Waseem Ahmed ORDER
Waseem Ahmed, Member (A)
1. The captioned appeal has been filed at the instance of the assessee against the order of the Learned Commissioner of Income Tax (Appeals), Ahmedabad, dated 27/02/2018 arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2015-16.
2. The only issue raised by the assessee is that the learned CIT(A) erred in confirming the levy of penalty under section 271(1)(c) of the Act.
3. The facts in brief are that the assessee is an individual and engaged in the profession of advocacy and practicing in Hon'ble Supreme and various other courts of India. In the return filed under section 139 of the Act for the year, the assessee declared income at Rs. 4,03,78,080/- under the head income from profession, STCG and other income. The case of assessee was selected under limited scrutiny under section 143(2) of the Act. During the assessment, the assessee vide letter dated 18-08-2017 submitted that due to oversight by the accountant an amount of Rs. 5 lakh being professional receipt form M/s. Health Secure (India) Pvt. Ltd. was not included in income but the credit of TDS on the same was claimed. The mistake was identified while preparing data for assessment and on realization of mistake he immediately deposited the due taxes. The AO accordingly completed the assessment after making addition of Rs. 5 lakh as mentioned above. The AO also initiated penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particular of income.
4. The assessee during the penalty proceedings submitted that there was bona-fide mistake committed by his accountant. However, on realization of mistake he deposited the due tax amount on such receipt. Accordingly, the assessee contended that there was no concealment of income or furnishing of inaccurate particular of income which was done with deliberate, willful or mala-fide intention. The assessee also contended that he has shown/declared such huge income for Rs. 4,03,78,080/- therefore, there was no reason to evade taxes on such small receipt of Rs. 5 Lakh. The assessee in support of his contention, that his accountant Shri Yogesh M shah committed error due to oversight, filed the affidavit of his accountant. Accordingly, it was contended that in such facts & circumstances, penalty under the provision of section 271(1)(c) of the Act should not be levied.
5. However, the AO found that the assessee offered the undisclosed income only after once it was detected by the department. Had there not been any scrutiny, the impugned receipt should have evaded from tax. The AO also found that it is the duty of the assessee to disclose true income. The assessee did not disclose the income on account of impugned professional receipt but claimed the credit of tax deducted by the payee. The AO also found that the assessee emphasized on mens rea, however the element of means rea has been done away by inserting the explanation to the provision of section 271(1)(c) of the Act. The explanation to section 271(1)(c) provides that any addition made to the total income shall be deemed as concealment of income unless the assessee furnishes explanation and proves that such explanation is bona fide. However, the assessee failed to substantiate the explanation furnished by him and also failed to prove that such explanation was bona-fide. The AO in holding so referred the CBDT circular No. 486 dated 23-09-1986 and several judicial pronouncements. Accordingly, the AO levied the penalty of Rs. 1,54,500/- being 100% of tax sought to be evaded.
6. On appeal by the assessee, the learned CIT(A) also confirmed the levy of penalty imposed by the AO.
7. Being aggrieved by the order of the AO the assessee is in appeal before me.
7.1. The learned AR before me filed paper book running from pages 1 to 41 and reiterated the submissions made before the authorities below.
7.2. On the contrary, the Ld. DR before us relied on the orders of the lower authorities.
8. I have heard the rival contentions of both the parties and perused the materials available on record. Admittedly, the assessee not offered income on professional receipt of Rs. 5 lakh in the original return filed under section 139 of the Act. The income was offered during the assessment proceedings by filing a letter in response to notice issued under section 142(1) of the Act and assessment was accordingly completed by the AO after making addition of impugned amount. Subsequently, the AO initiated penalty proceedings under section 271(1)(c) of the Act for furnishing inaccurate particulars income and finally levied the penalty which was also confirmed by the learned CIT(A).
8.1. It is a settled position of law that the penalty proceedings are different from assessment proceedings. In the penalty proceeding, the burden lies on the revenue to prove that the assessee has concealed income or furnished inaccurate particular of income. In holding so, I find support and guidance from the judgment of Hon'ble Madhya Pradesh High Court in case of CIT vs. Suresh Chandra Mittal reported in MANU/MP/0086/1999 : 241 ITR 124 where it was held as under:
It is well-settled that under section 271(1)(c), the initial burden lies on the revenue to establish that the assessee has concealed the income or has furnished inaccurate particulars of such income. The burden shifts to the assessee only if he fails to offer any explanation for the undisclosed income or offers an explanation which is found to be false by the assessing authority. However, the proviso to Explanation 1 provides for shifting of this burden again where the explanation offered by the assessee is found to be bona fide.
8.2. On further appeal by the department, the Hon'ble supreme court also confirmed the finding of the Hon'ble High court which is reported in MANU/SC/1286/2001 : 251 ITR 9.
8.3. Coming to the case on hand, it is undisputed fact that assessee deposited tax on impugned professional receipt of Rs. 5 Lakh dated 17-08-2017 i.e. after issuance of notice under section 142(1) of the Act dated 09-06-2017 where explanation with regard to difference in the amount of professional income declared viz-a-viz. income reported in Form-26AS was sought. The assessee in reply explained that the amount was omitted to be included in the computation of income by the accountant due to oversight. However, such human error was rectified on realization of mistake by depositing due taxes. The explanation of the assessee was nowhere found to be incorrect by the AO. The AO also has not brought any evidences on record that the assessee willfully not offered the income from impugned professional receipt of Rs. 5 Lakh. At this point it is also important to highlight that during the year the assessee has offered taxable income of Rs. 4,03,78,080/- on account of professional receipt, STCG and other receipts. Thus, considering the same, we find force in the contention of the assessee that impugned receipt of Rs. 5 lakh was omitted due to oversight without being any mala fide intention. As such, the AO only on the basis of presumption and surmises held that the assessee offered income only after same has been identified by the department. Such presumption of the AO is not based on any material. Therefore, in this fact and circumstances it cannot be held that the assessee has concealed or furnished inaccurate particulars of his income and liable to penalty under section 271(1)(c) of the Act. In holding so, I also fine support and guidance from the judgment of Hon'ble Gujarat High Court in case of PCIT vs. Gujarat State Electricity Corporation Ltd. reported in MANU/GJ/2314/2022 : 144 taxmann.com 165 where the Hon'ble court held that in no penalty can be imposed where the assessee made bona fide mistake and corrected the same on realization of mistake. The relevant observation of the Hon'ble court extracted as under:
11. We have considered the submissions made by learned advocate for the Revenue and in view of finding of fact arrived at by the Tribunal to the effect that the assessee on realisation of the mistake, has rectified the same by offering the provision for interest of Rs. 11.90 crores as prior period income in subsequent year and therefore, in view of such necessary correction done by the assessee on detecting the mistake pointed out by the Assessing Officer during the assessment proceedings for the year under consideration, it can be inferred that there is no mens rea on part of the assessee so as to attract the penalty under section 271(1)(c) of the Act.
8.4. In view of the above and considering the facts in totality, I find that there was human error committed by the accountant of the assessee due to which impugned professional receipt of Rs. 5 lakh omitted to be included in the total income. Thus, there was no willful attempt from the assessee to conceal his income. The explanation furnished by the assessee in this regard is bona fide and duly substantiated by the affidavit of the accountant. Therefore, I hereby set aside the finding of the learned CIT(A) and direct the AO to delete the penalty imposed by him. Hence the ground of appeal of the assessee is hereby allowed.
9. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the Court on 22/02/2023 at Ahmedabad.
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