TMI Blog2012 (8) TMI 385X X X X Extracts X X X X X X X X Extracts X X X X ..... ome it is not a case of furnishing inaccurate particulars of income - penalty proceedings are bad in law - IT APPEAL NO. 318 (LKW.) OF 2011 - - - Dated:- 4-5-2012 - D. MANMOHAN, SUNIL KUMAR YADAV, B.R. JAIN AND S.V. MEHROTRA, JJ. Rakesh Garg for the Appellant. Vivek Mishra and Jagdish for the Respondent. ORDER Sunil Kumar Yadav, Judicial Member This appeal is preferred by the assessee against the order of the ld. CIT(A) confirming the penalty of Rs. 30,600 under section 271(1)(c) of the Income-tax Act, 1961 (hereinafter referred in short "the Act"). 2. Briefly, the facts borne out from the record are that return of income showing total income of Rs. 1,85,810 was furnished on 23.10.2001. On 30.10.2002 a second return showing total income of Rs. 2,85,810 was furnished, in which an amount of Rs. 1 lakh, which had been claimed as gift (exempt income) in the original return, was surrendered as unexplained income. The second return filed on 30.10.2002 was not considered to be a valid revised return as the original return was not filed within the time prescribed under section 139(1) of the Act. According to the Revenue around February, 2002 the Department dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eath of the assessee was not timely informed, therefore, the Assessing Officer could not fulfill the requirement of law. The relevant observations of the ld. CIT(A) in this regard are extracted hereunder:- "1.2.1 The assessee's submission has been considered. Law allows the proceeding to be continued in the hands of the legal heir after the death of the assessee. In this case, the assessee is reported to have died on 16.4.2005 but the fact of his death was not communicated to the AO. It was communicated to him only on 19.09.2005 in response to the fresh show cause issued by him (in the name of the assessee). Since the last date for conclusion of the penalty proceeding was 30.09.2005, the AO was not left with hardly any time to do the necessary enquiry, serve notice in the name of the legal heir, hear her and then take a decision. No doubt, law requires that the AO should identify the legal heir/s and issue notice/s to him/them before taking any decision in the matter. But, since the assessee's death was not notified to him in time, the AO could not have possibly followed this requirement in letter and spirit. An officer is not expected to do the impossible. Since income tax proce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on record before reopening the assessment by issuing notice under section 148 of the Act on 19.3.2004. Since the assessee has already declared the additional income and paid taxes thereon, it cannot be said on a subsequent date that there is an income chargeable to tax has escaped assessment. Therefore, even reopening of the assessment under section 147 of the Act was not valid. In a situation where an assessee has already declared the additional income, the same cannot be called to have been concealed subsequently by reopening the assessment. The Revenue has made out a case that the assessee has received gift of Rs. 5 lakhs from Shri Babu Ram Gupta on the basis of information received from the Investigation Wing, but in fact the assessee received a cheque amounting to Rs. 1 lakh only from Shri Babu Ram Gupta. Therefore, whatever information received by the Revenue was also not correct. Since the assessee has already declared the additional income before detection by the Revenue, the additional income declared by the assessee cannot be treated to be a concealed income or furnishing of inaccurate particulars of such income which warrants the Assessing Officer to initiate penalty pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd by the Revenue to substantiate that they have received some information with regard to the bogus gift received by the assessee though they have reopened the assessment by issuing notice under section 148 of the Act on 19.3.2004 and framed the assessment on the additional income declared by the assessee. It is also evident from record that according to the Revenue they received information about receipts of gift of Rs. 5 lakhs from Shri. Babu Ram Gupta but in fact the assessee received gift of Rs. 1 lakh only from Shri Babu Ram Gupta. During the course of assessment proceedings, the assessee has furnished explanation as to why it could not obtain confirmation. Even if the stand taken by the Revenue is considered to be correct, it would not match the corresponding entries in the books of account of the assessee. 11. We have also examined another aspect with regard to the validity of the penalty order. Undisputedly assessment was completed on 28.3.2005 and in response to show-cause notice for penalty, reply of the assessee was submitted on 7.4.2005. On 16.4.2005 the assessee met with an accident and died. Another penalty notice was issued on 13.9.2005 and in response thereto, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ich the additional income was declared by filing a revised return, and the penalty was levied on the additional income by the Revenue under section 271(l)(c) of the Act. While deleting the penalty, their Lordships of the jurisdictional High Court have held that there is no primary evidence to establish that the assessee has concealed her income or furnished inaccurate particulars. 14. On a careful perusal of the facts of the case, we are of the view that under the given facts and circumstances, penalty under section 271(l)(c) of the Act is not sustainable in the eyes of law. We, therefore, set aside the order of the ld. CIT(A) and delete the penalty. 15. In the result, appeal of the assessee is allowed. B.R. Jain, Accountant Member - Unable to agree with the order proposed by learned Judicial Member, I proceed to write my own order as under. 2. Briefly, the facts are that the appellant filed belated return of income on 23/10/2001 declaring an income of Rs. 1,65,610/- as his income from salaries, house property and interest etc. The assessee thereafter on 30/10/2002 furnished another return declaring income of Rs. 2,85,810/-. In this return the assessee also included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ied were found to be different on facts and not applicable to the facts of the assessee's case before him. 4. The Assessing Officer was of the opinion that the concealment has to be reckoned viz-a-viz the original return of income. In this case there was no valid revised return u/s 139(5) of the Act. The subsequent return filed by the assessee on 30/10/2002 was a return to declare his concealed income. The surrender made by the assessee in this return was neither voluntary nor in good faith but was as a result of investigation made by Revenue. The assessee has done concealment in this case after meticulously planning the act of taking bogus gift and filing the income tax return on 23/10/2001 which was belated and surrendering income subsequently on 30/10/2002 by Rs. 1,00,000/- was pursuant to enquiries made by DI(Inv.), Kanpur. Reference has also been made to the following case laws: (1) Hon'ble Madras High Court in the case of Sivagaminatha Moopanar Sons v. CIT [1964] 52 ITR 591 (Mad.) where it has been held as under: "If an assessee, therefore makes a false return knowing it to be false, the fact that he subsequently discloses the true particulars of income Charter ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ), Shaikh Abdul Kadar ( supra ) and Jai Prakash Singh ( supra ) challenging validity of penalty by the same stood rejected on the ground that there has been a failure on the part of the assessee himself in not bringing the legal heirs on record in time and secondly the order was made in the name of the legal heir after considering her reply dated 19/09/2005. 7. On merit he found that the Department had detected the bank account through which the bogus gifts have been channelized and it is only thereafter the assessee filed a subsequent return on 30/10/2002 disclosing his concealed income of Rs. 1,00,000/-. This was not a return filed on account of discovering of any omission or wrong statement therein. The original return of income filed on 23/10/2001 was a belated return and as such the subsequent return dated 30/10/2002 was not a return of income u/s 139(5) of the Act. Elaborately discussing the issue and concurring with the findings by way of a speaking order as were also reached by the Assessing Authority, he confirmed the imposition of penalty and dismissed the grounds raised in appeal as well as the appeal filed by the assessee. 8. Heard parties with reference to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iend has been made without substantiating the same by any documentary evidence or bringing on record any circumstantial material or record to prove his claim. The explanation thus given by him lacks total faith and is not found bona fide. The judgment rendered by Hon'ble Allahabad High Court in the case of Km. Sonali Jain ( supra ), placed on record by the assessee, is also not found applicable to the peculiar case of the appellant before us as in the case before the Hon'ble High Court the respondent had filed a valid revised return and had also produced the donor who had testified of making the valid gift. The Hon'ble High Court also found that the assessee respondent in that case did not fail to furnish any explanation regarding material facts for computation of her income nor the explanation furnished by her was found false. In the present case, however, 1 find that the assessee has failed to disclose true particulars of his income in the original return filed and the subsequent return filed was merely to disclose the income which stood concealed in the original return being a belated return. Thus this is a case where original return of income filed by the assessee was a false ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fference, if necessary by reframing the question. 2. Facts giving rise to levy of penalty of Rs. 33,600/- u/s 271(1)(c) of the Income-tax Act, 1961 are stated in brief. Assessee Late Shri Jai Narain Upadhyay was working as Lecturer in Subhash Smarak Inter College, Kanpur. In the previous year relevant to the assessment year 2001-02, he also earned income from house property. The assessee declared a total income of Rs. 1,85,810/- by filing a return of income on 23.10.2011 which was admittedly belated. The assessment order did not indicate as to whether the AO has regularised the return by issuing a notice u/s 148 of the Act. Instead he chose to process the return u/s 143(1) of the Act. Subsequently, the assessee filed a revised return declaring a total income of Rs. 2,85,810/-. In the said revised return the assessee declared an amount of Rs. 1,00,000/- as his income referable to gift received from Shri Babu Ram Gupta. Since the original return itself is belated, the revised return was treated as non-est in law. Though the revised return was filed on 30.10.2002, the AO has not taken cognizance of the additional income into account to probe as to whether the assessee had earned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ur, the Revenue having not placed any material on record to substantiate that the Investigation Wing had some specific information with regard to gift received by the assessee from Shri Babu Ram Gupta, it cannot be said that the declaration by the assessee was on account of fear of information obtained by the Investigation Wing; In fact, the Revenue's information was that the assessee received gift of Rs. 5,00,000/- from Shri Babu Ram Gupta whereas only a sum of Rs. 1,00,000/- was received by the assessee as gift from Shri Babu Ram Gupta. During the course of assessment proceedings, the assessee has furnished explanation as to why it could not be obtain confirmation. If the stand taken by the Revenue is considered to be correct, it would not match the corresponding entries in the books of account of the assessee. Therefore, whatever information received by the Revenue was also not correct and hence the additional income declared by the assessee cannot be treated to be a concealed income. 6. He also noticed that the assessee declared additional income on 30.10.2002, whereas between the month of October, 2002 to March, 2004 neither any notice was issued by the Revenue u/s 148 nor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id to be voluntary disclosure. The assessee has not brought on record any material to show that Shri Babu Ram Gupta is his friend and gift was given out of love and affection. Explanation was thus held to be not bona fide. Since offence of penalty has to be examined with reference to the original return of income Onkar Saran Sons ( supra ), even in a case where a return is filed in response to a notice u/s. 148, one has to go by the facts and law as it stood at the time when the original return was filed. He also observed that the penalty is exigible for furnishing inaccurate particulars leading to concealment of income. 10. On account of difference of opinion the following point of difference was forwarded to Hon'ble President for nominating Third Member to resolve the difference of opinion. "Whether under the facts and circumstances of the present case penalty under section 271(l)(c) of the Income-tax Act, 1961 is sustainable in the eyes of law ?" 11. Learned counsel for the assessee strongly relied upon the order passed by learned Judicial Member and submitted that in the instant case wife of the assessee has informed the Assessing Officer, during the course of pen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as his income voluntarily, it is not a case of either concealment of income or furnishing of inaccurate particulars of income, in the light of the decision of Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P.) Ltd. [2010] 322 ITR 158/189 Taxman 322. It was submitted that the penalty proceedings were initiated on the ground that the assessee furnished inaccurate particulars of income but in the penalty order it was stated that there has been a conscious designing for concealment of income by routing once own money from various bank accounts in the form of gift. Penalty order states that the assessee could not produce donor for cross-examination but there is nothing on record to suggest that the Assessing Officer called upon the assessee to furnish any further evidence. In fact the Assessing Officer has also not made any independent inquiries (in the absence of any material placed on record) to prove that Mr. Babu Ram Gupta has not given the gift. In fact assessment order was passed on 28.3.2005 and immediately penalty proceedings were initiated in response to which the assessee filed a reply on 7.4.2005. Thereafter the Assessing Officer has not called for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee filed return under protest. Thereafter notices u/s. 143(2) were not responded to. Having regard to the peculiar facts of the case Hon'ble M.P. High Court observed that the issue as to whether assessment completed in the name of the assessee's legal representative, though the proceedings were initiated on the dead person, is valid or not is academic for the simple reason that the widow of the deceased has already participated in the proceedings by filing returns; Thus issuance of notice on a dead person is procedural regularity. 17. However, in the case of late Jai Narain Upadhyay mere statement of widow of the assessee, that the person on whom notices were issued is no longer alive, cannot be equated to participation in the proceedings. She has neither filed income tax return nor replied to the penalty notice and thus it cannot be said that she was aware of the facts of the case. There is nothing on record to suggest that the Assessing Officer informed the widow of the assessee as to what is the case of the revenue. Thus it was a clear case of completion of penalty proceedings in violation of principles of natural justice. Mere laxity of the Assessing Officer in not com ..... X X X X Extracts X X X X X X X X Extracts X X X X
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