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TMI Blog2024 (3) TMI 814X X X X Extracts X X X X X X X X Extracts X X X X ..... aving India, was employed in Indian Company and used to live at a rented premises. He had parked his Indian Savings fixed deposits and mutual funds which continued during the year under consideration. The assessee did not file his income tax returns due to bona fide ignorance that tax has already been deducted by the Bank on interest income and due to his stay outside India. Thus the penalty was levied by the AO on interest income on which TDS was deducted which is also reflected in Form No. 26AS. Keeping in view the above facts, circumstances of the case and also the decision of ITAT Ahemdabad in the case Vijaybhai Dashrathbhi Patel [ 2022 (2) TMI 1429 - ITAT AHMEDABAD] wherein held assessee had earned interest income (being the only source of income for the captioned year), on which taxes had been duly withheld by the payer. Therefore, the assessee is conscious of the fact that the Income Tax Department is aware about his having income, but was of the mistaken view that once taxes have been deducted on this income, the assessee was not required to be filed return of income, thus not a fit case for levy of penalty since the assessee in the instant set of facts had reasonable cause ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... with the reply. He imposed minimum penalty of Rs. 1,92,439/- for concealment of income u/s 271(1)(c) read with Explanation 1. 2.2 Aggrieved by the order of the AO as to concealment of penalty of Rs. 1,92,439/- u/s 271(1)(c) of the Act on the assessee, the assessee carried the matter before the ld CIT(A) who concluded that this is a fit case for levy of penalty u/s 271(1)(c) of the Act read with Explanation 1 and thus confirmed the penalty by observing as under:- 6. I have carefully considered the facts of the case, penalty order and written submissions of the appellant. 7. The written submission in this regard is reproduced below: The appellant is a Non Resident and is not well versed with the intricacies of the Indian Income tax laws. He shifted to Saudi Arabia for employment long ago in 2007 and is eaming his bread and butter there since then. Before leaving India he was employed in an Indian company and used to live at a rented premises of Flat No.204 Vijay Laxmi Aptts, Bhaskar Marg, Bani Park, Jaipur. He had parked his Indian savings in fixed deposits and mutual funds which continued during the years under consideration. He did not file his income tax returns due to bonafide i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esent appeal in order to get justice. It is most respectfully submitted that the penalty proceedings are independent of assessment proceedings and any addition made in the assessment proceedings need not necessarily imply that penalty has to be Imposed. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income. In this regard, attention of the Hon'ble Bench is most respectfully invited to the following judgments:- S.No. Particulars Hon ble Court Held / Our humble submissions 1 Motilal Padampat Sugar Mills Co. Ltd. Vs. State of U.P. (1979) 118 ITR 326 (Supreme Court) Non-acquaintance with the provisions of law can be considered as a reasonable cause under taxation laws. There is no presumption that every person knows the law. It is often said that everyone is presumed to know the law, but that is not a correct statement. There is no such maxim known to the law. 2 Hindustan Steel Ltd. Vs. State of Orissa (1972) 83 ITR 26 (Supreme Court) An order imposing penalty for failure to carry out a statutory obligation is the result of quasi judicial proceedings and penalty for failure will not ordinarily be imposed u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee was not required to be filed return of income. Therefore, in our view, this is not a fit case for levy of penalty since the assessee in the instant set of facts had reasonable cause for not filing return of income. We therefore cancel trider Imposing penalty and allow the appeal of the assessee. In view of the above judgments, it is most respectfully submitted that the harsh penalty levied on the humble appellant ignoring the provisions of law may kindly be deleted. It is further submitted that at para no. 6 of the penalty order the Id A.O. has mentioned that notice was issued on 16.12.2021 request the assessee to fumish reply by 20.12.2021 but no reply was furnished the assessee. This observation of the Id. A.O. is totally erroneous as the appellant has submitted reply on the income tax portal on 18.12.2021 (before the due date of 20.12.2021) which is evident from the screenshot of the income tax portal enclosed herewith as the copy of acknowledgement of reply generated times the Income tax portal which is also enclosed herewith. The penalty levied A.O. without considering the reply filed by the assessee is illegal and unjustified. In the aforesaid circumstances and in the inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia J.D. Educational Society v. DGIT(E) [2011] 198 Taxman 443 (Delhi) has held that ignorance of law cannot be treated as an excuse for statutory compliance. 13.3 The Hon'ble Kerala High Court in Fathima Educational Charitable Trust v. CIT [WP(C).No. 31709 of 2016), in similar circumstances the court held that it is trite that ignorance of law is not an excuse and lack of understanding would also be akin to ignorance; which cannot validly be taken up. 13.4 Hon'ble Madras High Court in Viswanathan Silk Centre v. CIT [1994] 72 300 (MAD.) was dealing with ignorance of law pleaded as the ground for claiming condonation of delay. It held that ignorance of law is no excuse and that the appellants have failed to satisfactorily explain the cause of delay and the order of Commissioner to refuse condonation, in absence of proper explanation for the delay, was upheld. 13.5 In CIT vs M/S. Indian Gospel Fellowship, Tax Case (Appeal) No.477 of 2010, the High Court of Madras reiterated the well settled principle of law that ignorance of law cannot be a ground for condonation of statutory compliance. 13.6 The Hon'ble ITAT Delhi in Mewat Grit Udyog Vs PCIT [2017- TIOL-607-ITAT-DEL] held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and subject to non-initiation of penalty proceedings and prosecution. However, the AO levied penalty for the same for concealment of income and for not furnishing true particulars. The Apex Court held that it is the statutory duty of the assessee to record all its transactions in the books of accounts, to explain the source of payments made by it and to declare its true income in the ROI filed by it. The Court was of the view that the surrender of Income by the assessee in this case is not voluntary, in the sense, that the offer of surrender was made in view of detection by the AO in the survey conducted in the sister concern of the assessee. The Apex Court, therefore, concluded that the levy of penalty is correct in law. It held: We are of the view that the surrender of income in this case is not voluntary in the sense that the offer of surrender was made in view of detection made by the AO in the search conducted in the sister concern of the assessee. In that situation, it cannot be said that the surrender of income was voluntary. AO during the course of assessment proceedings has noticed that certain documents comprising of share application forms, bank statements, memorandum of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ). It is therefore abundantly clear that in view of the Explanation to Section 271(1)(c), the burden of proving the bonafides is on the assessee. This decision therefore gives the Important test for such cases and requires that it would depend how the assessee has discharged his burden of proving his bonafides. 16.3 The case at hand is at much weaker footing as in this case, not even a revise return was filed, 17. In view of the overall discussion made above, it is concluded that this was a fit case for levy of penalty u/s 271(1)(c) read with Explanation 1. The penalty imposed is confirmed. All grounds of appeal are dismissed. 18. In the result, the appeal is dismissed. 2.3 Now the assessee has carried the matter against the order of the ld. CIT(A) as to sustaining the penalty before this Bench and prayed that the appeal may kindly be allowed thereby deleting the harsh and unjustified penalty levied u/s 271(1)(c) of the Act for which the ld. AR has filed the detailed written submission as under:- Brief Facts Submissions : The appellant is a Non Resident and is not well versed with the intricacies of the Indian Income tax laws. He shifted to Saudi Arabia for employment long ago in 2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complex Indian income tax laws. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income and due to his stay outside India. Penalty was levied by the ld. A.O. on interest income of Rs. 17,39,319/- on which TDS of Rs. 1,73,001/- was deducted which is also reflect in Form No. 26AS. The ld. CIT(A) confirmed the penalty. Being aggrieved, the appellant has preferred this present appeal in order to get justice. It is most respectfully submitted that the penalty proceedings are independent of assessment proceedings and any addition made in the assessment proceedings need not necessarily imply that penalty has to be imposed. He did not file his income tax returns due to bonafide ignorance that tax has already been deducted by the bank on interest income. In this regard, attention of the Hon ble Bench is most respectfully invited to the following judgments:- S.No. Particulars Hon ble Court Held / Our humble submissions 1 Motilal Padampat Sugar Mills Co. Ltd. Vs. State of U.P. (1979) 118 ITR 326 (Supreme Court) Non-acquaintance with the provisions of law can be considered as a reasonable cause under taxation laws. Ther ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of Hon ble Supreme Court in the case of Mak Data Pvt. Ltd. and upheld deletion of penalty by holding at para 11 as under:- 11. In a recent decision of the Hon'ble Supreme Court in Civil Appeal No.9772 of 2013, dated 30.10.2013 (Mak Data P. Ltd., vs. Commissioner of Income Tax-II), the Hon'ble Supreme Court while considering the Explanation to Section 271(1), held that the question would be whether the assessee had offered an explanation for concealment of particulars of income or furnishing inaccurate particulars of income and the Explanation to Section 271(1) raises a presumption of concealment, when a difference is noticed by the Assessing Officer between the reported and assessed income. The burden is then on the assessee to show otherwise, by cogent and reliable evidence and when the initial onus placed by the explanation, has been discharged by the assessee, the onus shifts on the Revenue to show that the amount in question constituted their income and not otherwise. Factually, we find that the onus cast upon the assessee has been discharged by giving a cogent and reliable explanation. Therefore, if the department did not agree with the explanation, then the onus was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21 requesting the assessee to furnish reply by 20.12.2021 but no reply was furnished by the assessee. This observation of the ld. A.O. is totally erroneous as the appellant has submitted reply on the income tax portal on 18.12.2021 (before the due date of 20.12.2021) which is evident from the screenshot of the income tax portal enclosed herewith as the copy of acknowledgement of reply generated from the income tax portal which is also enclosed herewith. The penalty levied by the ld. A.O. without considering the reply filed by the assessee is illegal and unjustified and deserves to be deleted. In the aforesaid circumstances and in the interest of justice, it is most respectfully requested that the appeal may kindly be allowed thereby deleting the harsh and unjustified penalty levied. 2.4 On the other hand, the ld. DR supported the order of the ld. CIT(A). 2.5 We have heard both the parties and perused the materials available on record. In this case, it is noted that the AO had information in his possession that the assessee had made investment in FDR of Rs. 98,00,284/- and had received interest income of Rs. 17,39,319/-. As no regular return had been filed by the assessee, the AO re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avings fixed deposits and mutual funds which continued during the year under consideration. The assessee did not file his income tax returns due to bona fide ignorance that tax has already been deducted by the Bank on interest income and due to his stay outside India. Thus the penalty was levied by the AO on interest income of Rs. 17,39,319/- on which TDS of Rs. 1,73,001/- was deducted which is also reflected in Form No. 26AS. The Bench noted that similar issue was decided by the Ahemdabad Bench (SMC) vide its order dated 25- 02-2022 in the case of Vijaybhai Dashrathbhi Patel vs ACIT, Circle 7(1), Ahemdabad (ITA No. 2622/Ahd/2017 for the assessment year 2008-09 with following observations: 8 We note from the facts in the above case support the proposition that if on facts, the assessee is able to demonstrate that he has a reasonable cause for not filing return of income then the assessee cannot be subject matter of penalty u/s 271(1)(c) of the Act. In order to invoke Explanation 3 to Section 271(1)(c) of the Act, the assessing officer has to establish that there was no reasonable cause on part of the assessee for non-fling of return of income. However, if from the facts of the case ..... X X X X Extracts X X X X X X X X Extracts X X X X
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