AI Structured Summary
Not yet generated for this judgment
Judgment
PER NAVEEN CHANDRA, ACCOUNTANT MEMBER:
This appeal is filed by the Assessee against the order of Ld. National Faceless Appeal Centre dated 28-Jan-2026 arising from the penalty order u/s. 271(1)(c) of the Act dated 27-09-2022 of the Income-tax Act, 1961 (hereinafter referred to as “the Act”) of Circel - 67(1), Delhi the Assessing Officer (hereinafter referred to as “the AO”) for the Assessment Year 2015-16.
The Assessee has raised the following grounds of appeal:
1)That the Ld. CIT(A)/NFAC has erred in law and on facts of the matter by sustaining the penalty of Rs. 85,227/- under section 271(1)(c) of the Income Tax Act, 1961, being the penalty has been levied in a mechanical manner without appreciating that the Appellant had filed the return of income disclosing true and correct income without any concealment, and thereby the impugned penalty deserves to be deleted.
2)That the Ld. CIT(A)/NFAC has erred in law and on facts of the matter by sustaining the penalty of Rs. 85,227/- under section 271(1)(c) of the Income Tax Act, 1961, without appreciating the fact that the assessment under section 143(3)/147 was completed accepting the returned income declared by the appellant in the return filed u/s 148, clearly establishing that there was no concealment of income, and accordingly the penalty imposed deserves to be deleted.
3)That the Ld. CIT(A)/NFAC has erred in law and on facts by not appreciating that most of the tax liability had already been discharged through TDS amounting to Rs. 15,82,355/-, thereby establishing the bona fide conduct of the Appellant, and that the non-filing of the return within the prescribed time was not deliberate OR intentional but due to inadvertent oversight during corporate restructuring, constituting reasonable cause under Section 273B of the Act, for which penalty ought not to have been levied.
4)That the Ld. CIT(A)/NFAC has erred in law and on facts by not following and distinguishing the judicial precedents cited by the Appellant, including those of the Honourable Supreme Court and various High Courts on narrow factual grounds without appreciating that the fundamental legal principle that penalty u/s 271(1)(c) cannot be levied in the absence of any mens rea OR wilful intent to evade tax.
5)The Ld. CIT(A)/NFAC erred in dismissing the challenge to jurisdiction of the JAO to pass the penalty order, when the penalty proceedings initiated under the Faceless Penalty Scheme, 2021 were transferred from the National Faceless Penalty Centre (NFPC) to the JAO without prior approval of the CBDT, in violation of the mandatory provisions of The Faceless Penalty Scheme, 2021.
6)The Ld. CIT(A)/NFAC erred in not adjudicating the ground relating to absence of draft penalty order in substance, and in mechanically dismissing the same without examining whether personal hearing was duly provided as mandated under the Faceless Penalty Scheme, 2021.
7)The Appellant craves leave to add, alter OR amend any of the above grounds of appeal at the time of hearing and to submit such additional grounds as may be necessary and expedient in the interest of justice.
The present case pertains to penalty proceedings initiated under section 271(1)(c) of the Act, for A.Y 2015-16. Brief facts of the case are the assessee, an individual salaried person, had not filed the return of income within the prescribed time under section 139 of the Act. On verification of departmental records, the Jurisdictional AO noticed that the assessee had earned salary income of Rs.61,33,690/- and interest income of Rs.4,11,749/- during the relevant financial year. Accordingly, the ld AO issued notice u/s 148 dated 28.03.2021. The assessee though contested the service of notice u/s 148, he filed the return of income on 15.01.2022 declaring total income of Rs.59,80,040/-, comprising salary income of Rs. 57,18,288/- and interest income of Rs. 4,11,749/-, after claiming deduction under section 80C of Rs.1,50,000/-. The returned income was accepted in assessment proceedings.
The ld AO however, initiated penalty proceedings for concealment of particulars of income by issuing notice under section 274 read with section 271(1)(c). The assessee contested the penalty proceedings contending that notices under section 148 and section 142(1) were not properly served and that the non-filing was due to inadvertent oversight during corporate restructuring and that there was no intention to evade tax. Rejecting the explanation, the ld AO concluded that income would not have surfaced but for reopening under section 147 and imposed a minimum penalty of Rs.16,67,582/-under section 271(1)(c) of the Act. The assessee thereafter contested the quantum and submitted that as the tax liability was already covered through TDS, as per Explanation 4(b) below Section 271(1)(c)(iii), credit of TDS is deductible from the amount of tax payable worked out, for imposition of penalty u/s 271(1)(c) of the Act. The ld rectified the mistake apparent from record, and reduced the penalty to Rs. 85,227/-. Aggrieved the assessee was in appeal before the ld. CIT(A) who dismissed the appeal of the assessee
Aggrieved by the order of the ld. CIT(A), assessee is now in appeal before us.
Before us, ld. Counsel for the assessee stated that the ld. CIT(A), NFAC sustained the penalty of Rs.85,227/- under section 271(1)(c) of the Act without appreciating that the assessee had filed the return of income by disclosing true and correct income without any concealment. The ld AR relied on following judicial pronouncements:
a. CIT vs. Suresh Chandra Mittal [2001] 251 ITR 9 (SC)
b. CIT vs. Suresh Chandra Mittal [2000] 241 ITR 124 (MP)
c. CIT vs. SAS Pharmaceuticals [2011] 335 ITR 259 (Del.)
d. Ashvin Narayan Bajoria (HUF) vs. ITO, ITA No. 369 / SRT / 2022,
On the other hand, Ld. DR relied on the order of the ld. CIT(A).
We have heard the rival submissions and perused the material available on record. We find that the sole reason for levy of penalty is but for issuance of notice u/s 148, the income would not have been declared. We are of the view that for levying penalty u/s 271(1)(c), such a reasoning is not justified. The assessee has been subjected to the TDS on his salary and interest income and the state exchequer is not at a loss. Further, in the instant case, the Assessing Officer has fully accepted the income declared in the return of income filed under section 148 of the Act and there is no addition made. The Revenue has failed to establish that there is concealment of income or the assessee has furnished inaccurate particulars. We, therefore, following the decision of CIT v. SAS Pharmaceuticals [2011] 11 taxmann.com 207(Del), which held that concealment of income has to be established from the return filed by the assessee, and the decision of coordinate Bench of Delhi in the case of Vandana Verma in ITA No.582/Del/2026, hold that no penalty under section 271(1)(c) of the Act is leviable on the assessee. Appeal is allowed.
In the result, appeal filed by the assessee in ITA No. 3566/DEL/2026 is allowed.