Shri Rajendra M.Shah, Kalol V. The Income tax Officer,Ward-3, Mehsana

ITA 1333/AHD/2008

• Counselvise Citation: 133320514 RSA 2008
• Duration Of Justice: 3 year(s) 9 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-01-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 11-04-2008
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Unexplained cash credit; Gift; Business income; Depreciation; Income from undisclosed sources; Question of law; Initiation of penalty proceedings; Corroborative evidences; Reassessment proceedings
• Section: 142(1); 63

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. K. GARO DIA, AM) ITA NO.1333/AHD/2008 AND 390/AHD/2009 A. Y.: 2005-06 SHRI RAJENDRA M. SHAH, PROP. SHREE VALRAM STEEL TRADERS, 3, MELAMINE COMPOUND, MAHENDRA MILL ROAD, KALOL PA NO. ASEDPS 4848M VS THE INCOME TAX OFFICER, WARD 3, AATAJAR BHAVAN, MEHSANA (APPELLANT) (RESPONDENT) ASSESSEE BY SHRI TUSHAR HEMANI, AR RESPONDENT BY SHRI B. L. YADAV, SR. DR DATE OF HEARING: 11-01-2012 DATE OF PRONOUNCEMENT: 25-01-2012 O R D E R PER BHAVNESH SAINI: THIS ORDER SHALL DISPOSE OF BOTH THE APPEALS FILED BY THE SAME ASSESSEE. 2. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF BO TH THE PARTIES AND PERUSED THE FINDINGS OF THE AUTHORITIES BELOW. ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 2 ITA NO.1333/AHD/2008 3. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A), GANDHINAGAR DATED 28-01-2008 FOR AS SESSMENT YEAR 2005-06. 4. ON GROUNDS NO.1 AND 2, THE ASSESSEE CHALLENGED T HE ADDITION OF RS.19,25,400/- U/S 68 OF THE IT ACT ON ACCOUNT O F UNEXPLAINED CASH CREDITS. 5. ON THE ABOVE ADDITION OF RS.19,25,400/-, THERE A PPEARS THREE DIFFERENT CATEGORIES OF ADDITIONS I.E. ADDITION OF RS.13,85,550/-, ADDITION OF RS.4,46,850/- AND ADDITION OF RS.93,000 /-. IT IS NOTED IN THE IMPUGNED ORDER THAT THE ASSESSEE HAD DURING THE YEA R UNDER CONSIDERATION SHOWED FRESH UNSECURED LOAN IN CASH F ROM 131 PERSONS TOTALING TO RS.24,47,900/-. ALL THESE LOANS WERE IN TEREST FREE AND WERE BELOW RS.20,000/-. ON THE BASIS OF ADDRESSES PROVID ED BY THE ASSESSEE, THE AO SENT INQUIRY NOTICE U/S 133 (6) OF THE IT ACT TO ALL THESE PERSONS. EXCEPT FOR 13 NOTICES, REST OF THE N OTICES CAME BACK UN-SERVED EITHER VIA THE POSTAL AUTHORITIES OR THE DEPARTMENTAL NOTICE SERVER. THE AO CONFRONTED THE ASSESSEE BY MAKING FO UR CATEGORIES AS FOLLOWS: A) NOTICES SENT BY RPAD AND RETURNED BY POSTAL AUTH ORITIES UN-SERVED AMOUNT INVOLVED RS.13,43,300/- B) NOTICES RETURNED UN-SERVED BY THE NOTICE SERVER WITH REMARKS NO SUCH ADDRESSEE AVAILABLE ON GIVEN ADDRE SS AMOUNT INVOLVED RS.9,02,000/- ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 3 C) NOTICES SERVED BUT NO REPLY RECEIVED AMOUNT IN VOLVED. RS.2,22,300/- D) NOTICES SERVED AND CONFIRMATION - RECEIVED AMOUN T INVOLVED RS.17,000/- IN RESPONSE, THE ASSESSEE SUBMITTED AS UNDER: I) THE NAMES AND ADDRESSES WERE GIVEN AS PER THEIR RECORD IN 2004-05 AND THE INQUIRIES HAVE BEEN CARRIED OUT AFTER TWO YEARS. SOME OF T HE DEPOSITORS MAY HAVE SHIFTED THEIR RESIDENCE OR LEFT THE CITY AND HENCE THE PERSONS CO ULD NOT BE FOUND. II) THE DEPOSITORS ARE UNEDUCATED LABOURERS, FARMER S, ETC. AND THE MONEY HAVE BEEN DEPOSITED WITH THE APPELLAN T FOR SAFE KEEPING WITH THE EXPECTATION THAT WHENEVER THE MONEY REQUIRED THE SAME SHALL BE REFUNDED BACK. III) THE REFUSAL NOTICES MAY BE DUE TO SOME OF THE DEPOSITORS NOT BEING AT HOME AND THE FAMILY MEMBERS HAVING REFUSED TO ACCEPT THE NOTICE. IV) THE DEPOSIT BEING LESS THAN RS.20,000/-, WHICH IS NOT A HUGE SOME, THE APPELLANT IS NOT REQUIRED TO PROVE T HE CREDITWORTHINESS OF THE DEPOSITORS. THE ASSESSEE ALSO PROVIDED A FRESH BIFURCATION OF T HE DEPOSITORS WHERE FOR ANNEXURE- A, A LIST OF 74 NAMES WERE PR OVIDED, WITH THE REMARKS THAT WE WILL PROVIDE IDENTIFICATION AND OT HER EVIDENCE LATER ON. THE AMOUNT INVOLVED WAS RS.13,85,550/-. FOR A NNEXURE B, A ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 4 LIST OF 51 NAMES WERE PROVIDED WITH THE CLAIM THAT IDENTIFICATION PROOF IS BEING GIVEN. FOR ANNEXURE C, A LIST OF 6 NAMES WERE PROVIDED TELLING THE AO ABOUT NEW ADDRESSES. THE AO IN TURN COMPLETED THE ASSESSMENT BY TREATING THE ENTIRE SUM OF RS.13,85,5 50/- AS PER PARTIES FALLING IN ANNEXURE-A AS UNEXPLAINED IN THE ABSENCE OF ANY SATISFACTORY REPLY FROM THE ASSESSEE IN SPITE OF GI VING SUFFICIENT TIME. REGARDING THE IDENTIFICATION PROOF GIVEN FOR THE PA RTIES APPEARING IN ANNEXURE-B, THE AO POINTED OUT PARTY-WISE, THE DIFF ERENCE BETWEEN ORIGINAL IDENTIFICATION GIVEN AND THE PRESENT IDENT IFICATION GIVEN TO HOLD THAT MOST OF THESE CASES THE ASSESSEE HAVE BROUGHT IN THE IDENTIFICATION OF LOOK LIKE TO SUPPORT HIS VERSIO N. THE AO POINTED OUT THE DIFFERENCE BETWEEN THE NAMES AND ADVERSE AS GIV EN IN THE ORIGINAL LIST AND AS PER THE ANNEXURE-B. THE AO ACC EPTED ONLY A PART OF THESE IDENTIFICATION AND ADDED BACK A SUM OF RS. 4,46,850/-. OUT OF THE LIST OF ANNEXURE-C EXCEPT FOR ONE CASE, THE AO DID NOT ACCEPT THE REST OF THE CASES AS GENUINE DEPOSIT BECAUSE AS PER HIM THE ASSESSEE COULD NOT PRODUCE ANY SUPPORTING EVIDENCE TO ESTABLISH THE IDENTITY, CREDITWORTHINESS AND GENUINENESS OF THE C REDITORS AND MADE THE ADDITION OF RS.93,000/-. 6. BEFORE THE LEARNED CIT(A), THE ASSESSEE REITERAT ED THE SAME SUBMISSION AS WAS MADE BEFORE THE AO AND SUBMITTED THAT THE AO WAS REQUESTED TO ALLOW FURTHER TIME TO PROVE GENUIN ENESS AND IDENTIFICATION OF THE DEPOSITORS, WHICH WAS NOT GRA NTED BY THE AO TO THE ASSESSEE. IT WAS SUBMITTED THAT THE ACCOUNTANT HAS GIVEN THE NAME AND ADDRESS OF THE DEPOSITORS WITHOUT VERIFICA TION FROM THE RECEIPT IN WHICH THE DEPOSITORS HAS CORRECTED ITS N AME AT THE TIME OF ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 5 GIVING THE DEPOSIT. THE ACCOUNTANT HAS NOT CORRECTE D THE SAME IN THE BOOKS OF ACCOUNTS AND ALSO AT THE TIME OF GIVING TH E INFORMATION TO THE AO. IT WAS ALSO SUBMITTED THAT IT WAS DUE TO THIS T HAT THE AO HAS FACED PROBLEM OF RETURNED RPAD. SOME OF THE COPIES OF THE RECEIPTS WITH THE CHANGED NAMES WERE PRODUCED. IT WAS FURTHE R SUBMITTED THAT THIS EVIDENCE IS BEING SUBMITTED IN APPEAL BECAUSE OF LACK OF TIME GIVEN BY THE AO FOR FINDING THE DEPOSITORS WHO WERE RESIDING AT OTHER PLACES. THE ASSESSEE ALSO SUBMITTED THAT THE ASSESS EE HAD TURNOVER OF AROUND RS.1.3 CRORES IN THE YEAR 2004-05 AND HIS TRADING IS IN SCRAP ONLY. THE MARGIN OF NET PROFIT OF ALL SCRAP T RADERS IS AROUND 0.5% TO 1% OF THE TOTAL TURNOVER AND THAT THE ASSES SEE HAS SHOWN 0.96% AS HIS NET PROFIT WHICH INDICATES THE GENUINE NESS OF THE UNSECURED LOANS TAKEN BY THE ASSESSEE. THE ONLY ISS UE IS IT IS UNABLE TO PROVIDE THE EVIDENCE OF SOME OF THE PARTIES OF T HE DEPOSITORS. 7. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION O F THE ASSESSEE AND MATERIAL ON RECORD CONFIRMED THE ADDI TION. HIS FINDINGS IN PARA 3.3 TO PARA 4 ARE REPRODUCED AS UNDER: 3.3 THE MATTER HAS BEEN GIVEN DUE CONSIDERATION. AS FAR AS THE AUTHORISED REPRESENTATIVES SUBMISSION T HAT THE APPELLANT WAS NOT GIVEN SUFFICIENT TIME TO COLLECT INFORMATION ABOUT THE DEPOSITORS IS CONCERNED, BOTH FACTUALLY A ND CONCEPTUALLY, THE ARGUMENTS DO NOT APPEAR TO BE VER Y CONVINCING. THE APPELLANT HAS BORROWED MONEY FROM 1 31 PERSONS AND IS NOT IN A BUSINESS OF MONEY LENDING. THEREFORE, IN SUCH SITUATION, IT IS NORMALLY TO BE EXPECTED TH AT THE APPELLANT WOULD KEEP DETAILS OF PERSONAS FROM WHOM HE HAS TAK EN THE MONEY FOR READY REFERENCE. I CANNOT IMAGINE THE SIT UATION WHERE PERSONS COME AND DEPOSIT MONEY WITH THE APPEL LANT AND THE LATER HAS NO CLUE ABOUT THEIR EXISTENCE. NOTWIT HSTANDING THAT ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 6 THE FIRST NOTICE U/S. 142(1) HAS BEEN ISSUED ON 3/1 1/2006. THE SPECIFIC NOTICE IN THE CONTEXT OF THE PROPOSED ADDI TION HAS BEEN ISSUED ON 16/3/2007. THE ASSESSMENT ORDER HAS BEEN FRAMED ON 4/5/2007. THEREFORE, THE APPELLANT HAS BEEN GIVE N REASONABLE TIME AT VARIOUS STAGES TO EXPLAIN HIS PO SITION AND COLLECT THE INFORMATION. REGARDING THE SO CALLED N EW EVIDENCE PRODUCED BEFORE ME, I DO NOT THINK IT IS AN EVIDENC E AT ALL TO BE ADMITTED. WHAT HAS BEEN PRODUCED BEFORE ME ARE THE COPIES OF THE DEPOSIT SLIPS ISSUED IN THE NAME OF VARIOUS PER SONS, IN WHICH DETAILS LIKE NAME AND ADDRESSES HAVE BEEN OVE RWRITTEN. I FAIL TO APPREHEND HOW IT IS A NEW EVIDENCE AND IF T HE APPELLANT HAS BEEN IN THE POSSESSION OF THESE DOCUMENTS, WHY THIS WAS NOT PRODUCED BEFORE THE ASSESSING OFFICER. THE ARGU MENT THAT THE ACCOUNTANT OF THE APPELLANT GAGE NAME AND ADDRE SSES FROM THE BOOKS OF ACCOUNTS, WHEREAS NECESSARY CHANGES HA D TAKEN PLACE IN THE DEPOSIT SLIPS ALSO SEEMS TO BE FULL OF CONTRADICTION. AS PER THE NORMAL ACCOUNTING PRACTICE, FIRST, DOCUM ENTS IS TO BE PREPARED IS THE DEPOSIT SLIP AND THE LEDGERISATION TAKE PLACE AT THE END. THE ASSESSEE SEEMS TO BE CONVEYING THE REV ERSE, WHICH OBVIOUSLY IS UNACCEPTABLE. THEREFORE, CONSIDE RING ALL THE ASPECTS OF THIS ISSUE, I REFUSE TO ADMIT THE DEPOSI T SLIPS AS EVIDENCES IN THE CASE AND THEREFORE NO FURTHER ACTI ON IS NEEDED AS FAR AS THESE ARE CONCERNED. 3.3.1 COMING TO THE FINDINGS GIVEN BY THE ASSESSIN G OFFICER, I THINK, HE HAS TAKEN A VERY JUDICIOUS APP ROACH. WHEREVER THE ASSESSEE HAS BEEN ABLE TO PROVE THE ID ENTITY OF THE DEPOSITOR AND THE DEPOSITOR HAS CONFIRMED THE F ACTUM OF LOANS, HE HAS ACCEPTED THE SAME. AS STATED EARLIER, THE ASSESSING OFFICER HAS ALREADY ACCEPTED ABOUT RS.5.2 2 LACS OF LOANS FOR THE PARTIES FOR WHOM THE DETAILS COULD BE FILED. HOWEVER, WHERE THE DEPOSIT IS NOT IDENTIFIABLE EITH ER IN TERMS OF NON-AVAILABILITY OF ADDRESS NON CONFIRMATION OF PRO PER NAME THE APPELLANT CAN NOT GET THE BENEFIT OF DOUBT. AS IS W ELL ESTABLISHED, THE ONUS OF PROVING THE GENUINENESS OF CASH CREDITS IN TERMS OF IDENTIFICATION, CAPACITY AND GE NUINENESS OF TRANSACTION WITH THE LENDER IS ON THE ASSESSEE ONLY . IN THE FACTS AND CIRCUMSTANCES, THE APPELLANT HAS OBVIOUSLY NOT DISCHARGED THE SAID ONUS. ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 7 3.3.2 THEREFORE, IN THE FACTS AND CIRCUMSTANCES, T HE ADDITION MADE BY THE ASSESSING OFFICER U/S. 68 APPE ARS TO BE APPROPRIATE AND JUSTIFIED AND THE APPEAL IS DISMISS ED. 4. IN THE RESULT, THE APPEAL IS DISMISSED. 8. THE LEARNED COUNSEL FOR THE ASSESSEE FILED BRIEF SUBMISSION CONTAINING THE COMMENTS OF THE ASSESSEE WHICH HAVE ALREADY BEEN TAKEN INTO CONSIDERATION BY THE LEARNED CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE MERELY RELIED UPON THE SUBMISSIONS ALREADY MADE BEFORE THE AUTHORITIES BELOW. ON THE OTHER HAND, TH E LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEE FAILED TO PROVE THE IDENTITY, CREDITWORTHI NESS AND GENUINENESS OF THE TRANSACTIONS IN THE MATTER. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE FINDINGS OF THE AUTHORITIES BELOW. SINCE THE ASSESS EE CLAIMED GENUINE CREDITS IN THE MATTER, THEREFORE, BURDEN IS UPON TH E ASSESSEE TO PROVE IDENTITY OF THE CREDITORS, THEIR CREDITWORTHINESS A ND GENUINENESS IN THE TRANSACTION IN THE MATTER. HOWEVER, THE FACTS NOTED ABOVE CLEARLY PROVE THAT THE ASSESSEE DID NOT DISCHARGE THE BURDE N UPON HIM TO PROVE ALL THE ABOVE THREE INGREDIENTS OF PROVING GE NUINENESS OF THE CREDITS IN THE MATTER. THE HONBLE CALCUTTA HIGH CO URT IN THE CASE OF BHARATI PVT. LTD. VS CIT, 111 ITR 951 HELD AS UNDER : IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE INCOME-TAX OFFICER FOUND THAT THE ASSESSEE HAD SHOWN RS.20,000 AS LOAN IN ITS BOOKS TAKEN FROM TWO PARTIES. THE ASSESSEE PRODUCED THE ALLEGED CONFIRMATORY LETTERS FROM THOSE PARTIES BEFORE THE INCOME-TAX OFFICER IN SUPPORT OF THE TWO LOANS. THE ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 8 INCOME-TAX OFFICER SERVED NOTICES UNDER SECTION 131 OF THE INCOME TAX ACT, 1961, ON THE ALLEGED CREDIT ORS AND SINCE THOSE NOTICES CAME BACK UNSERVED, THE INCOME-TAX OFFICER TREATED THE LOAN AS ASSESSEES INCOME FROM UNDISCLOSED SOURCES. THE APPELLATE ASSISTANT COMMISSIONER DISMISSED THE ASSESSEES APPEAL ON THE GROUND THAT THE ASSESSEE COULD NOT EVEN ESTABLISH THE IDENTITY OF THE PARTIES. ON FURT HER APPEAL BY THE ASSESSEE, THE APPELLATE TRIBUNAL HELD THAT MERE FILING OF CONFIRMATORY LETTERS DID NOT DISCHARGE THE ONUS THAT LAY ON THE ASSESSEE AND THERE WAS NO MATERIAL ON THE RECORD TO ESTABLISH TH E IDENTITY OF THE CREDITORS: HELD, THAT THE TRIBUNAL HAD TAKEN ALL THE RELEVANT FACTS INTO CONSIDERATION AND THE CONCLUSION ARRIVED AT BY THE TRIBUNAL THAT THE LOANS REPRESENTED THE ASSESSEES INCOME FROM UNDISCLOSED SOURCES WAS NOT PERVERSE OR UNREASONABLE. 9.1 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF CIT VS UNITED COMMERCIAL AND INDUSTRIAL CO. (P) LTD., 187 ITR 596 HELD AS UNDER: THE PRIMARY ONUS LIES ON THE ASSESSEE TO PROVE THE NATURE AND SOURCE OF CREDITS IN ITS ACCOUNT. IT IS NECESSARY FOR THE ASSESSEE TO PROVE PRIMA FACIE THE IDENTITY OF HIS CREDITORS, THE CAPACITY OF SUCH CREDITORS TO ADVANCE THE MONEY AND LASTLY THE GENUINENESS OF THE TRANSACTIONS. ONLY WHEN THESE THINGS ARE PROVED BY THE ASSESSEE PRIMA FACIE AND ONLY AFTER THE ASSESSEE HAS ADDUCED EVIDENCE TO ESTABLISH THE AFORESAID FACTS DOES THE ONUS SHIFT O N TO THE DEPARTMENT. IT IS NOT ENOUGH TO ESTABLISH THE IDENTITY OF THE CREDITORS. MERE PRODUCTION OF THE CONFIRMATION LETTERS BEFORE THE INCOME-TAX OFFICER WOULD NOT BY ITSELF PROVE THAT THE LOANS HAVE BEEN OBTAINED FROM THOSE LOAN CREDITORS OR THAT THEY HAV E CREDIT-WORTHINESS. ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 9 HELD, THAT, IN THE INSTANT CASE, THE TRIBUNAL MISDIRECTED ITSELF IN HOLDING THAT THE TRANSACTIONS WERE GENUINE SIMPLY BECAUSE SOME OF THE TRANSACTIONS WERE MADE BY CHEQUES. THE ASSESSEE HAD FAILED TO PROVE THE CREDIT-WORTHINESS OF THE ALLEGED LENDERS. A NUMBER OF OTHER ASSESSEES HAD ALSO ADMITTED THAT LOANS OBTAINED FROM THESE BANKER S AGAINST HUNDIS WERE NOT GENUINE AND SUCH HUNDI LOANS REALLY REPRESENTED THEIR OWN CONCEALED INCOME . THE ASSESSEE HAD NOT DISCHARGED ITS BURDEN OF PROVING THAT THE LOANS IN QUESTION WERE GENUINE. 9.2 THE HONBLE CALCUTTA HIGH COURT IN THE CASE OF M/S. PRECISION FINANCE PVT. LTD., 208 ITR 465 HELD THAT EVEN THE LOAN THROUGH BANK CANNOT BE ACCEPTED AS GENUINE UNLESS THE IDENT ITY AND CREDITWORTHINESS OF THE CREDITORS ARE PROVED. MERE PAYMENT OF ACCOUNT PAYEE CHEQUE IS NOT SACROSANCT NOR CAN IT M AKE A NON- GENUINE TRANSACTION GENUINE. 9.3 THE HONBLE SUPREME COURT IN THE CASE OF DURGA PRASAD MORE, 82 ITR 540 AND SUMATI DAYAL, 214 ITR 801 HELD THAT THE COURTS AND TRIBUNAL HAVE TO JUDGE THE EVIDENCES BEFORE THE M BY APPLYING THE TEST OF HUMAN PROBABILITIES AFTER CONS IDERING THE SURROUNDING CIRCUMSTANCES. 10. CONSIDERING THE FACTS OF THE CASE NOTED ABOVE, IT IS CLEARLY PROVED ON RECORD THAT THE ASSESSEE COULD PROVE ONLY IDENTIFICATION OF SOME OF THE CREDITORS BUT FOR THE REMAINING EVEN TH E IDENTITY IS NOT PROVED. THE ASSESSEE HAS NOT PROVED THE CREDITWORTH INESS OF ANY OF THE CREDITORS AS WELL AS DID NOT PROVE GENUINENESS OF THE TRANSACTION IN THE MATTER. HUGE DEPOSITS HAVE BEEN RECEIVED IN CASH FOR WHICH NO ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 10 SATISFACTORY EXPLANATION HAS BEEN GIVEN. THE AO GAV E SUFFICIENT OPPORTUNITY TO PROVE THE GENUINENESS OF THE CREDITS IN THE MATTER BUT THE ASSESSEE FAILED TO PROVE THE SAME. THE LEARNED COUNSEL FOR THE ASSESSEE DURING THE COURSE OF ARGUMENT COULD NOT PO INT OUT ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). ACCOR DINGLY, WE CONFIRM THE ORDER OF THE LEARNED CIT(A) AND DISMISS THE APP EAL OF THE ASSESSEE. IN THE RESULT, APPEAL OF THE ASSESSEE ON GROUNDS NO.1 AND 2 IS DISMISSED. 11. ON GROUND NO.3, THE ASSESSEE CHALLENGED LEVY OF INTEREST U/S 234B, 234C AND 234D OF THE IT ACT WHICH IS CONSEQUE NTIAL AND MANDATORY AND NO ARGUMENTS HAVE BEEN MADE ON THE SA ME. GROUND NO.4 IS REGARDING INITIATION OF PENALTY PROCEEDINGS U/S 271 (1) (C) OF THE IT ACT WHICH IS SEPARATE PROCEEDINGS AND IS PRE -MATURED. THESE GROUNDS OF APPEAL ARE ACCORDINGLY DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ITA NO.390/AHD/2009 13. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A), GANDHINAGAR DATED 28-11-2008 FOR AS SESSMENT YEAR 2005-06, CHALLENGING LEVY OF PENALTY ON ACCOUNT OF CONFIRMING THE UNACCOUNTED CASH CREDIT IN THE MATTER. 14. THE LEARNED COUNSEL FOR THE ASSESSEE ARGUED DOC UMENTARY EVIDENCES WERE FILED TO PROVE THE GENUINE CREDITS B UT THE SAME COULD NOT BE PRODUCED TO THE SATISFACTION OF THE AO. THEREFORE, IT WOULD NOT BE ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 11 SUFFICIENT TO HOLD THAT THE ASSESSEE CONCEALED PART ICULARS OF INCOME OR FILED INACCURATE PARTICULARS OF INCOME. HE HAS SUBM ITTED THAT THE ISSUE IS COVERED BY THE ORDER OF ITAT AHMEDABAD D BENCH IN THE CASE OF MOHD. SOEB HAJI MOOSA TUMBI IN ITA NO.2747/AHD/2010 IN WHICH THE TRIBUNAL VIDE ORDER DATED 12-08-2011 CANCELLED THE PENALTY. ON THE OTHER HAND THE LEARNED DR RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 15. ON CONSIDERATION OF THE FACTS OF THE CASE, WE A RE OF THE VIEW PENALTY IS NOT LEVIABLE IN THE MATTER. SIMILAR ISSU E IS CONSIDERED IN THE CASE OF MOHD. SOEB HAJI MOOSA TUMBI (SUPRA) IN WHIC H IN PARA 8 TO PARA 11 THE TRIBUNAL HELD AS UNDER: 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. THE FACTS NOTED ABOVE ARE NOT DISPUTED. IT IS SETTLED L AW THAT PENALTY PROCEEDINGS ARE INDEPENDENT AND SEPARATE PROCEEDINGS. BEFORE PROCEEDING FURTHER, WE MAY NOTE THE RELEVANT FINDING OF THE TRIBUNAL ON THE QUANTUM ORD ER DATED 09-01-2009 WHILE DECIDING THE APPEAL OF THE ASSESSEE IN ITA NO.3449/AHD/2007 (PB-30 AND 31) AS UNDER: THIS IS AN ADMITTED FACT IN THE CASE OF THE ASSESSEE THAT 10 DONORS HAVE APPEARED BEFORE THE AO AND CONFIRMED THAT THEY HAVE MADE THE GIFTS TO THE ASSESSEE. THEY HAVE FILED THEIR IT RETURNS ALSO. COPIES OF THEIR CAPITAL ACCOUNTS AND THE COPIES OF ACKNOWLEDGEMENT OF IT RETURNS WERE ALSO FILED. IN THE CAPITAL ACCOUNTS THE GIFTS GIVEN TO THE ASSESSEE HAVE DULY BEEN SHOWN. BUT WHEN WE ASKED FOR THE PAN, PAN WAS FILED ONLY IN RESPECT OF 9 PERSONS OUT OF 10 PERSONS. FIVE DONORS DID NOT APPEAR ON THE GROUND THAT THEY WERE THE PARDANASHIN LADIES. ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 12 EVEN NO CONFIRMATIONS ON THEIR BEHALF HAVE BEEN FILED. IN OUR OPINION, ONCE THE DONORS ARE THE INCOME- TAX ASSESSEES AND THE GIFTS GIVEN BY THE DONORS HAVE DULY BEEN SHOWN BY THEM IN THEIR RESPECTIVE CAPITAL ACCOUNTS, THE AO SHOULD HAVE TAKEN ACTION AGAINST THE DONORS WHILE MAKING THEIR ASSESSMENTS. A SPECIFIC QUERY WAS RAISED FROM THE LEARNED DEPARTMENTAL REPRESENTATIVE BUT NO ACTION SEEMS TO HAVE BEEN TAKEN IN THE CASES OF THE DONORS. THIS IS ALSO A FACT ON RECORD THAT THE ASSESSEE HAS NOT COMMENCED THE BUSINESS. THE RESTAURANT WAS UNDER CONSTRUCTION ONLY. THE ASSESSEE THEREFORE, COULD HAVE NOT EARNED THIS MUCH INCOME FROM THE BUSINESS. THE ONUS IS ON THE ASSESSEE TO PROVE THE COURSE OF THE AMOUNTS RECEIVED BY HIM. THE ASSESSEE HAS PRODUCED SOME OF THE DONORS OUT OF WHICH NINE ARE HAVING PANS. THEREFORE, TO THE EXTENT THE FIVE PARTIES HAVE NOT CONFIRMED WHICH ARE APPEARING AT SERIAL NOS. 11 TO 15 AMOUNTING TO RS.5,50,000, RS.5,75,000, RS.5,75,000, RS.4,50,000 AND RS.4,75,000 TOTALING TO RS.26,25,000, THERE IS NO EVIDENCE ON RECORD ABOUT THE CONFIRMATIONS FROM THE DONOR SIDE THAT THEY HAVE GIFTED THE MONEY TO THE ASSESSEE. WE, THEREFORE, CONFIRM THE ADDITION TO THE EXTENT OF RS.26,25,000. NOW COMING TO THE GIFT RECEIVED FROM FARUK MOHMAD H. GHANIWALA AMOUNTING TO RS.5,00,000, SINCE THE ASSESSEE COULD NOT PLACE ON RECORD HIS PAN, THEREFORE, WE ALSO TREAT THIS GIFT TO BE NON-GENUINE AND THE ADDITION IN THAT REGARD IS ALSO CONFIRMED. IN RESPECT OF THE GIFTS RECEIVED BY THE ASSESSEE WHICH RELATE TO THE NINE PARTIES WHO APPEARED AND CONFIRMED HAT THEY HAVE GIFTED THE AMOUNTS ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 13 TO THE ASSESSEE, WE ARE OF THE VIEW THAT THE ASSESSEE HAS DISCHARGED THE ONUS AND IN OUR OPINION THE AO WAS BOUND TO TAKE ACTION IN THEIR RESPECTIVE CASES. WE, THEREFORE, DELETE THE ADDITIONS IN VIEW OF THE CASE LAWS AS DISCUSSED ABOVE AS IN OUR OPINION ON THE BASIS OF THESE CASE LAWS THE ASSESSEE HAS DULY DISCHARGED HIS ONUS AND THE ASSESSEE IS NOT SUPPOSED TO PROVE THE SOURCE OF SOURCES. THEREFORE, WE DELETE THE ADDITIONS WITH THE DIRECTION THAT THE AO SHOULD TAKEN ACTION IN THE CASES OF THOSE PARTIES IN RESPECTIVE ASSESSMENT YEARS FOR EXAMINING THE SOURCE OF THE GIFTS MADE BY THOSE PARTIES TO THE ASSESSEE UNDER THE APPLICABLE PROVISIONS OF THE IT ACT. THUS, THIS GROUND STANDS PARTLY ALLOWED. 9. IN THE FINDING OF FACT NOTED ABOVE, THE TRIBUNAL NOTED THAT 10 DONORS HAVE APPEARED BEFORE THE AO AND HA VE CONFIRMED GIVING OF GIFTS TO THE ASSESSEE. THEY HAV E FILED THEIR IT RETURNS ALSO AND FILED COPIES OF THEIR CAP ITAL ACCOUNTS AND COPIES OF THE ACKNOWLEDGEMENT OF RETUR NS TO SHOW THAT GIFTS HAVE BEEN GIVEN TO THE ASSESSEE. FIVE DONORS COULD NOT BE PRODUCED BEING PARDANASHIN LADI ES. IN THE OPINION OF THE TRIBUNAL, ONCE THE DONORS ARE INCOME TAX ASSESSEE AND GIFTS GIVEN BY THE DONORS HAVE BEE N DULY SHOWN BY THEM IN THEIR RESPECTIVE CAPITAL ACCO UNTS, THE AO SHOULD HAVE TAKEN ACTION AGAINST THE DONORS WHILE MAKING THEIR ASSESSMENTS. BUT NO ACTION HAS BEEN TA KEN AGAINST THE DONORS. THE RESTAURANT WAS UNDER CONSTRUCTION ONLY. THEREFORE, IT WAS HELD THAT THE ASSESSEE COULD NOT HAVE EARNED THIS MUCH INCOME FRO M THE BUSINESS. ADDITION IN THE CASE OF DONOR FAROOQ MOH. H. GHANIWALA WAS CONFIRMED BECAUSE NO P. A. NUMBER WAS PLACED ON RECORD. THE TRIBUNAL IN THE ORDER ALS O NOTED THAT ONCE THE PERSONS APPEARED BEFORE THE AO AND STATEMENTS HAVE BEEN RECORDED U/S 131 OF THE IT ACT AND THEY ARE INCOME TAX ASSESSEES, THE IDENTITY IS DULY PROVED. IT IS THEREFORE CLEAR THAT IN THE CASE OF D ONOR FAROOK MOH. H. GHANIWALA, HE HAS APPEARED BEFORE TH E AO AND HIS STATEMENT U/S 131 OF THE IT ACT WAS RECO RDED. ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 14 HE WAS ASSESSED TO TAX. MAY BE IN QUANTUM PROCEEDIN GS ADDITION IS MADE BUT PENALTY IS NOT LEVIABLE IN HIS CASE ON THE FACE OF THE FINDINGS OF FACT RECORDED BY THE TR IBUNAL THAT IDENTITY OF SUCH DONOR IS PROVED WHO HAS ALSO CONFIRMED GIVING OF GIFTS TO THE ASSESSEE. THE DECI SION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF MURLI DHAR LAHORIMAL VS CIT, 280ITR 512 WOULD APPLY IN THE CAS E OF THE ASSESSEE IN WHICH IT WAS HELD AS UNDER: HELD, THAT THE TRIBUNAL FAILED TO NOTE THE FACT THAT THE IDENTITY OF THE DONOR WAS ESTABLISHED, THE DONOR HAVING APPEARED IN PERSON BEFORE THE ASSESSING OFFICER, THE GENUINENESS OF THE TRANSACTION WAS ESTABLISHED, NOT ONLY BY THE RECEIPT OF THE BANK DRAFT, BUT ALSO BY THE FACT OF THE TRANSACTION HAVING BORNE GIFT TAX ONCE THE ASSESSMENT WAS FRAMED. THE PRIMARY ONUS WHICH RESTED WITH THE ASSESSEE, THUS, STOOD DISCHARGED. THEREAFTER, IF THE REVENUE WAS NOT SATISFIED WITH THE SOURCE OF THE FUNDS IN THE HANDS OF THE DONOR, IT WAS UP TO THE REVENUE TO TAKE APPROPRIATE ACTION. THE TRIBUNAL CONSIDERED THE MOTIVATION FOR MAKING THE GIFT WHICH WAS NOT RELEVANT. THE ADDITION OF RS.50,000 WAS NOT JUSTIFIED. 10. THE ASSESSEE FURTHER EXPLAINED THAT 5 LADY DONO RS WERE PARDANASHIN LADIES; THEREFORE, THEY COULD NOT BE PRODUCED BEFORE THE AO FOR EXAMINATION. SINCE PARDANASHIN LADIES WOULD NOT EXPOSE TO PUBLIC, THER EFORE, EXPLANATION OF THE ASSESSEE WAS CORRECT THAT THESE LADIES COULD NOT BE PRODUCED BEFORE THE AO FOR EXAMINATION . THE EXPLANATION OF THE ASSESSEE WAS BONA FIDE AND RELEVANT BEING THIS PRACTICE COMMONLY FOLLOWED IN M USLIM COMMUNITY. IT IS ALSO A FACT THAT ALL THESE LADY DO NORS WERE ASSESSED TO INCOME TAX. THE ASSESSEE FILED ALL RELEVANT DOCUMENTS TO EXPLAIN THE GIFTS. THE EXPLAN ATION OF THE ASSESSEE WAS BONA FIDE AND IT IS NOT A CASE WHERE THE ASSESSEE FAILED TO OFFER ANY EXPLANATION TO THE PENALTY MATTER. THE AO MADE THE ADDITION IN CASE OF ONE OF THE ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 15 DONOR HAVING NO P. A. NUMBER AND IN OTHER CASE S ADDITION WAS CONFIRMED BECAUSE NO CONFIRMATION WAS FILED DESPITE THEY HAVE FILED THEIR P. A. NUMBER. THUS, T HE ASSESSEE FILED ADEQUATE EXPLANATION BEFORE THE AO W HO HAS GIVEN CONTRADICTORY FINDING WITH REGARD TO AVAI LABILITY OF P. A. NUMBER IN ONE CASE. NO MATERIAL IS BROUGHT ON RECORD TO SHOW THAT GIFTS IN QUESTION WERE BOGUS OR FALSE. THE ASSESSEE MADE ALL EFFORTS TO PROVE ALL THE GIFT S BY PRODUCING THE SUBSTANTIAL DONORS BEFORE THE AO BUT SOME OF THEM COULD NOT BE PRODUCED BEING THE DONORS PARDANASHIN LADIES. THE EXPLANATION OF THE ASSESSEE IS THUS BONA FIDE AND IS SUBSTANTIATED BY DOCUMENTARY EVIDENCE ON RECORD. THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND TO BE DISPROVED. 10.1 THE HONBLE SUPREME COURT IN THE CASE OF CIT V S. RELIANCE PETROPRODUCTS PVT. LTD., 322 ITR 158 HELD AS UNDER: A GLANCE AT THE PROVISIONS OF SECTION 271(1) (C) OF THE INCOME-TAX ACT, 1961, SUGGEST THAT IN ORDER TO BE COVERED BY IT, THERE HAS TO BE CONCEALMENT OF PARTICULARS OF THE INCOME OF THE ASSESSEE. SECONDLY, THE ASSESSEE MUST HAVE FURNISHED INACCURATE PARTICULARS OF HIS INCOME. THE MEANING OF THE WORD PARTICULARS USED IN SECTION 271(1) (C) WOULD EMBRACE THE DETAILS OF THE CLAIM MADE. WHERE NO INFORMATION GIVEN IN THE RETURN IS FOUND TO BE INCORRECT OR INACCURATE, THE ASSESSEE CANNOT BE HELD GUILTY OF FURNISHING INACCURATE PARTICULARS. IN ORDER TO EXPOSE THE ASSESSEE TO PENALTY, UNLESS THE CASE IS STRICTLY COVERED BY THE PROVISION, THE PENALTY PROVISION CANNOT BE INVOKED. BY NO STRETCH OF IMAGINATION CAN MAKING AN INCORRECT CLAIM TANTAMOUNT TO FURNISHING INACCURATE PARTICULARS. THERE CAN BE NO DISPUTE THAT EVERYTHING WOULD DEPEND UPON THE RETURN FILED BY THE ASSESSEE, BECAUSE THAT IS THE ONLY DOCUMENT WHERE THE ASSESSEE CAN FURNISH THE PARTICULARS OF HIS INCOME. WHEN ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 16 SUCH PARTICULARS ARE FOUND TO BE INACCURATE, THE LIABILITY WOULD ARISE. TO ATTRACT PENALTY, THE DETAILS SUPPLIED IN THE RETURN MUST NOT BE ACCURATE, NOT EXACT OR CORRECT, NOT ACCORDING TO THE TRUTH OR ERRONEOUS. WHERE THERE IS NO FINDING THAT ANY DETAILS SUPPLIED BY THE ASSESSEE IN ITS RETURN ARE FOUND TO BE INCORRECT OR ERRONEOUS OR FALSE THERE IS NO QUESTION OF INVITING THE PENALTY UNDER SECTION 271(1) ( C ). A MERE MAKING OF A CLAIM WHICH IS NOT SUSTAINABLE IN LAW, BY ITSELF, WILL NOT AMOUNT TO FURNISHING INACCURATE PARTICULARS REGARDING THE INCOME OF THE ASSESSEE. SUCH A CLAIM MADE IN THE RETURN CANNOT AMOUNT TO FURNISHING INACCURATE PARTICULARS. DECISION OF THE GUJARAT HIGH COURT AFFIRMED. 10.2 THE HONBLE SUPREME COURT IN THE CASE OF M/S. RAJASTHAN SPINNING & WEAVING MILLS 2009 TIOL 63 SC HELD THAT ON EVERY DEMAND PENALTY IS NOT AUTOMATIC. 10.3 THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS A. D. KOHLI, 173 ITR 223 HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT, IN THE INSTANT CASE THERE WERE TWO SETS OF EVIDENCE, ONE PRODUCED BY THE ASSESSEE IN THE FORM OF A PASS BOOK AND ANOTHER COPY OF THE BANK LEDGER. THE PASS BOOK NORMALLY REFLECTS WHATEVER IS IN THE LEDGER, BUT, IN RESPECT OF TWO ENTRIES THERE WAS AN ERROR COMMITTED BY THE BANK OFFICIALS AND THE SAME HAD BEEN RELIED UPON BY THE ASSESSEE AND THE ASSESSEE HAD GIVEN AN EXPLANATION AND PAID THE TAX. THE EXPLANATION HAVING BEEN ACCEPTED THE CANCELLATION OF PENALTY WAS VALID. NO SUBSTANTIAL QUESTION OF LAW AROSE FROM THE ORDER. ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 17 10.4 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS JALARAM OIL MILLS, 253 ITR 192 HELD AS UNDER: HELD ACCORDINGLY, THAT, IN THE PRESENT CASE, ON THE BASIS OF THE ASSESSEE AGREEING TO HAVE CREDIT ENTRIES IN ITS BOOKS OF ACCOUNT TREATED AS ITS INCOME BY VIRTUE OF THE PROVISIONS OF SECTION 68 OF THE ACT, THE SAID SUMS WOULD BE DEEMED TO BE INCOME OF THE YEAR UNDER CONSIDERATION. HOWEVER, DE HORS THE SAID PROVISION, IT WAS NOT POSSIBLE TO STATE WITH CERTAINTY THAT THE SAID SUMS WOULD BE CONCEALED INCOME OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. THE TRIBUNAL HAD RECORDED A FINDING OF FACT TO THE EFFECT THAT THERE WAS NO PAST HISTORY OF THE ASSESSEE TO SHOW THAT THE ASSESSEE HAD BEEN EARNING BUSINESS INCOME OUTSIDE THE BOOKS, NOR WAS THERE IN THE BOOKS RELATING TO THE YEAR UNDER CONSIDERATION ANY INSTANCE POINTED OUT INDICATING ANY TRANSACTION OUTSIDE THE BOOKS. THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE PENALTY OF RS.30,000 IMPOSED BY THE INSPECTING ASSISTANT COMMISSIONER UNDER SECTION 271 (1) ( C) COULD NOT BE SUSTAINED. 10.5 THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS CIT, 249 ITR 125 HELD AS UNDER : HELD, THAT, IN THE INSTANT CASE, THE CASH CREDITS WERE NOT SATISFACTORILY EXPLAINED BY EVIDENCE AND DOCUMENTS. THE PARTIES WHO HAD ADVANCED THE ALLEGED TEMPORARY LOANS WERE NEITHER DISCLOSED NOR WERE THERE ANY SUPPORTING DOCUMENTS ON RECORD. THE ACCOUNTANT, WHO HAD ARRANGED THE LOANS WAS NOT PRODUCED AND IT WAS STATED THAT HE HAD LEFT THE SERVICE AS RELATIONS WITH HIM WERE STRAINED. IN THIS STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCEEDINGS, THE DEPARTMENT WAS JUSTIFIED IN TREATING THE CASH CREDITS AS INCOME OF THE ASSESSEE, BUT MERELY ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 18 ON THAT BASIS BY RECOURSE TO EXPLANATION 1, PENALTY UNDER SECTION 271 (1) (C) COULD NOT HAVE BEEN IMPOSED WITHOUT THE DEPARTMENT MAKING ANY OTHER EFFORT TO COME TO THE CONCLUSION THAT THE CASH CREDITS COULD IN NO CIRCUMSTANCES HAVE BEEN AMOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIOUS PARTIES. ADMITTEDLY, THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO PRODUCE THE ACCOUNTANT BUT THE DEPARTMENT ALSO IN PENALTY PROCEEDINGS MADE NO EFFORT TO SUMMON HIM. THEREFORE, IT WAS A CASE WHERE THERE WAS NO CIRCUMSTANCE TO LEAD TO A REASONABLE AND POSITIVE INFERENCE THAT THE EXPLANATION THAT CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS WAS FALSE. THE FACTS AND CIRCUMSTANCES WERE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THEY COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FROM DIFFERENT PARTIES. THEREFORE, THE IMPOSITION OF PENALTY WAS NOT JUSTIFIED. 10.6 THE HONBLE KARNATAKA HIGH COURT IN THE CASE O F CIT VS M. M. GUJAMGADI, 290 ITR 168 HELD AS UNDER: A READING OF SECTIONS 271AND 271 (1) ( C ) OF THE INCOME-TAX ACT, 1961, AND THE EXPLANATION APPENDED THERETO MANIFESTLY MAKES IT CLEAR 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 THAT WHILE COMPUTING THE TOTAL INCOME OF AN ASSESSEE, IF THE ASSESSEE, FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE THEN THERE WILL BE A DEEMED CONCEALMENT BY THE ASSESSEE. THE ASSESSEE FILED HIS RETURN OF INCOME FOR THE ASSESSMENT YEAR 1993-94 DISCLOSING AN INCOME OF RS.97,920. THE RETURN OF INCOME WAS TAKEN UP FOR SCRUTINY ASSESSMENT. THE INCOME- TAX OFFICER FOUND FROM THE BOOKS OF ACCOUNT OF ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 19 THE ASSESSEE A SUM OF RS.2,01,000 AND A NOTICE WAS ISSUED TO THE ASSESSEE TO EXPLAIN THE SAME. THE ASSESSEE STATED THAT HE HAD BORROWED THE SAME FROM DIFFERENT CREDITORS WHO ARE ALL AGRICULTURISTS. WHEN THE ASSESSEE WAS ASKED TO SUBSTANTIATE THIS CLAIM, THE ASSESSEE MADE ATTEMPTS TO SECURE THOSE CREDITORS TO BE EXAMINED BEFORE THE INCOME-TAX OFFICER. DESPITE THE BEST EFFORTS OF THE ASSESSEE, HE COULD NOT SECURE THE CREDITORS AS WITNESSES TO SUBSTANTIATE HIS CLAIM BEFORE THE INCOME-TAX OFFICER. HAVING NO OTHER ALTERNATIVE, THE ASSESSEE VOLUNTARILY AGREED FOR ADDITION OF RS.2,01,000 TO HIS INCOME AS CASH CREDIT. PENALTY WAS IMPOSED UNDER SECTION 271 (1) ( C) BUT IT WAS CANCELED BY THE TRIBUNAL. ON A REFERENCE HELD, THAT IT COULD NOT BE SAID THAT THE EXPLANATION OF THE ASSESSEE FOR NON-INCLUSION OF AN INCOME OF RS.2,01,000 IN HIS RETURN OF INCOME WAS NOT BONA FIDE. THE EXPLANATION OFFERED BY THE ASSESSEE WAS AVAILABLE ON RECORD. BONA FIDE FAILURE ON THE PART OF THE ASSESSEE IN NOT SUBSTANTIATING HIS CLAIM WAS ALSO AVAILABLE ON RECORD. THE INCOME-TAX OFFICER, WHILE PASSING THE ORDER OF PENALTY UNDER SECTION 271 (1) ( C ) OF THE ACT, HAD NOT CONSIDERED THE AVAILABLE EXPLANATION OF THE ASSESSEE AND WHETHER THE EXPLANATION SO OFFERED WAS BONA FIDE OR NOT. THE CANCELLATION OF PENALTY WAS JUSTIFIED. 10.7 THE HONBLE DELHI HIGH COURT IN THE CASE OF CI T VS SPAN HOLDINGS LTD., 294 ITR 83 HELD AS UNDER: DEPRECIATION IN RESPECT OF THE SALE AND LEASE BACK OF THE BIO GAS PLANT IN THE ASSESSMENT YEAR 1993-94 WAS ALLOWED. SUBSEQUENTLY, IN THE REASSESSMENT PROCEEDINGS AFTER A GAP OF FIVE YEARS THE ASSESSEE WAS ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 20 REQUIRED TO PRODUCE THE MANAGING DIRECTOR OF THE LESSEE COMPANY WHICH THE ASSESSEE COULD NOT DO FOR REASONS BEYOND THE CONTROL. THE ASSESSING OFFICER DISALLOWED THE DEPRECIATION. THE ASSESSEE APPEALED TO THE COMMISSIONER OF INCOME-TAX (APPEALS). MEANWHILE, THE ASSESSING OFFICER ALSO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271 (1) (C) OF THE INCOME-TAX ACT, 1961, IMPOSED A PENALTY ON THE ASSESSEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) SET ASIDE THE PENALTY PROCEEDINGS. THIS WAS CONFIRMED BY THE TRIBUNAL. ON APPEAL: HELD, DISMISSING THE APPEAL, THAT THE TRIBUNAL HAD CONSIDERED THE FINDINGS ARRIVED AT BY THE COMMISSIONER. THE TRIBUNAL HAD ALSO TAKEN INTO CONSIDERATION THE FACT THAT MORE THAN FIVE YEARS HAD GONE BY BETWEEN THE ORIGINAL ASSESSMENT AND THE REASSESSMENT PROCEEDINGS AND IT WAS UNDER THESE CIRCUMSTANCES THAT THE ASSESSEE WAS UNABLE TO PRODUCE THE MANAGING DIRECTOR OF THE LESSEE COMPANY. THE TRIBUNAL ALSO NOTED THAT THE ASSESSING OFFICER HAD MERELY STATED AFTER REFERRING TO THE ASSESSEES SUBMISSION THAT THE ENTIRE DEPRECIATION WAS DISALLOWED. THERE WAS NO MATERIAL OR EVIDENCE TO SHOW THAT THE TRANSACTION OF SALE AND LEASE BACK WAS NOT GENUINE OR WAS BOGUS NOR WAS ANY MATERIAL BROUGHT ON RECORD IN THE COURSE OF THE REASSESSMENT PROCEEDINGS. IN THE ABSENCE OF ANY MATERIAL HAVING BEEN PRODUCED BY THE REVENUE TO SHOW THAT TRANSACTION OF SALE AND LEASE BACK WAS NOT GENUINE OR WAS BOGUS, THERE WAS NO REASON TO INTERFERE WITH THE CONCURRENT FINDINGS ARRIVED AT BOTH BY THE COMMISSIONER AS WELL AS BY THE TRIBUNAL. NO SUBSTANTIAL QUESTION OF LAW AROSE FOR DETERMINATION. 10.8 THE FACTS NOTED ABOVE, CLEARLY PROVE THAT EVEN THE TRIBUNAL ON QUANTUM NOTED THAT DESPITE THE ABOVE ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 21 ADDITIONS ON ACCOUNT OF GIFTS, THE ASSESSEE COULD N OT HAVE EARNED UNDISCLOSED BUSINESS INCOME BEING THE BUSINE SS YET TO COMMENCE IN THE ASSESSMENT YEAR UNDER APPEAL . THUS, NO DEFINITE OR CONCRETE MATERIAL HAS BEEN BRO UGHT ON RECORD BY THE AO TO PROVE THAT THE ASSESSEE CONCEALED THE PARTICULARS OF INCOME OR FILED INACCU RATE PARTICULARS OF INCOME. IT IS SETTLED LAW THAT QUANT UM AND PENALTY PROCEEDINGS ARE ALL TOGETHER DIFFERENT AND DISTINCT PROCEEDINGS, THEREFORE, THE FACTS AND CIRCUMSTANCES NOTED ABOVE WOULD CLEARLY REVEAL THAT THE ASSESSEE MADE BONA FIDE EXPLANATION EXPLAINING THE ABOVE GIFTS AN D THE EXPLANATION OF THE ASSESSEE WAS SUBSTANTIATED THROU GH EVIDENCE AND MATERIALS ON RECORD. THE EXPLANATION O F THE ASSESSEE WAS NOT FOUND TO BE FALSE OR BOGUS. LEVY O F THE PENALTY IS DISCRETION OF THE AO BASED UPON PARTICUL AR FACTS. IN THE FACTS AND CIRCUMSTANCE OF THIS CASE, THERE MAY NOT BE CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR LEVY OF PENALTY. THEREFORE, THE DISCRETION VESTED ON THE AO SHOULD HAVE BEEN EXERCISED IN FAVOUR OF THE ASSESSE E. 11. CONSIDERING THE ABOVE DISCUSSIONS, WE ARE OF TH E VIEW THAT NO CASE OF LEVY OF PENALTY IS MADE OUT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. WE ACCORDINGLY , SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCE L THE PENALTY. 16. CONSIDERING THE FACTS AND CIRCUMSTANCES NOTED A BOVE IN THE LIGHT OF THE ORDER OF THE TRIBUNAL ABOVE, WE SET AS IDE THE ORDERS OF THE AUTHORITIES BELOW AND CANCEL THE PENALTY. 17. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ITA NO.1333/AHD/2008 AND 390/AHD/2009 SHRI RAJENDRA M. SHAH VS ITO, WARD-3, MEHSANA 22 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A NO.1333/AHD/2008 IS DISMISSED AND THE APPEAL OF THE ASSESSEE IN ITA NO.390/AHD/2008 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (A. K. GARODIA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/ LAKSHMIKANT DEKA/- -- - COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD