TaxTMI 
TaxTMI 
TaxTMI 
2024 (3) TMI 814
X X X X Extracts X X X X
X X X X Extracts X X X X
....irst of all, we take up the appeal of the assessee for the assessment year 2011 wherein brief facts of the case are that the AO had information in his possession that the assessee had made investment in FDR of Rs. 98,00,284/- and had received interest income of Rs. 17,39,319/-. As no regular return had been filed by the assessee, the AO recorded reasons for re-opening and obtained statutory approval of PCIT and issued notice u/s 148. In response no return of income was filed. No reply was filed in response to notices issued u/s 142(1). Therefore, the AO finalized the assessment u/s 147 r.w.s 144 on 17.12.2018 at a total income of Rs. 1,15,39,600/- Penalty proceedings u/s 271(1)(c) were also initiated for concealment of income. To this effect, the assessee filed appeal before CIT(A) who decided the appeal vide order dated 24.07.2019 in which the addition of FDR was deleted but the addition of interest income of Rs. 17,39,319/- was confirmed. Subsequently, the AO took up the penalty proceedings and issued show cause notice u/s 271(1)(c) r.w.s. 274 of the Act. In response, the assessee contended before the AO that he was a non-resident not well versed with the income tax law in India ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... and took his services and filed appeals. Moreover, all pending tax dues for all assessment years were duly deposited with interest and return of income was also filed for the assessment year 2018-19 and thereafter regularly, as the window for other assessment years were closed on the income-tax e-filing portal, however all remaining tax with interest was deposited. The Id. CIT(A)-42, New Delhi, vide order dated 24.07.2019 in appeal no 123/2018-19/CIT(A)-42, deleted the addition of Rs. 98,00,284/- in respect of unexplained investments in FDR. The addition of Rs. 17,39,319/- on account of interest income on which TDS of Rs. 1,73,001/- had been deducted which was reflected in 26AS was however sustained as this ground was not pressed by the appellant. During penalty proceedings, the appellant submitted before the Id. A.O. that the appellant is not well versed with the intricacies of complex Indian income tax laws. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income and due to his stay outside India. Penalty was levied by the Id. A.O on interest income of Rs. 17,39,319-on which TDS of Rs. 1,73,001/- was ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....copy enclosed) of Hon'ble ITAT, Ahmedabad Bench in the case of Vijaybhal Dashrathbal Patel Vs. ACIT in ITA No. 2622/Ahd/2017 recently decided on 25.02.2022 wherein it was held at para no. 8 as under:- "We note that the facts in the above cases support the proposition that if on facts the assessee is able to demonstrate that he has a reasonable cause for not filing return of income, then the assessee cannot be subject matter of penalty u/s 271(1)(c) of the Act. In order to invoke Explanation 3 to s.271(1)(c) of the Act, the assessing officer has to establish that there was no reasonable cause on part of the assessee for non-filing of return of income. However, if from the facts of the case, it seems that assessee did not file returm of income under a bona-fide mistake, then uniess the Ld. AO brings anything further to the record, it is not a fit case of levy of penalty u/s 271(1)(c) of the Act. In our considered view in the instant set of facts, the assessee had earned interest income (being the only source of income for the captioned year) on which taxes had been duly withheld by the payer. Therefore, the assessee is conscious of the fact that the income Tax Department is awa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mined hereunder. 13.1 It is trite law that ignorance of law is no excuse. Ignorantia juris non excusat or Ignorantia legis neminem excusat (Latin for "ignorance of the law excuses not and "ignorance of law excuses no one" respectively) is a legal principle holding that a person who is unaware of a law may not escape liability for violating that law merely by being unaware of its content. The rationale of the doctrine is that if ignorance were an excuse, a person charged with criminal offenses or a subject of a civil lawsuit would merely claim that one was unaware of the law in question to avoid liability, even if that person really does know what the law in question is. Thus, the law imputes knowledge of all laws to all persons within the Jurisdiction. Even though it would be impossible, even for someone with substantial legal training, to be aware of every law in operation in every aspect of a state's activities, this is the price paid to ensure that willful blindness cannot become the basis of exculpation. Thus, it is well settled that persons engaged in any undertakings outside what is common for a normal person will make themselves aware of the laws necessary to engage in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....her the contravention was made by the defaulter with any willfully or guilty intention or not. This view has been reiterated by the Hon'ble Supreme Court in their decision dated 29.9.2008 in the case Union of India vs. Dharmendra Textile Processors (2008) 306 ITR 277 (SC) holding that levy of penalty is only a civil liability and willful concealment is not an essential ingredient to be established before levy of penalty for concealment. This argument is therefore, rejected. 15. It is trite that admission of concealment after the same is discovered by AO cannot absolve an assessee from the penalty provision under Section 271(1)(C) for concealment of Income as decided by the Hon. Supreme Court in MAK Data Private Limited V. CIT (2013) 358 ITR 593 (SC). In this case, the assessee company filed its return of Income for the AY 2014-15. The case was selected for scrutiny and notices were issued under section 143(2) and section 142(1). During the course of the assessment proceedings, AO noticed that certain documents were found under survey proceedings under section 133A in the case of sister concern of the assessee. The AO issued a show cause notice seeking the information for cert....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ing of particulars of income is committed while filing original return, the revised return by itself would not mitigate the default. Reliance in this regard is placed on 171 ITR 390 All, 163 ITR 440 Raj, 32 ITR 677 Bom, 84 STC 271 Del, 96 STC 6 MP, 178 ITR 643 Pb,178 ITR 430 Ker, and 186 ITR 571 SC. It is observed that in this case there was no original return filed. 16.1 Hon. Supreme Court, in the case of G. C. Agarwal Vs. CIT (186 ITR 571) has held that when the assessee has filed revised return showing much higher income then disclosed in the original return but was unable to discharge the burden of proof, the A. O. is justified in imposing penalty u/s. 271(c). 16.2 In the case of Suresh Chander Mittal 241 ITR 124 MP, disclosure was made in revised return in pursuance of notice u/s 148 after search. The revised returns were filed just to avoid litigation. The HC, following SC decision in the case of Sir Shadilal 168 ITR 705, held that penalty was not leviable. This judgment has been affirmed by SC by passing a short order (251 ITR 9). The Apex Court in the case of K.P.Madhusudan 251 ITR 99 has held that decision in Shadilal's case is no more good law after insertion of E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t had already left long ago. The assessment was finalized by treating the investments as unexplained. Receipts as per Form 26AS were also added without allowing corresponding TDS credit. All these proceedings/orders came to the knowledge of appellant very late otherwise he could have visited India to resolve the issues. That appellant was not in touch with any legal counsel in India and it is only after it came to his knowledge that certain assessment orders have been passed against him, he contacted a legal expert in this field and took his services and filed appeals. Moreover, all pending tax dues for all assessment years were duly deposited with interest and return of income was also filed for the assessment year 2018-19 and thereafter regularly, as the window for other assessment years were closed on the income-tax e-filing portal, however all remaining tax with interest was deposited. The ld. CIT(A)-42, New Delhi, vide order dated 24.07.2019 in appeal no. 123/2018-19/CIT(A)-42, deleted the addition of Rs. 98,00,284/- in respect of unexplained investments in FDR. The addition of Rs. 17,39,319/- on account of interest income on which TDS of Rs. 1,73,001/- had been deducted w....
X X X X Extracts X X X X
X X X X Extracts X X X X
....re of reputed assessee having great expertise in tax matters, in non-disallowance of an expenditure which was to be disallowed as duly mentioned in its tax audit report. It was held that the assessee should have been careful cannot be doubted but absence of due care does not mean that assessee has furnished inaccurate particulars of its income or has concealed its income. This was a human error which we all are prone to make. Copy of judgment is enclosed herewith for you'r honours kind consideration. The ld. CIT(A) upheld the penalty by relying on the case of Mak Data Pvt. Ltd. Vs. CIT 358 ITR 593 (SC). However, the facts in the case of Mak Data Pvt. Ltd. case were entirely different from the present appellant's case as in that case surrender of income in view of detection made by AO in search conducted in sister concern of assessee and that too not in the return of income filed 10 months after survey date but during the assessment proceedings. Hon'ble Madras High Court in the case of CIT Vs. Gem Granites 2013 (11) TMI 1375 (Madras) (Copy enclosed) considered the judgments of Hon'ble Supreme Court in the case of Union of India vs. Rajasthan Spinning and Weaving Mills reported in ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... In order to invoke Explanation 3 to s.271(1)(c) of the Act, the assessing officer has to establish that there was no 'reasonable cause' on part of the assessee for non-filing of return of income. However, if from the facts of the case, it seems that assessee did not file return of income under a bona-fide mistake, then unless the Ld. AO brings anything further to the record, it is not a fit case of levy of penalty u/s 271(1)(c) of the Act. In our considered view, in the instant set of facts, the assessee had earned interest income (being the only source of income for the captioned year) on which taxes had been duly withheld by the payer. Therefore, the assessee is conscious of the fact that the Income Tax Department is aware about his having earned income, but was of the mistaken view that once taxes have been deducted on this income, the assessee was not required to be filed return of income. Therefore, in our view, this is not a fit case for levy of penalty since the assessee in the instant set of facts had reasonable cause for not filing return of income. We therefore cancel the order imposing penalty and allow the appeal of the assessee." In view of the above judgmen....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... AO was not satisfied with the reply. He imposed minimum penalty of Rs. 1,92,439/- for concealment of income u/s 271(1)(c) read with Explanation 1. The assessee carried the matter before the ld. CIT(A) who has confirmed the imposition of penalty of Rs. 1,92,439/- u/s 271(1)(c)of the Act read with Explanation 1 and thus dismissed the appeal of the assessee with following narration ''17. In view of the overall discussion made above, it is concluded that this was a fit case for levy of penalty u/s 271(1)(c) read with Explanation 1. The penalty imposed is confirmed. All grounds of appeal are dismissed. 18. In the result, the appeal is dismissed. The Bench further noted from the submissions of the assessee that the AO at para 6 of the penalty order had mentioned that the notice was issued on 16-12-2021 requesting the assessee to furnish reply by 20-12-2021 but no reply was furnished by the assessee. The observation of the AO is totally erroneous as the assessee had submitted the reply on the income tax portal on 18-12-2021 (i.e. before the due date) which is evident from the screen shot of the income tax portal and thus penalty levied by the AO is without considering the reply file....