prpri No Penalty under Wealth tax if AO not specifies that default relates to concealment and/or furnishing of inaccurate particulars No Penalty under Wealth tax if AO not specifies that default relates to concealment and/or furnishing of inaccurate particulars

Case Law Details

Case Name : Smt.Yannaben Anilbhai Jethani Vs ITO (ITAT Rajkot)
Appeal Number : WTA No.02/RJT/2017
Date of Judgement/Order : 04/06/2021
Related Assessment Year : 2011-12

Smt. Yannaben Anilbhai Jethani Vs ITO (ITAT Rajkot)

We find that the issue for our consideration is, whether penalty initiated and levied under section 18(1)(c) of the Wealth Tax Act, without clearly specifying particular default relates concealment of wealth and/or furnishing of inaccurate particulars is valid in law ? The contention of the assessee that assessing officer has failed to specify charge whether penalty is being imposed for furnishing inaccurate particulars or concealment of income. The case of the assessee is that show cause notice was issued “for filing inaccurate particulars and concealing the particulars of wealth” while penalty was imposed “for concealment or furnished inaccurate particulars of her wealth.” This distinction is fatal to the proceedings, and glaring contradiction on the part of the Revenue authorities while imposing penalty on the assessee, and therefore, wrong mentioning of the charge either in the penalty notice or in the penalty order renders them bad in law. We noticed this change of charge for imposition of penalty by of the Revenue authorities from the notice and the impugned order. They were not disputed by the Revenue. The Revenue contended the same to be technical and a clerical mistake, which did not help the assessee to render the impugned orders otiose. We have confronted earlier with similar issue in some other penalty cases imposed under section 271(1)(c) of the Income Tax Act, 1961 and held that Revenue should arrive at a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In the present case, there is no clear-cut or certain charges based on which impugned penalty has been imposed. As pointed out above, the Revenue used two distinct expressions of charge; one in the penalty notice and other in penalty order. This gives rise to the ambiguity and vitiate the proceedings. We find that similar aspect has been considered by the Hon’ble Gujarat High Court in the case of Snita Transport P. Ld. Vs. ACIT 42 taxmann.com 54 (Guj). In the case of Snita Transport P.Ltd. (supra), Hon’ble jurisdictional High Court has observed that while issuing notice under section 271(1)(c) r.w.s. 274 provide an opportunity to explain as to why penalty be not imposed. If an Assessing Officer used expression “or” in between the concealment of income/furnishing inaccurate particulars, then that show cause notice be not fatal to the proceedings, but while visiting the assessee with penalty the ld.AO ought to have recorded a specific finding, for which breach, he has visited the assessee with penalty i.e. whether he has visited the assessee with penalty for concealment of income or furnishing inaccurate particulars of income. In the penalty order he cannot use both the expression.

If the penalty order is perused in the light of the judgment of Hon’ble jurisdictional High Court, then it will reveal that the ld.AO was not specific in his finding for which he has visited the assessee with penalty. We also find support from the order of the ld.Third Member, ITAT Amristar Bench in the case of HPCL Mittal Energy Ltd. Vs. ACIT, in ITA No.554 & 555/Asr/2014 and others order dated 7.5.2018 wherein the ld.Third Member held that where the satisfaction of the AO while initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 is with regard to alleged concealment of income by the assessee, whereas the imposition of the penalty is for ‘concealment/furnishing inaccurate particulars of income’, the levy of penalty is not sustainable. It is pertinent here to note that section 271(1)(c) of the Income Tax Act, 1961 and section 18(1)(c) of the Wealth Tax Act, 1957 are pari materia to each other in terms of purpose and object, and therefore, proposition of law laid down by various higher judicial forums would be applicable on the same analogous in the cases of proceedings under section 18(1)(c) of the Act as well. Therefore, the impugned order is not in line of law laid down by the Hon’ble jurisdictional High Court, and hence not sustainable. The ld.CIT(A) has erred in upholding this order of the AO. We allow this appeal of the assessee and quash the penalty order.

FULL TEXT OF THE ITAT JUDGEMENT

Present appeal is directed at the instance of the assessee against order of the ld.Commissioner of Wealth-Tax(A)-2, Rajkot dated 19.5.2017 passed under section 23A of the Wealth Tax Act, 1957 for the assessment year 2011-12 by which the ld.CWT(A) confirmed action of the Assessing Officer in imposing penalty of Rs.56,780/-under section 18(1)(c) of the Act.

2. Brief facts of the case as emerging from the order of the AO is that the assessee is an individual who filed return of income for the Asstt.Year 2011-12 on 30.3.2012 showing total income at Rs.1,72,290/-. In the assessment completed under section 143(3), the returned income was accepted and assessed accordingly. Thereafter, the AO noticed that the assessee was liable to file wealth tax return, but she did not do so. According to the AO, the aggregate total wealth amounted to Rs.1,07,78,088/- and after deduction of exemption wealth of Rs.30.00 lakhs, the net wealth worked out at Rs.77,78,088/-. Since the assessee has not filed the return, her case was reopened under section 17 and issued notice under section 17(1) of the Act on 27.10.2014. In response to that notice, the assessee filed wealth-tax return declaring net wealth of Rs.86,78,088/- on 11.02.2015. The assessment under section 16(3) r.w.s. 17 of the WT Act was finalized on 16.11.2015 by accepting net taxable wealth as returned by the assessee. Simultaneously, the ld.AO also initiated penalty proceedings under section 18(1)(c)for not filing the wealth-tax return within the statutory time allowed. The AO issued requisite notice and sought reply against proposed levy of penalty. Since no satisfactory reply was given by the assessee, the ld.AO observed that the assessee has deliberately failed to disclose full and true value of wealth, and that omission on the part of the assessee to hide or conceal the wealth was intended to avoid payment tax. The ld.AO accordingly recorded a satisfaction that the case of the assessee was fit for imposition of penalty as the assessee has made the concealment or furnished inaccurate particulars of her wealth. As a result, the ld.AO imposed impugned penalty of Rs.56,780/-. This issue was agitated before the ld.CWT(A). Before the ld.CWT(A) the assessee has filed a detailed submissions, which the ld.CWT(A) reproduced from page no.4 to 13 the impugned order. Before the ld.CWT(A) it was inter alia pleaded that on the face of penalty notice and penalty proceedings, it was clear that there was a change of opinion on the part of the Revenue as to nature of default committed by the assessee. In other words, in the notice issued under section 18(2) of the Wealth Tax Act, 1957 it was mentioned that the penalty proceedings would be initiated for furnishing inaccurate particulars of such wealth; whereas in the proceedings penalty has been levied on the charge of concealment or furnishing of inaccurate particulars. It was submitted that the flip-flop on the part of the AO was very much apparent that on one hand penalty was initiated under one default and on the other hand, the same was considered to be levied under another default. It was submitted that the WTO has treated both these distinctive charges as if they were interchangeable and optional without appreciating that both these charges stand on an independent footing and cannot be applied as an option to each other. Therefore, since the very foundation for levying penalty was very much absent in the case of the assessee, the action of the Revenue authorities could not be sustained. It was further pleaded that the settled law on this issue is that penalty can be levied only on the charge for which it was initiated, and the Revenue cannot turn-around and levy penalty on another default, which was contemplated in the notice. It was further pleaded that in the quantum proceedings the assessee has filed all the relevant details and the wealth has been assessed as returned by the assessee. In the quantum proceedings or in the penalty proceedings, both the authorities failed to establish what was inaccurate in the particulars of wealth so submitted by the assessee or for that matter what was even concealed. The AO has assessed the wealth and levied the penalty merely on the basis of the details submitted by the assessee. It was further pleaded that the details and disclosure made by the assessee during the proceedings were not found to be false so as to attract the vigor of penalty. It was further submitted that since section 18(1)(c) of the Wealth-tax Act being analogues and para materia to section 271(1)(c) of the Income Tax Act, 1961, propositions of law laid by Hon’ble Courts for invocation of section 271(1)(c) would be equally applicable to section 18(1)(c) of the WT Act, and therefore, very foundation of the levy of penalty stands tainted on legal grounds, and hence penalty needed to be deleted. However, the explanation of the assessee was not found to be acceptable to the ld.CWT(A). He observed that this being clerical lacuna in the notice of penalty, the same could not help the assessee to infer that the AO was not clear as to under which limb the penalty was initiated/levied. He rejected the contentions of the assessee by treating the same as technical in nature and confirmed the order of the WTO. Dissatisfied with the order of the ld.CWT(A), the assessee is now before the Tribunal.

3. Before us, the ld.counsel for the assessee reiterated submissions made before the Revenue authorities. He further submitted that the order passed by the Revenue authorities is bad in law, because penalty notice was issued under section 18(1)(2) of the WT Act for “filing inaccurate particulars and concealing the particulars of wealth”; while penalty was imposed under different reason i.e. “the assessee has made the concealment or furnished inaccurate particulars of her wealth”. He submitted that the ITAT, Amristar Bench, Third Member in the case of HPCL Mittal Energy Ltd. Vs. ACIT, in ITA No.554 & 555/Asr/2014 on identical issue has struck down the penalty where there was flip flop as to whether the penalty initiated and levied, was under concealment and/or furnishing of inaccurate particulars. He also relied on other decisions as mentioned in the submissions made before the ld.CWT(A) to support the proposition that for confirming penalty, it is imperative that the specific charge must be mentioned, and both the penalty notice and order cannot be distinctive and separate as to reason and charge, based on which, penalty is to be levied. In other words, when the proceedings are initiated on one charge, then the penalty cannot be levied and confirmed on any other charge. Since the ld.WTO has made a fundamental error in the penalty order, the same cannot be sustainable in the eyes of law, such order liable to be quashed and cancelled.

4. On the other hand, the ld.DR supported orders of the Revenue authorities. The ld.CWT(A) has justified the finding of the AO on the ground that assessee has not filed return of wealth and failed to disclose full and true value of wealth. It was only after receipt of notice under section 17 of the WT Act, she has filed the return. There is no question of ambiguity in the penalty order of the WTO as the WTO has clearly spelt out in the order that the act of assessee for not furnishing the return of wealth within the stipulated time is treated as concealing the particulars of net wealth chargeable to wealth tax, and therefore, there is no flip-flop as contended by the assessee in the action of the WTO. Mere technical or clerical mistake cannot invalidate the penalty proceedings.

5. With the help of ld.representatives, we have gone through the record and impugned orders of the Revenue authorities. We find that the issue for our consideration is, whether penalty initiated and levied under section 18(1)(c) of the Wealth Tax Act, without clearly specifying particular default relates concealment of wealth and/or furnishing of inaccurate particulars is valid in law ? The contention of the assessee that assessing officer has failed to specify charge whether penalty is being imposed for furnishing inaccurate particulars or concealment of income. The case of the assessee is that show cause notice was issued “for filing inaccurate particulars and concealing the particulars of wealth” while penalty was imposed “for concealment or furnished inaccurate particulars of her wealth.” This distinction is fatal to the proceedings, and glaring contradiction on the part of the Revenue authorities while imposing penalty on the assessee, and therefore, wrong mentioning of the charge either in the penalty notice or in the penalty order renders them bad in law. We noticed this change of charge for imposition of penalty by of the Revenue authorities from the notice and the impugned order. They were not disputed by the Revenue. The Revenue contended the same to be technical and a clerical mistake, which did not help the assessee to render the impugned orders otiose. We have confronted earlier with similar issue in some other penalty cases imposed under section 271(1)(c) of the Income Tax Act, 1961 and held that Revenue should arrive at a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. In the present case, there is no clear-cut or certain charges based on which impugned penalty has been imposed. As pointed out above, the Revenue used two distinct expressions of charge; one in the penalty notice and other in penalty order. This gives rise to the ambiguity and vitiate the proceedings. We find that similar aspect has been considered by the Hon’ble Gujarat High Court in the case of Snita Transport P. Ld. Vs. ACIT 42 taxmann.com 54 (Guj). In the case of Snita Transport P.Ltd. (supra), Hon’ble jurisdictional High Court has observed that while issuing notice under section 271(1)(c) r.w.s. 274 provide an opportunity to explain as to why penalty be not imposed. If an Assessing Officer used expression “or” in between the concealment of income/furnishing inaccurate particulars, then that show cause notice be not fatal to the proceedings, but while visiting the assessee with penalty the ld.AO ought to have recorded a specific finding, for which breach, he has visited the assessee with penalty i.e. whether he has visited the assessee with penalty for concealment of income or furnishing inaccurate particulars of income. In the penalty order he cannot use both the expression. The discussion made by the Hon’ble Court in para-9 is worth to note. It reads as under:

“9. Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of “and/or” may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that “I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income.” It was in this respect the Bench observed that “Now the language of “and/or” may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down.”

6. If the penalty order is perused in the light of the judgment of Hon’ble jurisdictional High Court, then it will reveal that the ld.AO was not specific in his finding for which he has visited the assessee with penalty. We also find support from the order of the ld.Third Member, ITAT Amristar Bench in the case of HPCL Mittal Energy Ltd. Vs. ACIT, in ITA No.554 & 555/Asr/2014 and others order dated 7.5.2018 wherein the ld.Third Member held that where the satisfaction of the AO while initiating penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 is with regard to alleged concealment of income by the assessee, whereas the imposition of the penalty is for ‘concealment/furnishing inaccurate particulars of income’, the levy of penalty is not sustainable. It is pertinent here to note that section 271(1)(c) of the Income Tax Act, 1961 and section 18(1)(c) of the Wealth Tax Act, 1957 are pari materia to each other in terms of purpose and object, and therefore, proposition of law laid down by various higher judicial forums would be applicable on the same analogous in the cases of proceedings under section 18(1)(c) of the Act as well. Therefore, the impugned order is not in line of law laid down by the Hon’ble jurisdictional High Court, and hence not sustainable. The ld.CIT(A) has erred in upholding this order of the AO. We allow this appeal of the assessee and quash the penalty order.

7. In the result, appeal of the assessee is allowed.

Order pronounced in the Court on 4th June, 2021 at Ahmedabad.

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