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TMI Blog2012 (8) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... d February, 2002 the Department discovered that a racket of bogus gifts had been in operation in Kanpur and on receipt of specific information that the assessee was a beneficiary, proceedings under section 147 of the Act were initiated and assessment was made. In the course of assessment, the Assessing Officer required the assessee to establish the genuineness of the credit appearing in its bank account which the latter failed to do. The Assessing Officer accordingly concluded that the second return was not a valid return in the eyes of law and the assessee has concealed the particulars of income which had been brought back by him in the garb of alleged gift. The Assessing Officer also initiated penalty proceedings under section 271(1)(c) of the Act and imposed a penalty of Rs. 30,600. 3. Penalty was challenged before the ld. CIT(A) with the submission that the assessment was made on 28.3.2005 in which penalty was initiated. A reply to the notice for penalty was submitted on 7.4.2005. The assessee met with an accident and died on 16.4.2005. Another notice of penalty was issued on 13.9.2005 in the assessee's name. A letter was submitted to the Assessing Officer on 19.9.2005 conveyi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o do the impossible. Since income tax proceedings are subject to law of limitation, the failure to issue notice to the legal heir may at best be treated as a procedural irregularity and not nullity. Moreover, it is noticed that the penalty order is made in the name of "Late Sri Jai Narain Upadhya. L/H Smt. Kusum Upadhyay". This shows that the order was made in her name. Moreover, since the reply furnished by her vide her letter dt. 19.09.2005 was considered before taking a decision in the matter, she was effectively heard. In view of this, the challenge to the validity of penalty on the ground discussed above is rejected." 5. On merit, the ld. CIT(A) has relied upon the averments of the Assessing Officer made in the penalty order that there was a racket of bogus gifts in operation in Kanpur and the assessee was one of the beneficiaries of it and when the assessee has realized that he may be caught, he came forward and filed voluntary return declaring receipt of gift as additional income. 6. Aggrieved, the assessee has preferred an appeal before the Tribunal with the submission that the penalty order under section 271(l)(c) of the Act is not sustainable in the eyes of law on two c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ants the Assessing Officer to initiate penalty proceedings under section 271(l)(c) of the Act. 8. The ld. D.R., on the other hand, has placed heavy reliance upon the order of the ld. CIT(A). 9. Having given a thoughtful consideration to the rival submissions and from a careful perusal of record, we find that the first return of income was not filed by the assessee within the period prescribed under section 139(1) of the Act. Therefore, the second return filed by the assessee declaring the additional income on account of receipt of gift cannot be considered to be a valid revised return under section 139(5) of the Act. But, in any case the assessee has come forward and declared the additional income and paid taxes thereon. Now the question arises where the assessee himself has declared additional income by filing return of income and paid taxes thereon; whether penalty under section 271(1)(c) of the Act can be levied for concealment of income or furnishing of inaccurate particulars of such income. In this regard, we have carefully examined the relevant provisions of section 271(l)(c) of the Act and we find that for levying penalty under section 271(l)(c) of the Act, the Assessing O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 13.9.2005 and in response thereto, the Assessing Officer was informed vide letter dated 19.9.2005 that the assessee had died on 16.4.2005. Thereafter no notice was issued by the Assessing Officer to the Legal Heirs of the assessee and penalty was imposed on 30.9.2005. The penalty proceedings are considered to be quasi-criminal proceedings by the Hon'ble Apex Court and various High Courts and such proceedings should be concluded after affording proper opportunity of being heard to the assessee. In the instant case when the assessee was expired, proper opportunity of being heard should have been afforded to the Legal Representative of the assessee. But the fact is that even notice was not served upon the Legal Representative of the assessee and penalty order was passed in the name of the assessee through his wife, Smt. Kusum Upadhyay without affording her any opportunity to represent the assessee before the Assessing Officer. We are, therefore, of the view that penalty order was passed without affording any opportunity to the Legal Heir of being heard and to attend their case. Even the L.Rs were not brought on record by the Assessing Officer. 12. So far as merit of penalty is conce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e also included receipt of Rs. 1,00,000/- as his income claiming the same to be the amount of gift received from Shri Babu Ram Gupta. On the basis of information on record that income of assessee has escaped assessment, notice u/s 148 of the Act was issued on 19/03/2004 In response thereto, the assessee stated that the return already filed on 30/10/2002 may be treated as compliance to the said notice. In the assessment proceedings the Assessing Officer did not treat the return dated 30/10/2002 as a valid revised return u/s 139(5) of the Act as this return was filed by the assessee disclosing his concealed income and not that the assessee had discovered any omission or any wrong statement in the return required to be filed u/s 139(1) of the Act. In the assessment proceedings the statement of assessee was recorded on oath on 11/03/2005 and the assessee could not lead any evidence to prove the genuineness of the transaction of gift. The assessee, however, stated that he was in need of money so being a friend Shri Babu Ram Gupta had given gift cheque of Rs. 1,00,000/- but when he asked to give in writing for income tax purposes, he showed his inability in this regard and thus the amoun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Chartered Accountant not prevent the application of the section which is intended to punish fraud or continuing on the part of assessee indeed to such a case, it would not even be open to the assessee to submit revised return." (2) Hon'ble Guwahati High Court in the case of Sunanda Ram Deka v. CIT [1994] 210 ITR 988 where it has been held as under: "Mere filing of revised return is not sufficient to bring it within ambit of section 139(5). The further requirement is that the omission or mistake in the original return must be due to bona fide inadvertence of mistake on part of assessee." (3) Hon'ble Allahabad High Court in the case of Addl. CIT v. Radhey Shyam [1980] 123 ITR 125/[1979] 1 Taxman 29 wherein it has been held as under: "It thus appears to us that in order to avoid imposition of penalty contemplated by section 271(1)(c) by reason of the revised return, the revised return itself must fulfil the perquisite or sub section 5 of section 139. In other words it must fell within the ambit of that provision. If it cannot be said that an assessee was justified in filing of a revised return, then the assessee will not be entitled to get the revised return to be tak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s case laws brought on record. Admittedly, the widow of the deceased Smt. Kusum Upadhyay who has also preferred an appeal before this Appellate Tribunal had participated in the penalty proceedings before the Assessing Officer notwithstanding the fact that notice was issued in the name of the dead person. No other legal heir has been brought on record by the appellant. Since the widow of the deceased had already participated in the proceedings notwithstanding the fact that notice was issued in the name of the dead person, the defect in the notice stands automatically cured. This view finds support from the judgment by Hon'ble M.P. High Court in the case of Smt. Kaushalyabai v. CIT [1999] 238 ITR 1008. On these peculiar facts the judgment sought to be relied on behalf of the appellant requiring this Tribunal to treat the penalty order passed without affording any opportunity to the legal heir of being heard becomes purely academic. I also do not find this case of a penalty imposed on the dead person. The widow having participated in the proceedings, this cannot be taken as a case of denial of opportunity and any defect in the notice has to be taken as cured in the light of the afores ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s disclosed inaccurate particulars of income leading to concealment of his income. This is an admitted position of law that the offences of the penalty has to be examined with reference to the original return of income as has been held by the Apex Court in the case of CIT v. Onkar Saran & Sons [1992] 195 ITR 1/62 Taxman 440 where the Apex Court affirmed the judgment by Hon'ble Allahabad High Court in the case of Addl. CIT v. Onkarsaran [1979] 116 ITR 317 (All) and held that even in a case where a return filed in response to a notice under section 148 involved an element of concealment, the law applicable would be the law as it stood at the time when the original return was filed for the assessment year in question and not the law as it stood on the date on which the return was filed in response to the notice under section 148. 10. On the peculiar facts and the findings as have been set out in the orders of the authorities below and the finding as reached herein before by me and considering the law that stood at the time of filing the original return of income and the assessee is found to have filed a dishonest and false return of income and had concealed income initially with a vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvestigation Wing) (Kanpur) informed the Assessing Officer that a sum of Rs. 5,00,000/- was received by the assessee from Shri Babu Ram Gupta in the form of gift but it is part of bogus gift racket. Based on the information supplied by the D.I., the AO sought to re-open the assessment by issuing notice u/s 148 of the Act on 19.3.2004. In response to the notice u/s 148 of the Act, the assessee stated that he has already filed a revised return. During the course of assessment proceedings it was submitted that though the sum of Rs. 1,00,000/- was given by way of gift by Shri Babu Ram Gupta, when he was asked to give in writing for income tax purpose, he showed his inability to furnish details and hence the assessee surrendered the amount in revised return since it would be difficult for him to prove the transaction in strict legal sense. 3. The AO observed that the revised return was filed on account of fear of investigation by the Income Tax Department. The investigation had already started by the D.I. (Investigation) Wing, Kanpur in the month of February, 2002 in so many cases. With this remark, he completed the assessment on 28.3.2005 and initiated penalty proceedings. 4. In resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at at the time of voluntary declaration by the assessee, there was no information available with the Revenue to prove that the assessee has received a sum of Rs. 1,00,000/- from Shri Babu Ram Gupta and the same is bogus. 7. The ld. Judicial Member also noticed that the penalty was levied without giving a fresh notice in the name of legal heir. Since penalty proceedings have to be considered at par with quasi-criminal proceedings, penalty levied in the instant case, in the name of the legal heir, without issuing a proper notice to the legal heir is not in accordance with law. In fact, proper opportunity of being heard was also not given except merely mentioning the name of the legal representative in the penalty order. He also relied upon the decision of the Jurisdictional High Court in the case of Km. Sonali Jain (supra) in support of his conclusion that in the absence of any evidence to establish that the assessee has concealed her income or furnished inaccurate particulars, penalty is not leviable. He, therefore, set aside the order of the ld. CIT(A) and deleted the penalty. 8. On the other hand learned Accountant Member was of the view that it was a fit case for levy of penalt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tice and the Assessing Officer has not called for any further information during his life time. Another notice was issued on 13.9.2005 and the widow of the assessee took the first available opportunity to inform the Assessing Officer, vide letter dated 19.9.2005, that the assessee had died. Thereafter the Assessing Officer did not choose to issue any notice to the legal heir but proceeded to impose penalty on 30.9.2005 without giving any opportunity to the legal heir and hence merely because her name was mentioned in the penalty order it would not validate penalty proceedings. It was further contended that the penalty proceedings are quasi-criminal in nature and substantial opportunity has to be given to the party concerned before levying penalty whereas, in the instant case, without bringing any evidence on record to show that the donor was not friend of the assessee the Assessing Officer merely assumed-presumably based on the voluntarily offer made by the assessee - that the gift is not genuine. If the Department had any information about the so called gift racket why it had taken more than two years without issuing notice u/s. 148 ? When assessee voluntarily declared a sum of Rs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y in a hurried manner. Advertising my attention to the statement of facts filed before learned CIT(A), it was submitted that no adverse material was brought out on record in respect of the gift and there was no denial of money transfer as gift from the said person. 13. On the other hand learned Departmental Representative strongly relied upon the order passed by learned Accountant Member. 14. Joining the issue learned counsel for the assessee submitted that under identical circumstances ITAT, Lucknow cancelled the penalty levied by the Assessing Officer in the following cases ;- * Nand Kumar Gupta v. ITO (ITA No. 266/Lkw/11 dated 14.12.2011 * Smt. Sunita Tuli v. ITO (ITA No. 112/Luc/2006 dated 9.6.2006) * ACIT v. Shri Gurdeep Singh Soni (ITA No. 548/Lkw/2010 dated 7.1.2011) 15. I have carefully considered the rival submissions and perused the record. I have also carefully perused the orders passed by learned Accountant Member as well as learned Judicial Member. With regard to the preliminary objection raised on behalf of the assessee it may be noticed that the Assessing Officer has not issued any notice in the name of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve to move from forum-to-forum to seek justice, that too for a sum of? 33,600/-. 18. It is not a case where the Assessing Officer has brought any material on record to indicate that the revenue was aware of the non-genuineness of the gift received by the assessee. Except vague observations that there was a fake gift racket in Kanpur nothing specific has been pointed out in the case of the assessee. In fact action of the Assessing Officer on the ground that assessee has concealed income is contradictory in terms for the simple reason that the Investigation Wing appears to have passed on the information, in the year 2002, to the Assessing Officer that a sum of Rs. 5 lakhs was taken by Shri Jai Narain Upadhyay in the form of a gift from Mr. Babu Ram Gupta whereas, the record indicates a gift of Rs. 1 lakh only. Despite the fact that the assessee voluntarily declared return of income of Rs. 1 lakh it is intriguing to note that the revenue could not lay their hands on any evidence, for about two years, to prove that the gift received by the assessee was bogus and presumably because of non-availability of material no action was taken by the Assessing Officer till year 2004. In response ..... X X X X Extracts X X X X X X X X Extracts X X X X
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