In a recent case, the Surat bench of the Income Tax Appellate Tribunal (ITAT) held that mere cash deposits could not be considered income and deleted the tax addition under section 69 of the Income Tax Act, 1961. Further observed that every addition cannot be a basis for levying a penalty under section 271(1) unless there is a finding of AO that the assessee has deliberately furnished inaccurate particulars or concealed the income.
Dinesh Chandra Dudhwala, the assessee challenged the order of National Faceless Appeal Centre, Delhi/Commissioner of Income tax (Appeals) [NFAC/CIT(A)] which in turn arises out of penalty levied by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961.
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The Authorized Representative (AR) for the assessee submitted that there is a delay of 532 days in filing an appeal before the Tribunal. The assessee has filed an application for condonation of delay supported with an affidavit. The AR for the assessee submitted that the impugned order was passed by CIT(A) and that the assessee was required to file an appeal on or before 20.05.2022, however, the appeal was filed only on 03.11.2023 resulting by delay of 532 days.
The AR of the assessee submitted that the delay in filing the appeal is neither intentional nor deliberate but due to miscommunication and inadvertent assumption of fact by instructing Chartered Accountant, Kansariwala & Chevli & Associates by staff of Rasesh Shah & Co (AR).
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The instructing Chartered Accountant sent an e-mail to present the AR of his office on 17.04.2021 for filing an appeal before Tribunal for assessment year 2012-13, which was filed on 24.05.2021, which was filed in time. For filing an appeal for the assessment year 2011-12 against the order dated 21.03.2022, instructing Chartered Accountant sent an e-mail, however, that e-mail was inadvertently assumed by staff of present Ld.AR about assessment year 2012-13 and resultantly no further action was initiated. Thus, appeal for impugned year could not be filed.
The fact for non-filing appeal was realized only after 3rd week of October, 2023 when the assessee enquired from his instructing Chartered Accountant to know the status of appeal, when recovery notice was served for assessment year 2011-12. On verification of record, it was realized that due to negligence, the appeal for assessment year 2011-12 could not be filed before the Tribunal. The AR of the assessee submitted that there is no fault on the part of assessee rather he was relying upon the CA/Consultant who is well known professional in the matters of appeal before Tribunal.
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The assessee submitted that case of assessee was reopened under section 147 and notice under section 148 dated 27.03.2018 was served upon the assessee. In response to notice under section 148, the assessee filed return of income declaring income of Rs.12,31,590/- and assessment was completed by making a small addition on account cash deposit in City Bank of Rs. 60,800/- only. No further appeal was filed by assessee due to smallness of addition. The assessee has not filed any appeal to buy peace.
The Assessing Officer initiated a penalty only on the addition of cash deposited of Rs. 60,800/-. However, while levying penalty, the Assessing Officer levied penalty on additional income offered by assessee in revised return of income filed in response to notice under section 148 of the Act.
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The AR of the assessee reiterated that revised return in response to notice under section 148 was filed by assessee and there is no question in concealment or furnishing inaccurate particulars of income. So far as, addition of Rs. 60,800/-is concerned, the cash deposited was out of cash withdrawal from other bank account and which was substantiated by filing cash flow statement.
It was settled law that when assessee has filed return of income in response to notice under section 148, such return of income is to be considered as “return of income filed under section 139” for the purpose of penalty under section 271(1)(c) and no penalty is to be levied. Only income assessed over and above the return of income, if there is no income assessed over and above return of income, no penalty is liable to be levied under section 271(1)(c) of the Act.
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On the other hand, the Revenue supported the order of lower authorities. It was submitted that assessee offered additional income only on service of notice issued under section 148. The Assessing Officer while assessing income of assessee made addition of Rs.60,800/- under section 69 of the Act. The Assessing Officer while passing the assessment order, at the bottom of assessment order, has clearly recorded about issuance of notice for concealment of income and penalty was levied for concealment of income.
The Assessing Officer levied penalty on the additional income offered by assessee in the return filed in response notice issued under section 148 as well as addition made under section 69 of the Act on account of deposit in City Bank of Rs.60,800/-.
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A two member bench of Shri Pawan Singh, Judicial Member and Shri Bijayananda Pruseth, Accountant Member viewed that no penalty is leviable as mere cash deposit cannot be considered income of the assessee. The grounds of appeal raised by the assessee are allowed.
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