the peculiar facts of this case, the notice issued under Section 148 of the I.T. Act has to be seen as one that literally enabled the respondent/assessee to pay the differential tax along with interest thereon by filing a fresh return that was recognised under the I.T. Act. We have to remind ourselves that, but for the notice under Section 148 of the I.T. Act, the assesseee in the instant case could not have paid the differential tax that was admitted by him as payable, because the time limit for filing returns in terms of Section 139 of the I.T. Act had already expired. At any rate, the subsequent payment of tax, based on the disclosure that was made prior to the notice under Section148 of the I.T. Act, led to the finalisation of the assessment for the assessment year concerned [2011-12], and in the finalised assessment, there was no addition to the income of the respondent/assessee over and in addition to what was already disclosed and admitted by him before the Revenue authorities.

9…………… It will be seen from a perusal of Section 271 of the I.T. Act that it is a specific provision providing for imposition of penalties, and is a complete code in itself, regulating the procedure for the imposition of penalties prescribed. The proceedings are therefore to be conducted in accordance therewith, subject always to the rules of natural justice. The provisions for the assessment and levy of tax will not apply as such for the imposition of penalty, and when there is a specific provision, it is trite that it alone will govern the imposition of penalties. In terms of Section 271(1)(c) of the I.T. Act, the penal provision is attracted only when the conditions therein are fulfilled namely, when there is a concealment of the particulars of an assessee’s income or when the assessee has furnished inaccurate particulars of such income. The crucial question that arises for consideration before us is whether on the facts of the instant case those pre-conditions existed for initiating proceedings under Section 271 of the I.T. Act. Further, the provisions of Section 271(1) of the I.T. Act mandate that the existence of the conditions precedent for imposition of penalty under Section 271(1)(c) of the I.T. Act must have been noticed by the Assessing Authority in the course of some proceedings under the I.T. Act. In other words, the satisfaction of the Assessing Authority with regard to the existence of either of the conditions warranting the invocation of the provisions of Section 271(1)(c) had to be in the course of proceedings initiated by the Assessing Authority under the I.T. Act. In our view, the reference to proceedings under Section 271 of the I.T. Act, on the facts of the instant case, can only be a reference to the proceedings initiated against the assessee in terms of Section 148 of the I.T. Act. This is because the call for details and information under Section 131 of the I.T. Act cannot be seen as initiation of any proceedings under the I.T. Act but is merely a manifestation of the exercise of a power similar to that conferred to civil courts, by the Officers of the I.T. Department. If that be the case, then what we have to examine in the instant case is whether at the time of issuance of notice under Section 148, the Assessing Authority can say that he was satisfied that the assessee had concealed the particulars of his income or furnished inaccurate particulars of such income. In our view, in the light of the disclosure made by the assessee, of the income that he had omitted to include in his original return, well before the date on which the notice under Section 148 of the I.T. Act was issued to him by the Assessing Authority, the Assessing Authority was effectively estopped from contending that he was satisfied at that point in time, of the assessee having concealed the particulars of his income or furnished inaccurate particulars of such income. Section 271(1)(c) no doubt authorises the imposition of a penalty irrespective of whether the assessee had any mens rea to occasion the default specified therein. The liability in that sense is a strict one as was the case under Section 11AC of the Central Excise Act, the scope of which was considered by the Supreme Court in Union of India v. Dharmendra Textiles Processors – [(2008) 306 ITR 277]. It is therefore all the more necessary to strictly construe the provisions of Section 271(1)(c) to ensure that only the clear and unambiguous cases of defaults specified therein would attract a penalty. On the facts of this case, we fail to see how an assessee who disclosed his liability to tax, well before the Assessing Authority himself could determine it, can be seen as having concealed or incorrectly stated the facts leading to his liability. To invoke the penal provisions of the Act against an assessee in such a situation would throw to the winds the elements of fairness in tax administration and discourage asssessees from disclosing defects in their tax returns before their Assessing Authorities. This is more so when, as in the present case, the assessee had also paid the interest on the differential tax to cover the period of delay in payment thereof. The payment of statutory interest having compensated the exchequer adequately, to further penalise the assessee would tantamount to an act of overkill and would be antithetical to the rule of law. We are of the firm view that the honesty of an assessee cannot attract the penal provisions under the I.T. Act and that, in the instant case, the essential pre-conditions for the invocation of the provisions of Section 271(1) (c) of the I.T. Act against the assessee were not established.”

5.2 Hindustan Coca-Cola Marketing Company (P.) Ltd. v. DCIT [2014] 49 taxmann.com 61 (Delhi – Trib.) :

Facts : During the quantum assessment proceedings, the Assessing Officer observed that an amount of Rs.11,55,634/- on account of conveyance was not included in the value of fringe benefit. Accordingly, the Assessing Officer disallowed 20% of these expenses which was added to the total value of fringe benefit. On being informed by the Assessing Officer, the assessee agreed that this was a mistake in calculating the value of FBT. During the penalty proceedings, the Assessing Officer also took cognizance of the fact that the assessee had not filed any appeal against the disallowance made by the Assessing Officer. Subsequently, the Assessing Officer initiated penalty proceedings and after providing due opportunity of hearing, the Assessing Officer held that the assessee has filed inaccurate particulars of its income, therefore, the Assessing Officer levied penalty u/s 271(1)(d) of the Act.

Held : “16. In the case in hand, the Assessing Officer pointed out mistake of the assessee that the value of the amount of expenses on account of conveyance has not been considered in the value of FBT. As per penalty order the assessee offered this amount suo moto or voluntarily and did not agitate the issue further in appeal. The explanation before Assessing Officer during penalty proceedings was twofold, first, the mistake committed by the assessee at the time of preparation of return of income was just an error of omission which was identified by the assessee at the time of preparation of details for the assessment and secondly, it was just a casual mistake committed due to omission as the tax impact of the addition on account of conveyance expenses is only Rs.77,800 (including interest) which is quite insignificant in view of size of the assessee company and the amount of FBT paid by the assessee.

X X X X

19. In the instant case, there is no finding from the authorities below that it was not a mistake of omission and on the other hand, the mistake of omission was identified by the Assessing Officer and the assessee accepted the same without any dispute. In this situation, we are unable to accept the contention of the Commissioner of Income Tax(A) that the assessee made a wrong claim which was detected and disallowed by the Assessing Officer. Accordingly, we hold that the explanation offered by the assessee during penalty proceedings was acceptable which was wrongly rejected by the AO and the Commissioner of Income Tax(A) and penalty was not imposable on the assessee in this regard and we cancel the penalty orders. Thus, ground nos. 1, 2 and 3 of the assessee are allowed.”

5.3 CIT vs. Chennupati Tyre & Rubber Products (2014) 90 CCH 0181 APHC, wherein it was held as under :

“The principle that runs cutting across any systems of law is that before person is visited with punishment or penalty, the wrongful act on his part must be established. If not a deliberate intention, at least, intention, as such, must be proved to be existing. The intention of this nature may not be equated to the concept of mens rea. At the same time, the minimum contrast with an instance of mere omission, or failure must be made. Otherwise, every inadvertent omission, or a bona fide understanding of a particular provision, which is not accepted by the Income Tax Officer may expose the assessee to penalty. If that time is pursued, Act may turn out to be the one of the collection of penalties than the income tax.

Recently, in I.T.T.A.No.180 of 2003, we observed as under: The levy of penalty cannot be resorted to as a matter of course. By their very nature, the returns are bound to be at variance from what is contemplated under the Act or the estimates of the Assessing Officers. Many a time, the understanding of a given provision in a particular way, itself would lead to a considerable difference as to the income or the corresponding tax. The very fact that quite large number of remedies in the form of appeals at various stages is provided for, discloses that even the understanding of the assessing or adjudicatory authorities; not absolute. The levy of penalty is not going to leave the matter at that. It would expose the assessee to prosecution also by treating him as an economic offender. An assessee can be made to suffer such far reaching consequences, if only facts of the case support, and it emerges that the assessee had a clear intention to suppress the income.

Learned counsel for the appellant placed reliance upon the judgment of the Supreme Court in Mak Data P. Ltd. v. Commissioner of Income Tax, 358 ITR 593. Their Lordships held that once an item of income was found to have been concealed, the mere fact that the assessee has voluntarily disclosed it thereafter, does not absolve him from being proceeded under Section 271(1)(c) of the Act. We respectfully follow that. However, it is important to understand the purport of very word concealment. That can occur, only when the person is in full knowledge of the state of affairs and even while being under obligation to make it known to others, and in particular the authorities under the Act fails or refuses to do so. It is then, and only then, that he can be said to have concealed and once the factum of concealment is proved, his attempt to voluntarily disclose it does not save him. In the instant case, we do not find any ingredients of concealment.

4. CIT vs. GEM GRANITES (2013) 86 CCH 0160 Chen HC, wherein it was held 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 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.”

9. The ld. AR of the assessee in addition to the written submission vehemently argued that there is no difference in the return of income filed in response to notice u/s. 148 of the Act and thereafter the assessed income. It is not legally possible that for making assessment the ROI filed u/s 148 is not considered and is to be considered for imposition of penalty, whereas the ROI filed earlier u/s 139 cannot. To support this view he relied upon the various decision cited in the written submission.

10. The ld DR is heard who relied on the findings of the lower authorities and more particularly advanced the similar contentions as stated in the order of the ld. CIT(A). The ld. DR further argued that ld. AO has mentioned the reasons that the assessee has not disclosed the correct income in the return of income filed and it is clear from the finding of the ld. AO and that of the ld. CIT(A) that the assessee has concealed the particulars of income and therefore the penalty be sustained. The ld. DR vehemently submitted that it is not a case of bonafide mistake or error on the part of the assessee. It is a case of known facts to the assessee that there is an incorrect offering of the income by the assessee. The assessee only after issuance of the notice u/s. 148 filed by the ITR and paid the tax. The ld. DR in support of the contention relied upon the decision of the apex court in the case of Mak Data P. Ltd. Vs. CIT [ 38 taxmann.com 448 (SC) ].

11. We have heard the rival contentions and perused the material placed on record. Brief facts of the case are that the assessee filed its Return of Income for the A.Y. 2012-13 on 18.07.2014 declaring total income of Rs. 13,87,801/- before claiming deductions under sections 80C, 80CCF, 80D, 80DD and 80G to the tune of Rs. 1,00,000/-, 20,000, Rs 15,000/-, Rs 1,00,000/- and Rs. 24,000/- respectively and further claiming loss under the head ” Income from House Property” at Rs 70,000/- thereby declaring net taxable income of Rs. 10,58,800/- and refund of Rs 54,810/- was claimed. The return was filed after the time limit prescribed u/s 139(4) of the Act and which was invalid return. Thereafter, on an information in possession of the Revenue in respect of erroneous and illegitimate deductions account of deductions under Chapter VIA of the Act, it was considered after due application of mind that income to the tune of Rs. 13,87,801/- had escaped assessment on account of non filing of return and on account of such erroneous and illegitimate deduction. Based on that fact notice u/s. 148 of the Act was issued to the assessee on 26.03.2018. In response to the said notice the assessee filed return of income on 09.06.2018 declaring total income at Rs. 14,09,150/. The assessment u/s. 143(3)/148 of the Act was completed on 23.08.2018 at total income of Rs. 14,09,150/-. Thus, the returned income and assessee income becomes at the same figure. But the penalty proceedings u/s. 271(1)(c) was initiated separately by issue of show cause notice u/s. 271(1)(c) dated 23.08.2018 was issued and served upon the assessee. Thereafter, the A.O passed an order levying the penalty u/s.271(1)(c) of the I.T. Act vide order dated 12.12.2018 levying a penalty of Rs. 2,16,520/- for concealing and furnishing inaccurate particulars of income @ 200 %. In the first appeal the ld. CIT(A) has confirmed the action of the ld. AO in levying the penalty but the reduced it from 200 % to 100 %. The assessee has challenged that order of the ld. CIT(A) confirming the penalty @ 100 % of tax sought to be evaded. The assessee contended that the return of income in response to the notice u/s. 148 filed by the assessee and finally assessed income in the case of the assessee has same income of Rs. 14,09,150/-. Thus, since there is no difference in the returned income and assessed income there cannot be any levy of further penalty as the assessee has already paid the tax along with the interest. As it is clear from the order of the assessment that there is no difference in the assessed income and returned income. Since, there is no concealment of income or providing any inaccurate particulars of income in the case of assessee finally assessed there cannot be levy of penalty u/s. 271(1)(c) of the Act. We get strength to support our view from the decision of Jurisdictional Hon’ble Rajasthan High Court in the case of CIT Vs. Pushpendra Surana [ 49 taxmann.com 12 (Rajasthan) ], wherein the court held that;

6. In our considered view the CIT (A) and so also the Tribunal both have considered the matter, in detail and finally arrived at a conclusion that the income declared by the assessee from the long-term capital gain by selling agricultural land disclosed by the assessee in his revised return of income was accepted by the assessing authority and there was no material available on record by which there could be an inference drawn by the authority that it was a deliberate concealment on the part of the assessee and it could not be considered that there was an inaccurate particular of income that was made the basis for inflicting penalty upon the assessee in exercise of powers conferred under s. 271(1)(c) of the Act.

7. We do not find any substance in the submissions made by counsel for appellant and apart from that even if there appears some substance, this Court has a limited scope in the instant appeal under s. 260A of the Act, to examine it a substantial question of law arises for consideration.

8. Taking note of the submissions and the order passed by the CIT(A) and the Tribunal, in our considered view, no substantial question of law arises in the instant appeal which may require consideration.

Consequently, the appeal is wholly devoid of merits and accordingly dismissed.

12. The ld. DR relied upon the decision of the ld. AO and that of the ld. CIT(A) and also supported that considering the decision of the apex court in the case of the Mak Data P. Ltd. Vs. CIT (Supra) the penalty levied is required to be sustained. The bench noted that the in the case of Mak Data case, the AO had issued a show cause notice seeking specific information and in reply to SCN the assessee filed and made offer to surrender the income whereas in the case of the assessee is squarely covered by the decision of the jurisdictional high court in the case of Pushpendra Surana(Supra). Thus, the bench noted that it was not in dispute that the assessee has offered the income by filling the correct returned of income upon issue of notice and the assessment is completed on that returned income filed by the assessee without any change. Thus, the assessee though surrendered the income at the time of re-assessment notice by filling the return of income and has paid the tax due thereon along with the interest, thus, the said disclosure hold valid without any adjustment and made good faith voluntarily. We support this view from the decision of the Hon’ble High Court of Gujarat in the case of Cheldas Khushalas Patel and Ors. Commissioner of Income Tax on 31 January, 1992, 1992 196 ITR 200 Guj wherein the Hon’ble High Court held as under:-

“7. The Commissioner, in the case of the firm, refused to waive penalty and interest for the assessment years 1976-77 and 1977-78 only on the ground that the returns filed beyond the prescribed period could not be considered to be returns in the eye of law. As pointed out above, since the returns for the said two assessment years were filed beyond the period prescribed for making assessment, the Income-tax Officer issued notice under section 148 of the Act and at the request of the petitioners treated the returns which were earlier filed as returns filed in response to the notice under section 148. It is urged on behalf of the Revenue that disclosure of income voluntarily and in good faith, as envisaged under sub-clauses (a) and (c) of sub-section (1), could be made only by filing a valid return and, if disclosure was not made by a valid return, such disclosure could not be considered, even if it was made voluntarily and in good faith

8. We are not inclined to accept the submission made on behalf of the Revenue. There is nothing in the above provision to support the Revenue’s argument that disclosure could be made only by a valid return. What the provision envisages is a disclosure and not a disclosure by a valid return. It is significant that the provision does not require the filing of a return of income for disclosure of income. Disclosure need not necessarily be made by filing returns of income. It could be made either by an application or a letter or a return which might be beyond the period prescribed for making assessments. A return filed after the expiry of the period of limitation for making assessment would, in our opinion, amount to disclosure of income within the meaning of sub-clauses (a) and (c) of sub-section (1) of section 273A. It cannot be gainsaid that the return of income discloses the total income of the assessee filing the return. Therefore, merely because the return of income is filed beyond the period prescribed for making assessment, it would not mean that it does not disclose income. As pointed out above, a return of income does disclose the total income of the assessee and such return would not cease to be disclosure of his total income, merely because it is filed beyond the period prescribed for making assessment. In other words, it is not necessary that there should be a valid return filed before the expiry of the period prescribed for making assessment for making disclosure as envisaged under sub-clauses (a) and (c) of sub-section (1) of section 273A. Sub-clause (b) of sub-section (1) also speaks about full and true disclosure of particulars of income. So far as a case covered by clause (ii) of sub-section (1) is concerned, such full and true disclosure has to be made prior to the detection by the Income-tax Officer of concealment of particulars of income or of the inaccuracy of particulars furnished in respect of such income. Such disclosure could also be by a revised return or an application or a letter addressed to the taxing authority. Disclosure contemplated by sub-clauses (a), (b) and (c) cannot have different meanings. In other words, it has the same meaning and such disclosure could be made by a return within or beyond the prescribed time for making assessment or by a letter or an application to the taxing authority.”

Respectfully following the finding of the binding decision of Jurisdictional high court in the case of Pushpendra Surana and decision of Hon’ble Gujarat High Court wherein the similar view is taken that if the assessee filed correct income at the time of the re-assessment proceeding and such disclosure accepted by the revenue without any change, then in that case it does not hold liable the assessee for any penalty u/s. 271(1)(c) of the Act.

In terms of these observations, the appeal of the assessee in ITA no. 543/JP/2024 is allowed.

13. The facts of the case in ITA Nos. 544 to 547/JP/2024 are similar on set of facts and grounds so raised by the assessee in ITA No. 543/JP/2024. As we have heard both the parties and persuaded the materials available on record and decided the case of the assessee in 543/JP/2024 dealing with facts of the case, arguments of the parties and have rendered our decision in 543/JP/2024 herein above. Thus, bench feels that it is not imperative to repeat the facts and various grounds raised by both the parties for other appeals having similar issue and grounds and therefore, we feels that the decision taken by us in ITA No. 543/JP/2024 for the Assessment Year 2012-13 shall apply mutatis mutandis in the case of Shri Ajoy Sharma in ITA Nos. 544 to 547/JP/2024 for the Assessment Year 2013-14 to 2016-17.

In terms of these observations, all the appeals of assessee are allowed.

Order pronounced in the open court on 22/07/2024.