SONU KHANDWLWAL, Jaipur V. ITO, Jaipur

ITA 1/JPR/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5067 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 01-01-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BHATEJA CIT DHK
• Keywords: Gift
• Section: 143(3); 131; 68; 6

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS [KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YAD AV, AM VK;DJ VIHY LA-@ ITA NO. 01/JP/2015 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2007-08. SMT. SONU KHANDELWAL, C-19, JAGAN PATH, CHOMU HOUSE, JAIPUR. CUKE VS. THE INCOME TAX OFFICER, WARD 2(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AHEPK 3168 N VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI RAJEEV SOGANI (CA) JKTLO DH VKSJ LS@ REVENUE BY : SHRI O.P. BHATEJA (ADDL. CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 19.09.2016. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 27/09/2016. VKNS'K@ ORDER PER SHRI KUL BHARAT, JM. THE APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. CIT (APPEALS)- I, JAIPUR DATED 28.10.2014 PERTAINING TO ASSESSMENT YEAR 2007-08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL :- IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) HAS ERRED IN CONFIRMING THE ACTION OF THE LD. A O IN IMPOSING PENALTY U/S 271(1)(C) OF INCOME TAX ACT, 1961 AMOUN TING TO RS. 2,64,054/-. THE ACTION OF THE LD. CIT (A) IS ILLEGA L, UNJUSTIFIED, ARBITRARY AND AGAINST THE FACTS OF THE CASE. RELIEF MAY PLEASE BE GRANTED BY QUASHING THE PENALTY OF RS. 2,64,054/- I MPOSED U/S 271(1)(C) . 2. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REF ERRED TO AS THE ACT) WAS COMPLETED ON 29.12.2009 ASSESSING THE TOTAL INCOME OF THE ASSESSEE AT RS. 2 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL 34,92,880/-. THE AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT IN RESPECT OF THE ADDITION MADE UNDER SECTION 6 8 OF THE ACT. SUBSEQUENTLY, THE AO IMPOSED PENALTY OF RS. 2,64,054/- ON THE CREDITS INTRODUCED DURING THE YEAR OF RS. 7,19,500/-. AGGRIEVED BY THIS ORDER, ASSESSEE PREFERRED APPEAL BEFORE LD. CIT (A), WHO AFTER CONSIDERING THE SUBMISSIONS SUSTAINE D THE ORDER OF THE AO. 3. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 3.1. THE LD. COUNSEL FOR THE ASSESSEE REITERATED TH E SUBMISSIONS AS MADE IN GIST OF SUBMISSIONS WHICH ARE REPRODUCED AS UNDER :- 1. FOLLOWING FACTS EMERGE OUT OF THE ORDER OF THE LD. AO, PASSED DURING QUANTUM PROCEEDINGS:- NAME AMOUNT (RS.) UNDISPUTED FACTS SMT. MUNNI DEVI (AO QUANTUM ORDER PAGE 5) 60,000 AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE COMPLETE ADDRESS WAS PROVIDED CONFIRMATION SUBMITTED SUMMON U/S 131 SERVED AND REPLY RECEIVED BY THE LD AO SHE IS AN INCOME TAX ASSESSEE. INCOME TAX RETURN F OR A.Y.2007-08 SUBMITTED, WHEREIN INTEREST INCOME OF R S. 72,215 IS SHOWN. BANK STATEMENT EVIDENCING THE PAYMENT SUBMITTED. SHRI SUBHASH ATOLIA (AO QUANTUM ORDER PAGE 5) 60,000 AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE COMPLETE ADDRESS WAS PROVIDED CONFIRMATION SUBMITTED SUMMON U/S 131 SERVED HE IS AN INCOME TAX ASSESSEE. INCOME TAX RETURN FO R A.Y.2007-08 SUBMITTED. BANK STATEMENT EVIDENCING THE PAYMENT SUBMITTED. NAME AMOUNT (RS.) UNDISPUTED FACTS SHRI RAJENDRA SHARMA (AO QUANTUM ORDER PAGE 7) 1,49,500 AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE COMPLETE ADDRESS WAS PROVIDED CONFIRMATION SUBMITTED SUMMON U/S 131 SERVED AND REPLY RECEIVED BY THE LD AO HE IS AN INCOME TAX ASSESSEE. INCOME TAX RETURN FO R A.Y.2007-08 SUBMITTED. SHRI NARAYAN PRAKASH KEDAWAT 2,50,000 AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE COMPLETE ADDRESS WAS PROVIDED 3 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL 2. FOLLOWING ARE THE UNDISPUTED FACTS:- 2.1 THE ASSESSEE HAD RECEIVED UNSECURED LOANS FROM THE ABOVE MENTIONED PERSONS THROUGH ACCOUNT PAYEE CHEQU E ONLY. 2.2. ALL PERSONS ARE INCOME TAX ASSESSEES AND HAD F ILED THEIR INCOME TAX RETURN FOR THE A.Y. 2007-08. 2.3. SUMMONS U/S 131 WERE DULLY SERVED PROVING THEI R IDENTITY. 3. FROM THE ORDER OF THE LD. AO, PASSED IN THE QUAN TUM PROCEEDINGS, IDENTITY OF ALL THE PERSONS, FROM WHOM ASSESSEE HAD TAKEN UN SECURED LOAN DURING THE PREVIOUS YEAR, WAS ESTABLISHED BEYOND DOUBT . THE LD. AO, NOT BEING SATISFIED OF THE GENUINENESS OF THE TRANSACTIONS, A T BEST, COULD HAVE ASSESSED SUCH AMOUNT IN THE HANDS OF SUCH INDIVIDUA LS. 4. THERE ARE AMPLE JUDICIAL DECISIONS FAVORING THE ASSESSEE EVEN FOR DISCHARGING THE ONUS FOR THE PURPOSES OF SECTION 68 WHEN THE EVIDENCES, AS MENTIONED ABOVE, WERE ADDUCED DURING QUANTUM PRO CEEDINGS. REFERENCE MAY BE DRAWN TO THE RATIO LAID DOWN BY TH E HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF KANHAIALAL JANGID [2008] 217 CTR 354 (RAJ.) . HOWEVER, NOT BEING FAVORED IN THE QUANTUM PROCEED INGS (AO QUANTUM ORDER PAGE 7) CONFIRMATION SUBMITTED SUMMON U/S 131 SERVED AND REPLY RECEIVED BY THE LD AO HE IS AN INCOME TAX ASSESSEE. INCOME TAX RETURN FO R A.Y.2007-08 SUBMITTED. SHRI RAJESH PANCHAL (AO ORDER PAGE 10) 2,00,000 AMOUNT WAS RECEIVED THROUGH ACCOUNT PAYEE CHEQUE COMPLETE ADDRESS WAS PROVIDED CONFIRMATION SUBMITTED SUMMON SERVED AND HE APPEARED BEFORE LD AO HE IS AN INCOME TAX ASSESSEE. INCOME TAX RETURN FOR A.Y.2007-08 SUBMITTED. SHRI RAJESH PANCHAL HAD ONE BANK ACCOUNT IN THE AN DHRA BANK AT VANASTHALI MARG, JAIPUR. THE SAME WAS O PERATED AND CHEQUE BOOK WITH SIGNATURE OF RAJESH PANCHAL WA S KEPT BY SHRI SATYA NARAYAN SHARMA. THE CHEQUE IN THE FAV OUR OF THE ASSESSEE WAS ISSUED FROM THAT ACCOUNT. BANK STATEMENT OF ANDHRA BANK EVIDENCING THE PAYME NT SUBMITTED. IT MAY BE TRUE THAT LOAN IS NOT GIVEN BY SHRI RAJE SH PANCHAL TO THE ASSESSEE AS PER HIS STATEMENT, BUT THE LOAN IS CERTAINLY GIVEN BY SHRI SATYA NARAYAN ON BEHALF OF RAJESH PANCHAL AS THE CHEQUE BOOK WITH SIGNATURES OF RAJES H PANCHAL WAS KEPT BY SATYANARAYAN WITH THE CONSENT O F RAJESH PANCHAL. NO OPPORTUNITY WAS PROVIDED TO THE ASSESSE FOR CRO SS EXAMINATION OF RAJESH PANCHAL. TOTAL 7,19,500 4 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL THE SAME MUST BE CONSIDERED FOR AT LEAST FOR DECIDI NG THE PENALTY PROCEEDINGS. 5. DURING THE QUANTUM PROCEEDINGS, THE LD. AO, COUL D NOT BRING TO THE FORE ANY EVIDENCE, DIRECT OR INDIRECT, TO SHOW THAT THE MONEY SO RECEIVED BY THE ASSESSEE, AS PART OF THE UNSECURED LOAN, ACTUALLY B ELONGED TO HER. NOWHERE THE LD. AO HAS SUGGESTED THAT THE MONEY GIV EN BY SUCH INDIVIDUALS HAD ACTUALLY FLOWN FROM THE ASSESSEE. A DDITIONS MADE BY THE LD. AO, UNDER SECTION 68, IN THE HANDS OF THE ASSES SEE WERE SIMPLY BASED ON CONJECTURE AND SURMISES. 6. IT IS SUBMITTED THAT THE BUSINESS WAS CARRIED OU T BY THE ASSESSEE IN SEJAL ENTERPRISES ALONG WITH THE BROTHER OF THE ASSESSEE S HUSBAND (AO ORDER PAGE 2) . HOWEVER, DUE TO INTERNAL FAMILY DISPUTES, ASSESSE ES BROTHER-IN- LAW, WHO WAS LOOKING AFTER DAY TO DAY ACCOUNTING, D ID NOT COOPERATE IN THE APPELLATE PROCEEDINGS. THE ASSESSEE COULD NOT, IN S PITE OF TRYING THE LEVEL BEST, PRODUCE SUFFICIENT EVIDENCES TO THE SATISFACT ION OF THE LD. AO, TO PROVE THE GENUINENESS OF THE TRANSACTIONS WITH REGA RDS TO SUCH UNSECURED LOANS. 7. THE ASSESSEE EVEN COULD NOT VEHEMENTLY PRESS THE CROSS OBJECTION, FILED BEFORE HONBLE ITAT, JAIPUR BENCH, IN THE QUANTUM P ROCEEDINGS, AGAINST THE ADDITIONS SUSTAINED BY THE LD. CIT (A). 8. MERELY BECAUSE THE ASSESSEE DID NOT PRESS THE CR OSS OBJECTION, DOES NOT ESTABLISH THE TRANSACTIONS TO BE NON-GENUINE AND TH EREBY WARRANTING PENALTY U/S 271(1)(C). 9. SIMPLY BECAUSE THE ASSESSEE COULD NOT SUBSTANTIA TE THE TRANSACTION BY PRODUCING THE INDIVIDUALS OR OTHER RELEVANT DOCUMEN TS, TO THE SATISFACTION OF THE LOWER AUTHORITIES, PENALTY CANNOT BE LEVIED. 10. IT MAY BE POINTED THAT BEFORE PENALTY COULD BE IMPOSED ON THE ASSESSEE, THE LOWER AUTHORITIES WERE DUTY BOUND, IN THE ENTIR ETY OF CIRCUMSTANCES, TO POINT TO THE CONCLUSION THAT THE DISPUTED AMOUNT RE PRESENTED INCOME OF THE ASSESSEE AND THAT THE ASSESSEE HAD CONSCIOUSLY CONCEALED THE PARTICULARS OF HER INCOME OR HAD DELIBERATELY FURNI SHED INACCURATE PARTICULARS. THE LOWER AUTHORITIES HAVE FAILED TO B RING TO THE FORE ANY MATERIAL WHICH CAN TO ACCEPTED AS AN EVIDENCE FOR F ALSITY OF THE CLAIM OF THE ASSESSEE OR THAT THE ASSESSEE CONSCIOUSLY CONCE ALED ANY PARTICULARS OF INCOME. ON THE OTHER HAND, THE LOWER AUTHORITIES IN A MECHANICAL 5 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL MANNER LEVIED PENALTY ON THE PREMISE THAT WHEN ANY ADDITIONS ARE SUSTAINED IRRESPECTIVE OF THE FACTS OF THE CASE PEN ALTY HAS TO BE LEVIED. 11. THE EXTENT OF ONUS UNDER SECTION 68 FOR QUANTUM PROCEEDINGS IS DIFFERENT AND HIGHER ON THE ASSESSEE. AS AGAINST TH IS, THE EXTENT OF ONUS IN PENALTY PROCEEDINGS IS DIFFERENT AND HIGHER ON THE REVENUE. UNDOUBTEDLY EXPLANATION 1 TO SECTION 271(1)(C) RAI SES A PRESUMPTION OF CONCEALMENT AGAINST THE ASSESSEE, IF THERE ARE A NY ADDITIONS TO THE RETURNED INCOME BUT THE SAID PRESUMPTION IS REBUTTA BLE. IN THE INSTANT CASE THE OVERWHELMING EVIDENCES PRODUCED, TO SUBSTA NTIATE THE CREDITS RELIEVE THE ASSESSEE OF HER ONUS UNDER SECTION 271( 1)(C). NEEDLESS TO MENTION THAT ASSESSEE MIGHT BE LACKING IN SUBSTANTI ATING THE EXPLANATION BUT THE SAME IS NOT PROVED TO BE FALSE NOR IS LACKING IN BONA-FIDES. IN VIEW OF THIS PENALTY IMPOSED IS CONT RARY TO THE BASIC FRAMEWORK OF THE PROVISIONS OF SECTION 271(1)(C). 12. IT IS SUBMITTED THAT EVEN THOUGH UNDER SECTION 68, THE ADDITIONS MADE ARE DEEMED TO BE THE INCOME OF THE ASSESSEE OF THE RELEVANT PREVIOUS YEAR, NO LEGAL FICTION HAS BEEN CREATED TO TREAT SU CH ADDITIONS AS CONCEALED INCOME OF THE ASSESSEE FOR THE PURPOSE OF PENALTY PROCEEDINGS. 13. IN THE CASE OF BARODA TIN WORKS [1996] 221 ITR 661 (GUJARAT), EVEN THOUGH THE ADDITION UNDER SECTION 68 WAS MADE ON AD MISSION BY THE ASSESSEE, THE TRIBUNAL, AFTER CONSIDERING THE RELEV ANT MATERIAL AND EVIDENCE ON RECORD, COME TO THE CONCLUSION THAT THE PRESUMPTION UNDER THE EXPLANATION TO SECTION 271(1)(C) STOOD REBUTTED , IT WAS JUSTIFIED IN DELETING PENALTY IN THE ABSENCE OF ANY POSITIVE EVI DENCE BROUGHT BY THE DEPARTMENT. HONBLE GUJARAT HIGH COURT, IN THE SAID JUDGMENT, ALSO HELD THAT (CASE LAW PAGE 8) IT IS TO BE NOTICED THAT FALSITY OF EXPLANATION WAS EXPRESSLY PUT DIFFERENTLY FROM MERE UNSATISFACTORY NATURE OF EXPLANATION OFFERED. SO ALSO A CLEAR DIST INCTION WAS DRAWN BETWEEN AN EXPLANATION WHICH IS NOT SATISFACTORY AN D WHICH IS NOT BONA FIDE. THE FORMER WAS SUFFICIENT TO INCLUDE THE DISP UTED SUM IN THE COMPUTATION OF INCOME OF THE ASSESSEE AS FALSITY OF EXPLANATION, INHERES WILFUL NONDISCLOSURE. IN THE LATTER CASE, T HOUGH EXPLANATION OFFERED BY THE ASSESSEE IN RESPECT OF SUCH ADDITION S OR DISALLOWANCE MAY BE NOT SATISFACTORY IN THE OPINION OF THE INCOM E TAX OFFICER, IT MAY BE SUFFICIENT TO INCLUDE IT IN INCOME, BUT STILL IF THE ASSESSEE ESTABLISHES HIS BONA FIDES ABOUT THE EXPLANATION SUBMITTED BY H IM, PENALTY COULD NOT BE IMPOSED BY INVOKING THE EXPLANATION.. 6 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL 14. THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF BARODA TIN WORKS (SUPRA) WAS FOLLOWED BY THE HONBLE ITAT CHANDIGARH BENCH IN THE CASE OF JASBIR SINGH SAINI [2015] 61 TAXMANN.COM 230 (CHANDIGARH - TRIB.) AND HELD THAT (CASE LAW PAGE 10) HEAD NOTES. SECTION 271(1)(C), READ WITH SECTION 68, OF THE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMEN T OF INCOME (SETTING ASIDE OF ADDITION, EFFECT OF) - ASSESSMENT YEAR 2005-06 - WHETHER ONCE EXPLANATION GIVEN BY ASSESSEE IS FOUND NOT TO BE FALSE, TO BRING CASE UNDER AMBIT OF EXPLANATION TO SECTION 271(1)(C), IT HAS TO BE SEEN WHETHER SAME IS SUBSTANTIATED OR NOT - HELD , YES - WHETHER WHERE IN QUANTUM APPEAL AGAINST ADDITION MADE UNDER SECTION 68, TRIBUNAL HAD ACCEPTED ASSESSEE'S EXPLANATION IN RES PECT OF PART OF DEPOSIT AND PARTLY CONFIRMED ADDITION STATING THAT EXPLANATION GIVEN BY ASSESSEE WAS NOT CONVINCING, IT COULD BE SAID THAT ASSESSEE HAD CONCEALED HIS INCOME OR FURNISHED ANY INACCURATE PA RTICULARS WARRANTING LEVY OF PENALTY UNDER SECTION 271(1)(C) - HELD, NO [PARA 11] [IN FAVOUR OF ASSESSEE].. 15. HONBLE ITAT JAIPUR BENCH , UNDER IDENTICAL SET OF FACTS, IN THE CASE OF SHRI K.C. GARG, ITA NO. 133/JP/2012, RELIED IN ITS EARLIER ORDER IN THE CASE OF KESAR DEVI GARG AND DELETED THE PENALTY IMPOSED UNDER SECTION 271(1)(C). HONBLE ITAT JAIPUR BENCH IN THE CASE OF KESAR DEVI GARG, AS REPRODUCED IN THE ORDER OF SHRI K.C. GARG (SUPRA), HELD THAT (CASE LAW PAGE 19-20) COPY OF THE ORDER OF TRIBUNAL IS ALSO PLACED ON RECORD WHERE IT HAS BEEN OBSERVED THAT ASSESSEE COULD NOT PROVE CONCLUSIVELY THAT THE GIFTS WERE GENUINE. THUS THE SAME APPEARED TO BE NO-GENUINE AND THE CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTIONS COULD ALSO NOT BE PROVED. AFTER TAKING INTO ACCOUNT THE OBSERVATION OF THE TRIBUNAL IT IS SEEN THAT THOUGH ASSESSEE COULD NOT PROVE CONCLUSIVELY THE GENUINENESS OF THE GIFT BUT HAVE FILED ALL THE DETAILS IN RESPECT TO THE GIFT RECEIVED. THIS IS NO T A CASE OF THE DEPARTMENT THAT ASSESSEE HAS GIVEN HIS OWN MONEY AN D THEREAFTER HAS RECEIVED THE SAME IN THE GARB OF GIFT. CONFIRMATION OF GIFT, SOURCE OF GIFT ALONGWITH BANK ACCOUNT OF THE DONOR AND DONEE WERE FILED. THE MAJOR DETAILS IN RESPECT OF GIFT WAS FILED, THEREFORE, AS STATED ABOVE THAT THESE DETAILS WERE NOT SUFFICIENT TO BE A GENUINE GIFT, T HEREFORE, AMOUNT OF GIFT WAS ADDED. THIS IS NOT NECESSARY THAT WHERE ANY ADD ITION HAS BEEN SUSTAINED, PENALTY IS ALSO LEVIABLE. THERE ARE NUME ROUS DECISIONS WHEREIN IT HAS BEEN HELD THAT IT IS NOT NECESSARY T HAT PENALTY IS LEVIABLE IF THE ADDITION IS SUSTAINED. THE EXPLANATION GIVEN BY THE ASSESSEE WAS NOT FOUND FALSE. THIS IS ONLY A CASE OF THE ASSESSE E THAT ASSESSEE FAILED TO SUBSTANTIATE IT, PENALTY IS NOT LEVIABLE AS HELD BY THE HONBLE RAJASTHAN HIGH COURT IN THE CASE OF SHIVLAL TAK VS. CIT (2007) 251 ITR 373 (RAJ.). IN THE CASE OF BARTESH JAIN VS. ITO (20 11) 137 TTJ (DEL) 7 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL 200 WHEREIN IT HAS BEEN HELD THAT IF ADDITION HAS B EEN MADE U/S 68 OF THE ACT ON ACCOUNT THAT CREDITOR COULD NOT BE PRODU CED BUT PENALTY CANNOT BE LEVIED JUST BECAUSE THE ADDITIONS WERE SU STAINED. SIMILAR VIEW HAS BEEN EXPRESSED IN CASE OF S.L.N. TRADERS ( 2012) 341 ITR 235 (KARN) AND IN CASE OF CIT VS. OASIS HOSPITALITIES P . LTD. (2011) 333 ITR 119 (DEL.). WE HAVE ALSO SEEN THAT OTHER CASES ON W HICH RELIANCE HAS BEEN PLACED AND FOUND THAT THEY ARE ALSO IN SUPPORT OF THE CASE OF THE ASSESSEE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW THAT AT LEAST PENALTY IS NOT ALLOWABLE ON THE FACTS OF THE PRESENT CASE, ACCORDINGLY WE CANCEL THE LEVY OF PENALTY 16. HONBLE BOMBAY HIGH COURT IN THE CASE OF UPENDRA V. MITHANI ITA (L) NO. 1860 OF 2009, DECIDED ON 05.08.2009, (CASE LAW PAGE 25) OBSERVED IN THE MATTER OF LEVY OF PENALTY UNDER SEC TION 271(1)(C) OF THE ACT, THAT IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED I.E IT IS NOT ACCEPTED BUT CIRCUM STANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE, THEN NO PENALTY CAN BE IMPOSED IN SU CH CASES. SAME RATIO WAS LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES (2001) 249 ITR 0125 (GUJ-HC) (CAS E LAW PAGE 31) 17. HONBLE ITAT DELHI BENCH IN THE CASE OF SAKET AGARWAL [2014] 147 ITD 686 (DELHI - TRIB.) , RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT AND HONBLE GUJARAT HIGH COURT IN THE CASE OF UPENDRA V. MITHANI (SUPRA) AND NATIONAL TEXTILES (SUPRA) , DELETED PENALTY ON THE ADDITIONS SUSTAINED UNDER SECTION 68, AND HELD THAT (CASE LAW PAGE 39-40) IN THE CASE IN HAND, WE OBSERVE THAT THE ASSESSE E CONSENTED TO PAY TAX TO AVOID FURTHER LITIGATION AN D TO BUY MENTAL PEACE AND INSTEAD OF OFFERING FURTHER EXPLANATION, THE AS SESSEE VOLUNTARILY SURRENDERED BEFORE THE TAX AUTHORITIES AND PAID THE TAX IMPOSED BY THE ASSESSING OFFICER IN REGARD TO THE IMPUGNED ADDITIO N. IN ABSENCE OF FURTHER APPEAL TO THE COMMISSIONER OF INCOME TAX (A ) OR TO THE TRIBUNAL, THE QUANTUM ASSESSMENT ORDER HAS REACHED TO ITS FINALITY BUT THE ASSESSMENT ORDER IS NOT CONCLUSIVE EVIDENCE THA T THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE AND IT CANNOT BE PRESUMED THAT THERE WAS A CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS BY THE ASSESSEE. ACCORDIN GLY, RESPECTFULLY FOLLOWING THE JUDGEMENT OF HON'BLE HIGH COURT OF GU JARAT IN THE CASE OF NATIONAL TEXTILE (SUPRA) WE HOLD THAT THE PENALTY I S NOT IMPOSABLE IN THE PRESENT CASE AND THE ASSESSING OFFICER IMPOSED PENA LTY ON ERRONEOUS ASSUMPTIONS WHICH WAS WRONGLY CONFIRMED BY THE COMM ISSIONER OF INCOME TAX (A) 8 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL 18. FURTHER RELIANCE IS PLACED ON THE FOLLOWING JUD ICIAL PRONOUNCEMENTS, IN WHICH UNDER IDENTICAL SET OF FACTS PENALTY UNDER SE CTION 271(1)(C) WAS DELETED, THE EXTRACTS OF WHICH HAVE BEEN SET OUT FO R THE SAKE OF CONVENIENCE:- 18.1. CIT VS. M.M. GUJAMGADI [2007] 162 TAXMAN 211 (KAR.) (CASE LAW PAGE 43) . A READING OF SECTIONS 271 AND 271(1)(C) AND THE EXPLANATION APPENDED THERETO MANIFESTLY MAKES IT CL EAR THAT EVERY ADDITION OF INCOME BY THE INCOME-TAX OFFICER WILL NOT AUTOMATICALLY ATTRACT LEVY OF PENALTY. IT IS CLEAR FROM EXPLANATION 1(B) TO SECTION 271(1)(C) OF THE ACT TH AT WHILE COMPUTING THE TOTAL INCOME OF AN ASSESSEE, IF THE A SSESSEE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE T HEN THERE WILL BE A DEEMED CONCEALMENT BY THE ASSESSEE. IN THE INS TANT CASE, IN RESPONSE TO THE NOTICE ISSUED BY THE INCOM E-TAX OFFICER FOR ADDITION OF RS. 2,01,000, THE ASSESSEE REPLIED THAT HE BORROWED THE SAME FROM DIFFERENT CREDITORS WHO A RE ALL AGRICULTURISTS. WHEN THE ASSESSEE WAS ASKED TO SUBS TANTIATE THIS CLAIM, THE ASSESSEE MADE ATTEMPTS TO SECURE TH OSE CREDITORS TO EXAMINE BEFORE THE INCOME-TAX OFFICER. DESPITE THE BEST EFFORTS OF THE ASSESSEE, HE COULD NOT SECU RE THE CREDITORS AS WITNESSES TO SUBSTANTIATE HIS CLAIM BE FORE THE INCOME-TAX OFFICER. HAVING NO OTHER ALTERNATIVE, TH E ASSESSEE VOLUNTARILY AGREED FOR ADDITION OF RS. 2,01,000 TO HIS INCOME AS CASH CREDIT. ACCORDINGLY, THE INCOME-TAX OFFICER CO MPUTED THE TOTAL INCOME OF THE ASSESSEE AT RS. 2,99,500, VIDE ORDER OF ASSESSMENT DATED 3-8-1994, AND ON THAT THE ASSESSEE HAS PAID THE TAXES. UNDER THESE CIRCUMSTANCES IT CANNOT BE SAID THAT THE EXPLANATION OF THE ASSESSEE FOR NON-INCLUS ION OF AN INCOME OF RS. 2,01,000 IN HIS RETURN OF INCOME IS N OT BONA FIDE. THE EXPLANATION OFFERED BY THE ASSESSEE IS AVAILABL E ON RECORD. BONA FIDE FAILURE ON THE PART OF THE ASSESS EE IN NOT SUBSTANTIATING HIS CLAIM IS ALSO AVAILABLE ON RECOR D. THE INCOME-TAX OFFICER, WHILE PASSING THE ORDER OF PENA LTY UNDER SECTION 271(1)(C) OF THE ACT, HAS NOT CONSIDERED TH E AVAILABLE EXPLANATION OF THE ASSESSEE AND WHETHER THE EXPLANA TION SO OFFERED IS BONA FIDE OR NOT. 10. THE TRIBUNAL, BY CONSIDERING THESE FACTS, CONCL UDED THAT THE LEVY OF PENALTY BY THE INCOME-TAX OFFICER AND T HE CONFIRMATION OF THE SAME BY THE COMMISSIONER OF INC OME-TAX (APPEALS) IS NOT JUST AND PROPER AND SET ASIDE THE SAME. THE ORDER OF THE TRIBUNAL IN SETTING ASIDE THE PENALTY PROCEEDINGS 9 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL ON THE BASIS OF THE MATERIAL ON RECORD, IN OUR OPIN ION, IS JUST AND PROPER 18.2. CIT VS. OASIS HOSPITALITIES (P.) LTD. [2011] 198 TAXMAN 247 (DELHI - HC) (CASE LAW PAGE 44) HEAD NOTES ..SECTION 271(1)(C), READ WITH SECTION 68, OF T HE INCOME-TAX ACT, 1961 - PENALTY - FOR CONCEALMENT OF INCOME - ASSESSEE HAD GIVEN CERTAIN DOCUMENTS TO PROVE IDENT ITY AND CREDITWORTHINESS OF SHARE APPLICANTS, BUT CREDITWOR THINESS OF THOSE PERSONS COULD NOT BE PROVED BECAUSE OF GAP OF A SUBSTANTIAL PERIOD AND FACT THAT THOSE PERSONS WERE NOT PRODUCED BY ASSESSEE WITH NECESSARY DOCUMENTARY EVI DENCES ORIGINALLY IN SUPPORT OF THEIR IDENTITY AND CREDITW ORTHINESS - ASSESSING OFFICER MADE AN ADDITION UNDER SECTION 68 AND ALSO LEVIED PENALTY UNDER SECTION 271(1)(C) - WHETHER, T HOUGH ASSESSEE COULD NOT PROVE IDENTITY AND CREDITWORTHIN ESS OF SHARE APPLICANTS, YET IT WAS NOT A CASE OF CONCEALM ENT OF INCOME BY ASSESSEE AND, THEREFORE, LEVY OF PENALTY WAS NOT JUSTIFIED - HELD, YES.. 18.3. CIT VS. AWADH FERTILISERS (P.) LTD. [2013] 35 TAXMANN.COM 453 (ALLAHABAD- HC) (CASE LAW PAGE 59) .THAT BEING THE POSITION, FACTUALLY, FAILURE OF T HE ASSESSEE IN PROVING THE CAPACITY OF THE VARIOUS SHAREHOLDERS TO INVEST IN THE SHARE CAPITAL, COULD NOT HAVE BEEN A GROUND FOR INITIATING PENALTY PROCEEDINGS 18.4. VIKRAM BHATIA VS. ITO [2014] 47 TAXMANN.COM 3 65 (LUCKNOW - TRIB.) (CASE LAW PAGE 62) WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. WE FIND THAT THE ONLY ADDITION MADE BY THE AO FOR WHICH PENALTY IS I MPOSED IS THE ADDITION ON ACCOUNT OF TWO UNSECURED LOANS, AND THE ADDITION WAS MADE UNDER S. 68 OF THE ACT. WE ALSO F IND THAT BOTH THE PERSONS HAVE GIVEN CONFIRMATION, WHICH IS AVAILABLE IN THE PAPER BOOK. IT IS TRUE THAT THE UNSECURED LOAN, CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE, WAS NOT ACCEPTE D BY THE REVENUE, BUT PRESENT PROCEEDINGS ARE PENALTY PROCEE DINGS AND THEREFORE, WE HAVE TO SEE AS TO WHETHER THERE I S POSSIBILITY OF CONCEALMENT OR FURNISHING OF INACCURATE PARTICUL ARS OF INCOME OR NOT. IN THE CASE OF K. BHANJI VANMALIDAS & CO. (SUPRA), IT IS OBSERVED BY THE TRIBUNAL IN PARA 6 T HAT ALTHOUGH IT 10 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL IS TRUE THAT MAJORITY OF THE CASH CREDITS WERE NOT ACCEPTABLE EVEN TO THE TRIBUNAL, THIS ALONE CANNOT BE THE FOUN DATION FOR HOLDING THE ASSESSEE GUILTY OF CONCEALMENT. THE TRI BUNAL FURTHER NOTED THAT THE ASSESSEE HAS REASONABLY EXPL AINED THAT THE ADDITION WAS MADE AND CONFIRMED AS THE ASSESSEE COULD NOT DISCHARGE THE PRIMARY ONUS WHICH LAY ON IT UNDE R THE LAW. THE TRIBUNAL FURTHER OBSERVED THAT THE VARIOUS EVID ENCES SUBMITTED BY IT WERE NOT CONSIDERED AS SUFFICIENT T O PROVE THE CASH CREDIT AND AVOID THE DEEMING FICTION PROVIDED IN S. 68 OF THE ACT. THEREAFTER, THE FINDING IS GIVEN THAT THER E IS NOTHING ON RECORD TO PROVE THAT THE ADDITION REPRESENTS THE CO NCEALED INCOME AND THAT THE SAME IS CONSCIOUSLY CONCEALED. AFTER MAKING THESE OBSERVATIONS, THE TRIBUNAL DELETED THE PENALTY IN THAT CASE. WE ALSO FIND THAT IN THE PRESENT CASE AL SO, THE ASSESSEE HAS SUBMITTED CONFIRMATION. IN THE PRESENT CASE ALSO, THE ASSESSEE COULD NOT PROVE INGREDIENTS OF S . 68 IN RESPECT OF THESE TWO LOANS BUT THE EXPLANATION OF T HE ASSESSEE COULD NOT BE DISPROVED ALSO BY THE REVENUE. UNDER T HESE FACTS, WE ARE OF THE CONSIDERED OPINION THAT ALTHOU GH THE ADDITION IS FINALIZED BUT PENALTY IS NOT JUSTIFIED BECAUSE THE ASSESSEE HAS SUBMITTED EXPLANATION REGARDING THESE CASH CREDITS AND THE SAME COULD NOT BE ESTABLISHED TO BE NON- BONA FIDE AND THEREFORE, IN OUR CONSIDERED OPINION, THE PENALTY IS NOT JUSTIFIED. IN VIEW OF THE ABOVE PENALTY LEVIED, BY THE LD. AO AND SUSTAINED BY THE LD. CIT(A), DESERVES TO BE DELETED AS THE SAME HAS BEEN LEVIED IN A MECHANICAL MANNER AND WIT HOUT ESTABLISHING THAT THE ADDITIONS, UNDER SECTION 68, WERE AS A RESULT OF ACTIVE/DELIBERATE CONCEALMENT ON THE PART OF THE ASSESSEE. 3.2. ON THE CONTRARY, THE LD. D/R SUPPORTED THE ORD ERS OF THE AUTHORITIES BELOW. 3.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. WE ARE IN AGREEMENT WITH THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT QUANTUM PROCEEDINGS AND PENALTY PROCEEDINGS ARE DIFFERENT. THE AO LEVIED PE NALTY ON RS. 7,19,500/-. WE FIND THAT IN RESPECT OF MOST OF THE CREDITORS, THE TRANS ACTION HAS BEEN EFFECTED THROUGH 11 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL BANKING CHANNEL. THE EVIDENCES AS SUBMITTED BY THE ASSESSEE WERE NOT ACCEPTED AS SUFFICIENT IN THE QUANTUM PROCEEDINGS. WE FIND THAT IN THE QUANTUM PROCEEDINGS THE TRIBUNAL IN PARA 4.5 OF ITS ORDER HAS HELD AS UNDER :- 4.5. WE HAVE HEARD BOTH THE PARTIES. THE LD. CIT (A) HAS RECORDED THE FINDING THAT CREDITS OF RS. 13,24,300/- ARE OLD . WE ARE NOT AWARE AS TO WHETHER THE CREDITS WHICH ARE CONSIDERED OLD WERE GENUINE TO RESPECT OF THE IDENTITY. IN CASE THE CREDITORS WERE NOT VERIFIABLE IN RESPECT OF IDENTITY THEN THE ADDITION SHOULD HAVE B EEN MADE IN THE YEAR IN WHICH SUCH CREDITORS WERE INTRODUCED. HOWE VER, IF THE CREDITORS CAN BE LOCATED AND IT CAN BE FOUND THAT THEY HAVE R ECEIVED BACK THE CREDITS THEN ADDITION CAN BE MADE U/S 41(1) OF THE ACT IN THE YEAR IN WHICH SUCH REPAYMENT HAS BEEN MADE. WE, THEREFORE, FEEL THAT THE LD. CIT (A) WAS JUSTIFIED IN CONFIRMING THE ADDITION OF RS. 7,19,500/-. THE CONTENTION OF THE ASSESSEE IS THAT ALL AMOUNTS WERE RECEIVED THROUGH BANKING CHANNEL. THEREFORE, IT IS NOT THE CASE WHERE THE AS SESSEE TRIED TO CONCEAL THE CREDITS. ADMITTEDLY, IN THE QUANTUM PROCEEDINGS, CREDITS AMO UNTING TO RS. 7,19,500/- HAVE BEEN SUSTAINED TILL THE STAGE OF TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE GUJARAT HIG H COURT RENDERED IN THE CASE OF CIT VS. BARODA TIN WORKS, 221 ITR 661 (GUJARAT) WHE REIN THE HONBLE HIGH COURT HAS HELD AS UNDER :- HEAD NOTES - SECTION 271(1)(C), READ WITH SECTIO N 68, OF THE INCOME-TAX ACT, 1961 PENALTY FOR CONCEALMENT OF INCOME (SETTING ASIDE OF ADDITION, EFFECT OF) ASSESSMENT YEAR 200 5-06 WHETHER ONCE EXPLANATION GIVEN BY ASSESSEE IS FOUND NOT TO BE FALSE, TO BRING CASE UNDER AMBIT OF EXPLANATION TO SECTION 271(1)(C ), IT HAS TO BE SEEN WHETHER SAME IS SUBSTANTIATED OR NOT HELD, YES WHETHER WHERE IN QUANTUM APPEAL AGAINST ADDITION MADE UNDER SECTION 68, TRIBUNAL HAD ACCEPTED ASSESSEES EXPLANATION IN RESPECT OF PART OF DEPOSIT AND PARTLY CONFIRMED ADDITION STATING THAT EXPLANATION GIVEN B Y ASSESSEE WAS NOT CONVINCING, IT COULD BE SAID THAT ASSESSEE HAD CONC EALED HIS INCOME OR FURNISHED ANY INACCURATE PARTICULARS WARRANTING LEV Y OF PENALTY UNDER SECTION 271(1)(C) HELD, NO (PARA 11)(IN FAVOUR OF ASSESSEE). 12 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL IN THE LIGHT OF ABOVE DECISION, WE ARE OF THE CONSI DERED VIEW THAT THE REVENUE HAS NOT BROUGHT ANY MATERIAL ON RECORD SUGGESTING THAT THESE CASH CREDITS WERE THE INCOME OF THE ASSESSEE. IN THE ABSENCE OF THE SAME , THE PENALTY CANNOT BE SUSTAINED. THEREFORE, WE DIRECT THE AO TO DELETE TH E PENALTY. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 27/09/20 16. SD/- SD/- FOE FLAG ;KNO ( DQY HKKJR ) (VIKRAM SINGH YADAV) ( KUL BHARAT ) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 27/09/2016. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SMT. SONU KHANDELWAL, JAIPUR. 2. THE RESPONDENT- THE ITO WARD 2(3), JAIPUR. 3. THE CIT, 4. THE CIT (A) 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO. 01/JP/2015) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 13 ITA NO. 01/JP/2015 SMT. SONU KHANDELWAL