KISHOR DIGAMBAR PATIL, NASHIK v. Income Tax Officer, Ward-2(1), Nashik, Nashik

॥ आयकर अपीलीय न्यायाधिकरण, पुणे "ए" न्यायपीठ, पुणे में ॥ IN THE INCOME TAX APPELLATE TRIBUNAL, PUNE ‚A‛ BENCH, PUNE BEFORE HON'BLE SHRI S. S. GODARA, JUDICIAL MEMBER

AND

SHRI G. D. PADMAHSHALI, ACCOUNTANT MEMBER

आयकर अपऩल स.ं / ITA No. 54 & 55/PUN/2023 निर्धारण वषा / Assessment Year : 2017-18 & 2018-19

Kishor Digambar Patil, 03, Saras Apartment, Patil Lane 04, College Rd., Nashik - 422005 PAN: AARPP2052J . . . . . . . अपऩलधर्थी / Appellant बिधम / V/s

Income Tax Officer, Ward 2(1), Nashik . . . . . . . प्रत्यर्थी / Respondent द्वधरध / Appearances

Assessee by : Shri Shardul Sonawane & Ms Abhilasha Pawar Revenue by : Shri Ramnath Murkunde

सनुवाई की तारीख / Date of conclusive Hearing : 30/03/2023 घोषणा की तारीख / Date of Pronouncement : 30/03/2023

आदेश / ORDER PER G. D. PADMAHSHALI, AM;

These twin appeals for assessment years [in short 'AY'] 2017-18 & 2018-19 are assailed against respective orders of National Faceless Appeal Centre, Delhi [in short 'NFAC'] dt. 06 & 07/12/2022 passed u/s 250 of the Income-tax Act, 1961 [in short

'the Act'],

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2. Since the issue involved in both these appeals is identical, with the agreement of parties hereto, the matter is heard together for a consolidated order; resultantly the adjudication laid ITA No. 54/PUN/2023 shall mutatis-mutandis apply to ITA No. 55/PUN/2023.

3. At the outset we note that the grounds raised in the present appeal are inconsonance with rule 8 of the Income Tax Appellate Tribunal Rules, 1963 [in short 'ITAT-Rules'], hence without reproducing them it shall suffice to articulate that the substantive legal ground orbits alleging violation of principle of natural justice and non-application of mind on the part of Ld. AO while dealing with imposition of penalty u/s 270A of the Act.

4. Both the parties laid their rival contentions and after hearing them at a length, we have perused the case records in the light of rule 18 of ITAT, Rules 1963 and freezed the following undisputed facts for adjudication;

4.1 The appellant assessee is a salaried employee had filed his original return of income [in short 'ITR'] u/s 139(1) of the

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Act on 19/07/2017 declaring income of ₹8,82,790/- after claiming deduction u/c VI-A for sum of ₹1,65,284/-.

4.2 Subsequently the assessee revised his ITR u/s 139(5) of the Act thereby slicing down the total income to ₹4,90,810/- consequent to higher claim of deduction u/c VI-A of ₹3,59,844/- as against original claim of deductions made in original return filed u/s 139(1) of the Act.

4.3 A survey action u/s 133A of the Act was carried out on a third party wherein certain information about the appellant was gathered which was shared by the Investigation wing to the jurisdiction AO of the assessee. Pursuant to such information, the case of the appellant was subjected for re- assessment u/s 147 of the Act following the due procedure laid therefore.

4.4 In response to notice u/s 148 of the Act, the appellant filed his ITR correcting spurious claim of deductions and thus restored original state as was then returned in the ITR filed u/s

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139(1) of the Act i.e. withdrawn additional claim of deductions made in ITR filed u/s 139(5) of the Act. The said re- assessment proceedings culminated accepting income retuned pursuant to notice u/s 148 of the Act. Thus the department recovered the refund of tax earlier paid on revision of return.

4.5 The Ld. AO underlining the variation between income returned pursuant to notice u/s 148 with that of revised ITR filed u/s 139(5) of the Act, has invoked the penal provision and after considering the submission of the appellant has finally by an order dt. 14/01/2022 u/s 270A of the Act imposed a penalty of ₹1,64,392/- i.e. @200% of tax sought to be evaded for under-reporting of income holding it is in the nature of mis-reporting .

5. On an unsuccessful attempt before the first appellate authority, the appellant has set-up a present case for reversal of aforestated penalty on a solitary legal ground as intoned at para 3 herein before.

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6. In this admitted factual matrix, our indulgence is called to adjudicate the legal ground and in doing so, without reproducing provision of section 270A of the Act in verbatim, it shall be purposive to state that, from AY 2017-18 Ld. AO, CIT, CIT(A) and PCIT are severally empowered at a discretion to initiate and levy a penalty @50% and @200% of tax sought to be evaded respectively on under-reported income and when such under- reported income is in consequence of mis-reporting. Here it is apt to note that, unlike section 271(1)(c) the present penalty provision of section 270A of the Act clearly enumerates seven exclusive

circumstances or incidences in clause (a) to clause (g) of s/s (2) which gives rise to under-reported income of a person. And once the incidence of under-reported income is identified or determined, the sub-section (9) of section 270A lineally list outs six actions to tests whether such under-reported income is in consequence of mis-reporting or not for the purpose of imposition of accelerated rate of penalty @200% of tax sought to be evaded under s/s (8) in place of empathetic rate of penalty @50% for sheer under-reporting us/s (7) of section 270A of the Act.

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7. We are mindful to the evolution of present penalty law, whereby the legislature in his highest wisdom has brought-in this new simplified penalty scheme through insertion of section 270A with a pre-dominant intent to end highly debated and litigated provision of section 271(1)(c) of the Act. And in this context it shall be apt to note the 'Explanatory Memorandum' to the provisions of Finance Bill, 2016 which explains the objective behind inserting this section 270A vide para 62.1 CBDT Circular 3/2017 (F. No. 370142/20/2016-TPL) as;

"Under the existing provisions, penalty on account of concealment of particulars of income or furnishing inaccurate particulars of income is leviable under section 271(1)(c) of the Income-tax Act. In order to rationalise and bring objectivity, certainty and clarity in the penalty provisions, it is proposed that section 271 shall not apply to and in relation to any assessment for the assessment year commencing on or after the 1st day of April, 2017 and subsequent assessment years and penalty be levied under the newly inserted section 270A with effect from 1st April, 2017. The new section 270A provides for levy of penalty in cases of under-reporting and misreporting of income." (Emphasis supplied)

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8. Coming back to present appeal we observed that, the Ld. AO after having clearly analysed facts and circumstances of the case has dejectedly failed to identify or determined and then communicate either through reassessment order or through notice the specific circumstance or incidence i.e. specific clause (a) to clause (g) of s/s (2) of section 270 within which the case of the appellant falls so has to hold income as under-reported to trigger said penal provision. The failure continued further in identifying or determining and showcasing the specific action of the appellant in terms of clause (a) to clause (f) to s/s (9) of section 270 within which such action of the assessee falls so has to jacket or categorise such under-reported income is in consequence of mis-reporting. We note that without adhering to aforestated exercise, the Ld. AO precipitately culminated penal proceedings imposing a penalty @200% of the tax sought to be evaded. We further note wistfully that, in an appeal the Ld. NFAC exercising plenary, coterminous and coextensive jurisdiction could have rightly dealt with this provision; however it too perfunctory ceased the proceedings echoing in line with the Ld. AO.

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9. Albeit it is true that present section 270A unlike section 271 does not require the Ld. AO to record satisfaction for invocation of penal provision, but unless the person has been communicated the specific incidence vis-à-vis action triggering the imposition of penalty in his case, he could never be able to refute the charge brought out against him.

10. Thus non identification or determination vis-à-vis

communication of specific clause lineally from sub-section (2) and sub-section (9) would drastically obstruct an assessee from enforcing his right to dismantle the charge alleged against him, thus resulting into violation of principle of natural justice.

11. We understand a traffic constable when catch holds of a rider entering into 'no-entry or one-way', before he draws a challan on him, he first shows a traffic signboard indicating 'no entry' and then demonstrates how that rider has entered into 'no entry or one-way' path violating traffic rules and only after hearing him decides to make a penalty challan. So if a traffic constable scrupulously follows a principle of natural justice even before

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imposing a petty penalty, then we are unable to comprehend as to what stopped the lower tax authorities in outstepping from principle of natural justice while dealing with impugned penalty proceedings.

12. In adjudicating the issue under consideration we are heedful to state that, the penalty provisions of section 270A like provision of section 271(1)(c) are detrimental, albeit commercial consequences and being mandatory brooks no trifling or dilution therewith. Thus a contravention of a mandatory condition or requirement is fatal with no further proof and as a result in our considered view the ratio decidendi laid in context of section 271(1)(c) of the Act by the Hon'ble Supreme Court in ‚Dilip N Shroff Vs JCIT‛ reported in 291 ITR 519 (SC) and ‚Ashok Pai Vs CIT‛ reported at 292 ITR 11(SC), further by Jurisdictional Bombay High Court in plethora judgements including ‚CIT Vs Samson Pericherry‛, ‚PCIT Vs Goa Dorado‛ and ‚PCIT Vs New Era Sova Mine‛ shall still hold good even in impugned penal proceedings of section 270A of the Act.

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13. Having aforesaid, in our opinion, the non-application of mind by tax authorities while dealing with the penal provisions cannot at this stage be improved by remanding the matter back for de- nova consideration, hence prayer of the Ld. DR stands meritless.

14. In the light of aforestated reasoning and discussion, we observed that, the notice initiating the penal proceedings is silent on the circumstance or incidence triggering the very initiation in this case. Further the order of penalty did neither mention the circumstance or incidence nor make a mention of alleged action in reaching the final imposition. In the event respectfully applying similar analogy as laid in aforestated judicial precedents to the case in hand, we find force in the argument of the appellant that, the failure on the part of lower tax authorities to identify and communicate the specific circumstance or incidence from clause (a) to (g) of s/s (2) of section 270A by virtue of which the income of the appellant held as under-reported and further failure on the part of lower tax authorities to showcase which of the specific action of the appellant from clause (a) to (f) of s/s (9)

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