Krishan Chand Jain vs ITO, Ward-2(3)

1.

That the impugned penalty order is bad in law as well as on merits.

2.

That the impugned penalty notice is without jurisdiction.

3.

That the penalty has been initiated vide notice Us. 274 dtd. 06.12.2017 and 03.03.2020 without any specific charge, hence, notice issued U/s. 274 and the order passed U/s. 271(1)(c) of the Act are illegal, bad in law and without jurisdiction.

4.

That under the facts and circumstances, no penalty Us. 271 (1)(c) for Rs. 4,26,310/-should have been levied.

5.

That under the facts and circumstances of the case, no penalty can be levied on the estimated additions made during the asstt. proceedings / CIT(A) proceedings.

6.

That under the facts and circumstances of the case, no penalty can be levied on the addition deleted by CIT(A) during quantum proceedings.

“6.1

I have considered the facts of the case, penalty order and submission made by the appellant. The facts as perused from the order under appeal is that the appellant filed his return of income for the assessment year 2015-16 declaring his total income at Rs.5,91,760/-. The case was selected for scrutiny under CASS and notice u/s. 143(2) of the Act was issued on 28.07.2016 to the appellant. During the assessment proceedings, AO treated taxable rental income at Rs.5,55,658/-out of Rs.7,93,796/- as income from house property of the appellant. Further, AO made disallowance of Rs.16,64,454/- by disallowance of 75% of insurance expenses and RC expenses of Rs.14,27,232l- and Rs.7,92,036/- respectively for A.Y. 2015-16 in the assessment order passed u/s 143(3) of the Act dated 23.11.2017 In consequence to this, penalty proceedings u/s 271(1)(c) was also initiated in the case.

6.2

The AO has also noted in the penalty order that appellant had preferred first appeal before the Ld. CIT(A)-, Gurgaon against the addition made of rental income at Rs.5,55,658/- and disallowance of Rs.16,64,454/- by disallowance of 75% of insurance expenses and RC expenses of Rs.14,27,232/- and Rs.7,92,036-respectively for A.Y. 2015-16. Subsequently, Ld. CIT(A)-l, Gurgaon through its order Appeal No 520/17-18 dated 16/08/2018 partly allowed the appeal of appellant. CIT(A) had deleted the addition of Rs.5,55,658/- in respect of rental income since appellant included in P& L account as rental income of Rs.7,93,796/- and restricted the disallowance of Rs. 16,64,454/- at 50% in respect of insurance and RC expenses.

Aggrieved with the order of CIT(A)-1, Gurgaon, appellant filed appeal before Hon ble ITAT, New Delhi.

Thereafter, AO passed order u/s 271(1)(c) of the Act on 20/03/2020 and levied penalty of Rs.4,26,310/- for the year under consideration. As CIT(A) gave relief to 50% of expenses under RC charges and insurance charges which came to Rs.16,64,454/-*50%= 8,32,227/- AO passed penalty order u/s 271(1)(c) of the Act and important portion of above said penalty order is as under:

Keeping in view the law of natural justice, sufficient opportunity of being heard have been provided to the assesssee. But no response/no satisfactory reply is received. It is well settled that the onus of filling of inaccurate particulars of income/ concealment of income could be discharged by assessee.

Itis important to mention here that collection of taxes is a sovereign function of the state. Further it is the duty of the Department to appropriately penalize the tax evaders o those who try to mislead the Govt. during the Income Tax proceedings by filing inaccurate particulars of income.

Again Reliance is placed on the Judgement of Kerala High Court in the case of CIT vS Shree Krishna Trading Company, reported in 253 ITR 645, in which it was held that in penalty proceedings initiated u/s 271(1)(c) of the TAct 1961, the burden is on the assessee to establish that he has not concealed the particulars of income. The Hon'ble High has held that in such case if the assessee fails to furnish an explanation or offers an explanation which he is not able to substantiate, Explanation 1 to the Sec 271(1(c) of the | T Act has application and the levy of penalty is justified.

The Hon'ble Apex Court in the case of K.P. Madhusudhanan Vs. Commissioner of Income Tax (251-ITR-99) has observed that, 'by reason of the explanation to section 271, the onus is on assessee to prove that his failure to return his correct income was not due to fraud or neglect. The relevant portion of the judgment is reproduced as under: -

Reliance in this regard is also placed on the Bombay High Court's Judgement in the case of CITvs SMJ Builder(2003) where in it was held that the explanation to section 271(1)(c) deems concealment wherever there is difference between the reported and assessed income.

Reliance is also placed on the Commissioner of Income Tax vs Atul Mohan Bindal Judgement, where Hon'ble Apex Court Held that penalty u/s 271(1)(c) is neither criminal nor quasi criminal but a civil liability. Such liability being civil in nature, mensrea is not essential.

In view of the facts and the circumstances of the appellant, AO imposed penalty u/s 271(1)(c) of the Act of Rs.4,26,310/-.

6.3

Hon'ble ITAT, SMC Bench, New Delhi in ITA No.6917/Del/2018 vide order dated 26.04.2019 has dismissed the quantum appeal of the appellant and held that neither before the Assessing Officer or Commissioner of Income Tax (Appeals), the appellant could demonstrate by filing evidence that for which of the vehicles sold by him, the appellant had borne the expenses under the head Insurance and registration charges. The Assessing Officer and the Commissioner of Income Tax(Appeals) had made disallowance for that reason. Even before Hon'ble ITAT, the AR of the appellant could not show the nexus between the expenses incurred and the vehicles sold by him. Therefore, Hon'ble ITAT dismissed the appeal of the appellant.

During the appellate proceedings, the appellant furnished few case laws where the Hon'ble Courts have held that notice issued u/s 271(1)(c) should specifically mention the charge on which the action is proposed. The appellant also submitted few case laws where Hon'ble Courts held that penalty can not be levied on adhoc estimation of net profit and also penalty can not be levied on disallowance of expenses made on estimation basis. However, in the case of the appellant the facts are entirely different. The appellant claimed certain expenses in the P & L account in the form of insurance and RC charges incurred by him on the vehicles sold. However, the appellant has not produced any details w.r.t. vehicles sold and insurance and RC charges incurred by him during the assessment proceedings as well as appellate proceedings before CIT(A) as well as Hon'ble ITAT. Therefore, the disallowance made by the AO has been confirmed for want of details from the appellant and however, appellant has not discharged his duties and instead avoided to submit the evidences against the expenses claimed by him. This is clear cut furnishing of inaccurate particulars by the appellant while filing of return of income and thereby leading to concealment of income. The AO in his penalty order held that appellant has furnished inaccurate particulars of income and made a default liable for penalty u/s 271(1)(c) of the , T. Act. In view of that the contention made by the appellant alongwith supporting case laws is not correct and hence rejected.

Therefore, in view of the above, facts and circumstances of the case, penalty levied by AO of Rs.4,26,310/-u/s 271(1)(c) of the Act is confirmed and all the Therefore, in view of the above, facts and circumstances of the case, penalty grounds of appeal of the appellant are dismissed accordingly. In the result, appeal is dismissed.”