The ITAT, Ahmedabad in Amit kumar Hasmukhbhai Shah v. Deputy CIT [ITA Nos. 517 & 518/Ahd/2019 dated January 18, 2023] has set aside the penalty, for alleged concealing the particulars of income, on the grounds that the income which was sought to be taxed in the hands of the assessee had already been taxed as income in the hands of another entity. Directed the Revenue Department to delete the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961 (“the IT Act”).
Relevant Provisions:
Section 271(1)(c) of the IT Act:
“Failure to furnish returns, comply with notices, concealment of income, etc. –
(1) If the Assessing Officer or the Commissioner (Appeals) or the Principal Commissioner or Commissioner in the course of any proceedings under this Act, is satisfied that any person-
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(c) has concealed the particulars of his income or furnished inaccurate particulars of such income, or”
Amitkumar Hasmukhbhai Shah (“the Appellant”) filed a tax return on March 22, 2007, declaring a total income of INR 16,20,430/-. During a survey conducted under Section 133A of the IT Act, it was discovered that the Appellant was running a transport business in the name of M/s Chandan Carrier (“the Firm”), which involved the movement of trucks and tankers owned by the Appellant. The Firm did not own any vehicles, and although it was owned by Nilesh Shah, the Appellant acted as its authorized signatory, power of attorney holder, and mandate holder.
The Revenue Department (“the Respondent”) subsequently issued an order adding INR 1,07,890/- to the Appellant’s income on the basis that the Appellant was the benami owner of the Firm and any income earned by the Firm should be taxed as income in the Appellant’s hands. The Respondent alleged that the Appellant was the effective owner of the business, and therefore the income was added to the Appellant’s income.
The Appellant previously appealed the decision, and the first Commissioner of Income Tax (Appeals) (“CIT(A)”) and the ITAT set aside the issue of the addition of INR 1,07,890/- for fresh adjudication. However, during the fresh assessment proceedings, the Respondent added INR 1,07,890/- again via an order dated January 17, 2019 (“the Impugned Order”) and imposed a penalty under Section 271(1)(c) of the IT Act for concealing the particulars of income.
The Appellant has appealed this decision, arguing that the income sought to be taxed by the Respondent belongs to Nilesh Shah, has already been assessed in his name, and therefore there is no basis for imposing a penalty under Section 271(1)(c) of the IT Act.
Facts:
Amitkumar Hasmukhbhai Shah (“the Appellant”) filed a tax return on March 22, 2007, declaring a total income of INR 16,20,430/-. During a survey conducted under Section 133A of the IT Act, it was discovered that the Appellant was running a transport business in the name of M/s Chandan Carrier (“the Firm”), which involved the movement of trucks and tankers owned by the Appellant. The Firm did not own any vehicles, and although it was owned by Nilesh Shah, the Appellant acted as its authorized signatory, power of attorney holder, and mandate holder.
The Revenue Department (“the Respondent”) subsequently issued an order adding INR 1,07,890/- to the Appellant’s income on the basis that the Appellant was the benami owner of the Firm and any income earned by the Firm should be taxed as income in the Appellant’s hands. The Respondent alleged that the Appellant was the effective owner of the business, and therefore the income was added to the Appellant’s income.
The Appellant previously appealed the decision, and the first Commissioner of Income Tax (Appeals) (“CIT(A)”) and the ITAT set aside the issue of the addition of INR 1,07,890/- for fresh adjudication. However, during the fresh assessment proceedings, the Respondent added INR 1,07,890/- again via an order dated January 17, 2019 (“the Impugned Order”) and imposed a penalty under Section 271(1)(c) of the IT Act for concealing the particulars of income.
The Appellant has appealed this decision, arguing that the income sought to be taxed by the Respondent belongs to Nilesh Shah, has already been assessed in his name, and therefore there is no basis for imposing a penalty under Section 271(1)(c) of the IT Act.
Issue:
Whether the Impugned Order imposing penalty upon the Appellant is sustainable?
Held:
The ITAT, Ahmedabad in ITA Nos. 517 & 518/Ahd/2019 held as under:
- Relied on the judgment of the Hon’ble Gujarat High Court in Patel Chemical Works v. Assessing Officer [Tax Appeal No. 772 of 1999 dated September 8, 2008] wherein, it was held that in penalty proceedings, the factum of the same income having been offered to tax by a different entity and having been taxed substantially in hands of such different entity becomes a relevant factor for determining whether assessee has concealed said income or furnished inaccurate particulars regarding said income which has already been taxed after being shown in hands of different entity.
- Observed that, the primary reason for levy of penalty is that the Firm is effectively held by the Appellant and the income which is sought to be taxed in the hands of the Appellant has already been offered to tax as income in the hands of Nilesh Shah and the assessment proceedings have also been completed by the Respondent in respect of such income.
- Held that, it is not a fit case for levy of penalty under Section 271(1)(c) of the IT Act and directed the Respondent to delete such penalty.