Once income suffered TDS it cannot be said to be undisclosed income – ITAT
ABCAUS Case Law Citation
ABCAUS 3650 (2023) (01) ITAT
Important Case Laws relied upon:
Samson Maritime Ltd. vs CIT
Mak Data 258 ITR 593 (SC)
Dharmendra Textiles Processors (2007) 295 ITR 244
CIT vs Vidyagauri Natwar Lal, 238 ITR 91 (Guj)
Virtual Soft Systems Ltd. vs. CIT (2007) 207 CTR (SC) 733: (2007) 289 ITR 83 (SC)
CIT v/s Agrawal Round Rolling Mills Limited (2013) 85 CCH 0510
CIT v/s Shankerlal Nebhumal Uttamchandani (2009) 311 ITR 0327 (Guj)
CIT vs Suresh Chandra Mittal (2001) 251 ITR 9 (SC)
CIT vs. SAS pharmaceuticals (2011) 335 ITR 0259 (Del)
CIT vs. Pushpendra Surana (2013) 96 DTR 0231 (Raj)
In the instant case, the assessee had challenged the order passed by the CIT(A) in confirming the concealment penalty u/s 271(1)(c) of the Income Tax Act, 1961 (the Act).
The assessee has filed its return of income belatedly. After receiving notice u/s 143(2), the assessee revised the return declaring additional income from house property, interest from FDRs and consultancy fee.
The AO noted that the original return was not filed by the assessee u/s 139(1). Therefore, the assessee was not entitled to file revised return and the assessee’s revision of return after issuance of notice u/s 143(2) was not in accordance with law. The AO was of the view that in case the case of the assessee was not selected for scrutiny u/s 143(3) of the Act then this amount of income would have escaped.
As a result, the AO levied the impugned penalty u/s 271(1)(c) of the Act.
Before the ITAT, the assessee submitted that the declaration of additional income being the interest on FDR, Consultancy Fees and Income from House Property were declared voluntarily, suo moto and in good faith before any detection made, even remotely.
It was further submitted that the AO did not ask for any details at the time of issuing notice u/s 143(2) in which the AO simply required the assessee to submit evidence in support of the ROI filed. However, no specific query w.r.t. the non-declaration of the subjected items of income was ever raised.
It was also contended that the notice u/s 142(1) was issued only much later to the date of filing of the revised ROI. Hence the question of detection of the discrepancy by the AO did not arise in the instant case.
Further, it was submitted that the assessing officer in the assessment order as also in the penalty order nowhere recorded any finding and nor referred any specific query raised by him nor it was a case of survey / search or a case of getting information from a third party) and it was the assessee itself who, on its own declared the income.
It was also submitted that the revised computation / return of income might not be admissible for technical reasons yet it was a good material admittedly available on the record of the AO showing the fact that the assessee had included and always intended to include such income in its taxable total income and it is only such material, which has been made a basis and was the starting point by the AO. The AO had proceeded only w.r.t. such material. He had not only accepted the figures mentioned in the revised computation / return of income but also assessed the same. It was not disputed that the entire amount of the tax becoming payable on such a revision was duly deposited by way of the Self-assessment tax and TDS and was duly accepted by the AO as well.
No upward variation made by the AO in the declared income. On one hand the AO was relying upon the very material submitted by the assessee, however, ignoring the same, at the same time also charging the assessee of the blame of concealment, on the other.
For non inclusion of the income in original return, it was submitted that the assessee was a salaried class person and frequently undertaking foreign/ domestic journeys in connection with his profession hence was not able to pay much attention to his accounts and being salaried class, he was otherwise not maintaining regular books of account.
It was submitted that the assessee was a senior citizen and remained under a bonafied belief that once tax has already been deducted he was not violating any provision. For the tax purposes he has to share relevant information to his C.A. himself or used to instruct his staff to do so in his absence. The C.A. being stationed in other State, there was a lack of face to face detailed discussion and therefore, there were all the chances of lack / mis-communication between the two. On the other hand, the C.A. was dependent on whatever information he could obtain from the assessee / his subordinate staff.
It was contended that TDS suffered income is not concealed income. The entire additional income was subject to TDS. Once such income appears in the TDS statement in Form-26AS and tax has been deducted it can-not be a case of undisclosed income. At the worst, it was only a bona fide mistake committed by the assessee or his Tax Consultant who prepared the computation but no one can smack of malafide intention of concealment w.r.t. such items of income.
Further it was submitted that the word “concealment” inherently carried with it the element of mens rea. To impose a penalty u/s 271(1)(c), it has to be proved that the assessee has consciously made the concealment or furnished inaccurate particulars of his income.
The Tribunal observed that the notice u/s 143(2) is normally a formal notice showing the selection of the case for scrutiny and to comply with the limitation provision. Nothing was brought on record by the revenue if the assessee was specifically asked or investigation was made with reference to all the three items of income additionally declared.
The Tribunal opined that during the relevant year it was a quite usual practice for the deductor to issue certificate in form 16A or to upload the same in form 26AS lately. It cannot be denied that the assessee must have been under a bona fide impression that all such incomes were subjected to TDS and therefore, he was not concealing any income from the department.
The Tribunal observed that there was no difference between the assessed income and the income declared in the revised return.
Further, ITAT expressed agreement with the contention that once the additional income has suffered TDS it cannot be said to be undisclosed income of the assessee.
The Tribunal opined that cumulative consideration of all the facts and circumstances clearly establish that it was not a case of concealment of income with respect to the declaration of the additional income.
The Tribunal stated that it is well settled principle of interpretation of penal provisions that the same has to be construed strictly and no penalty cannot be imposed unless the case strictly fall within the legal parameters.
Accordingly, the AO was directed to delete the penalty imposed u/s 271(1)(c) under challenge.
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