2023 (7) TMI 1210 - AT - Income Tax

Penalty u/s 271(1)(c) - Reopening of assessment initiated u/s 147 - Information u/A 28 of the India-France DTAA was received regarding the four undisclosed foreign bank accounts held with HSBC Bank, Geneva, Switzerland - HELD THAT - Appeal by the Revenue against the order passed by the learned CIT(A) in quantum appeal, the coordinate bench of the Tribunal 2023 (3) TMI 1105 - ITAT MUMBAI allowed the petition filed by the assessee under Rule 27 of ITAT Rules and held that the AO had no jurisdiction to make the addition under section 147 of the Act. Accordingly, the appeal filed by the Revenue in quantum proceedings was rendered academic and therefore, was dismissed. Since the addition made by the AO while completing the assessment under section 147 of the Act was held to be beyond the jurisdiction by the coordinate bench of the Tribunal vide aforesaid order, we find no basis in the penalty levied under section 271(1)(c) of the Act based on the very same addition. Grounds raised by the Revenue are dismissed.

Summary

Issues:
The judgment involves the challenge by the Revenue against the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1997-98.

Issue 1:
The Revenue contested the deletion of penalty by the CIT(A) without considering specific information received from a foreign government regarding beneficial ownership of undisclosed foreign bank accounts by the assessee.

The Revenue argued that the CIT(A) erred in deleting the penalty without acknowledging the information received in the form of a 'Base Note' from a foreign government regarding the undisclosed foreign bank accounts. The Revenue contended that this information was crucial and should have been taken into consideration before deleting the penalty.

Issue 2:
The Revenue challenged the deletion of penalty by the CIT(A) based on the assessee's failure to provide proper explanation and disclose facts within his exclusive knowledge.

The Revenue asserted that the CIT(A) erred in deleting the penalty without considering that the assessee failed to provide a satisfactory explanation and disclose relevant facts during the penalty proceedings. The Revenue argued that the onus was on the assessee to provide necessary information, which he failed to do.

Issue 3:
The Revenue objected to the deletion of penalty by the CIT(A) in light of the department's disagreement with the deletion of quantum addition towards undisclosed HSBC bank accounts.

The Revenue contended that the CIT(A) should not have deleted the penalty without considering the department's disagreement with the deletion of quantum addition related to the undisclosed HSBC bank accounts. The Revenue highlighted that an appeal had been filed before the ITAT for the assessment year 1997-98, indicating a discrepancy in the decisions made.

The Tribunal upheld the deletion of the penalty under section 271(1)(c) of the Act. The case involved information received under the India-France Double Taxation Avoidance Agreement regarding undisclosed foreign bank accounts held with HSBC Bank, Geneva. A search and seizure action revealed that the assessee was a beneficial owner of a foreign bank account with HSBC Bank, Geneva. Reassessment proceedings were initiated, and the AO added an amount to the total income of the assessee as unexplained money. The CIT(A) upheld the jurisdiction under section 147 of the Act but deleted the addition made by the AO. Subsequently, the penalty under section 271(1)(c) was levied and later deleted by the CIT(A) due to the deletion of the addition in the quantum appeal. The Tribunal found that since the addition made by the AO was held to be beyond jurisdiction, the penalty was not sustainable. Therefore, the appeal by the Revenue was dismissed, upholding the deletion of the penalty.