Jaikisan Sumitrai Ganwani, Pune V. ITO, Ward 1(3), Pune, Pune

ITA 147/PUN/2012

• Counselvise Citation: 14724514 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 27-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: R TARWALA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI R.K. PANDA ACCOUNTANT MEMBER ITA NO. 147/PN/2012 (ASSESSMENT YEAR 2007-08) JAIKISAN SUMITRAI GANWANI, B-20, KUDALE PATIL PARADISE, MANIKBAUG, SINHAGAD ROAD, PUNE 411051. PAN NO.AEEPG 4254N .. APPELLANT VS. ITO, WARD-1(3), PUNE .. RESPONDENT APPELLANT BY : SHRI R. TARWALA RESPONDENT BY : MS. ANN KAPTHUAMA DATE OF HEARING : 26-06-2013 DATE OF PRONOUNCEMENT : 28-06-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 25-07-2011 OF THE CIT(A)-I, PUNE RELATING TO ASSESS MENT YEAR 2007-08. PENALTY OF RS.4,66,152/- LEVIED BY THE ASSESSING OF FICER U/S.271(1)(C) AND UPHELD BY THE CIT(A) IS THE ONLY ISSUE RAISED B Y THE ASSESSEE IN THE GROUNDS OF APPEAL. 2. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS AN INDIVIDUAL AND IS ENGAGED IN THE BUSINESS OF TRADING IN STAINLESS STEEL AND HARDWARE ITEMS. HE FILED HIS RETURN OF INCOME DECLARING TOT AL INCOME OF RS.4,85,200/-. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS RECEI VED UNSECURED LOAN OF RS.10 LAKHS FROM 2 PERSONS OF RS.5 LAKHS EACH. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE THE GENUINENESS AND CRE DIT WORTHINESS OF THE 2 PERSONS FROM WHOM UNSECURED LOANS OF RS.10 LAKHS WE RE RAISED AND WHY THE SAME WAS ACCEPTED IN CASH. THE ASSESSEE SUBMIT TED THE 7/12 EXTRACTS OF THE 2 PERSONS FROM WHOM THE LOANS HAVE BEEN RAIS ED. IT WAS SUBMITTED THAT THE ASSESSEE WAS IN NEED OF FUNDS FO R MAKING PAYMENTS TO THESE CREDITORS ON URGENT BASIS AND THE CASH RECEIV ED WAS IMMEDIATELY DEPOSITED AND CREDITED IN THE BANK ACCOUNT OF THE A SSESSEE AND PAYMENTS MADE IMMEDIATELY. THEREAFTER, THE ASSESSEE OFFERED THE SAID LOANS AS INCOME OF THE ASSESSEE AND REQUESTED NOT TO INITIAT E PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT STATING THAT THE GENU INENESS OF THE LOAN AND NEED OF THE ASSESSEE IS PROVED. THE ASSESSING OFFI CER ACCORDINGLY TREATED THE LOAN TAKEN AS INCOME OF THE ASSESSEE U/ S.68 OF THE I.T. ACT AND INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT. IN RESPONSE TO THE SHOW CAUSE NOTICE ISSUED BY THE ASSESSING OFFIC ER THE ASSESSEE SUBMITTED THAT HE HAS TAKEN THE UNSECURED LOAN FROM HIS FRIENDS FOR HIS BUSINESS PURPOSES. ALL THE EVIDENCES REGARDING THE GENUINENESS OF THE LOAN TAKEN LIKE DETAILS OF PAYER, THEIR CAPACITY AN D CREDIT WORTHINESS TO PAY WERE SUBMITTED AT THE TIME OF ASSESSMENT. IT W AS ACCORDINGLY SUBMITTED THAT THE PENALTY PROCEEDINGS SHOULD BE DR OPPED. 3. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE ON THE GROUND THA T THE ASSESSEE COULD NOT PROVE THEIR GENUINENESS SUFFICIENTLY DURING ASS ESSMENT PROCEEDINGS FOR WHICH HE ASSESSEE OFFERED THE SAID LOAN AS HIS INCOME. THE ASSESSEE HAD TAKEN RS.10 LAKHS AS LOAN FROM 2 PERSONS NAMELY MR. JAYWANT PATIL GARGOTE RS. 5 LAKHS AND MR. DHARMENDRA RATNANI RS. 5 LAKHS. 3 3.1 FROM THE DETAILS FURNISHED BY MR. JAYWANT PATIL THE ASSESSING OFFICER NOTED THAT HE OWNS APPROXIMATELY 2 ACRES OF AGRICULTURAL LAND WHERE RICE AND OTHER CROPS ARE CULTIVATED AND HIS A VERAGE EARNING PER ANNUM IS RS.40,000/-. THE ASSESSING OFFICER, THERE FORE, DISBELIEVED THE CAPACITY OF THE LOAN CREDITOR ON THE GROUND THAT A PERSON HAVING MEAGRE INCOME OF RS.40,000/- PER ANNUM FROM AGRICULTURE CO ULD NOT HAVE GIVEN RS.5 LAKHS AS LOAN TO THE ASSESSEE. FURTHER, THE S O CALLED AGRICULTURAL LAND IS IN THE NAME OF 2 PERSONS, NAMELY MR. KERBA DAULU PATIL AND MR. JAYWANT PATIL. HE FURTHER OBSERVED THAT SRI KERBA D. PATIL HAS TAKEN LOAN FROM MAHARASTRA COOPERATIVE BANK BY MORTGAGING THE ABOVE LAND. SO FAR AS THE OTHER LOAN CREDITOR IS CONCERNED THERE I S NO DISCUSSION IN THE BODY OF THE PENALTY ORDER. REJECTING THE VARIOUS E XPLANATIONS GIVEN BY THE ASSESSEE AND RELYING ON CERTAIN DECISIONS THE A SSESSING OFFICER LEVIED PENALTY OF RS.4,66,152/- U/S.271(1)(C) ON ACCOUNT O F THE ADDITION MADE U/S.68 OF THE I.T. ACT. 4. IN APPEAL THE LD. CIT(A) SUSTAINED THE PENALTY L EVIED BY THE ASSESSING OFFICER FOR WHICH THE ASSESSEE IS IN APPE AL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE STRONGLY CHALLE NGED THE ORDER OF THE CIT(A). HE SUBMITTED THAT IN RESPONSE TO THE N OTICE U/S.142(1) DATED 05-10-2009 CALLING FOR CERTAIN INFORMATIONS THE ASS ESSEE FILED THE DETAILS ON 18-11-2009. AFTER VERIFYING THE DETAILS SUBMITT ED THE ASSESSING OFFICER ASKED THE ASSESSEE TO SUBMIT FURTHER DETAIL S LIKE CONFIRMATION LETTERS FROM SUNDRY CREDITORS IN RESPONSE TO WHICH THE ASSESSEE FURNISHED 7/12 EXTRACTS OF AGRICULTURAL LAND HELD BY THE PERS ONS FROM WHOM UNSECURED LOAN HAS BEEN RAISED. HE SUBMITTED THAT AT NO POINT OF TIME THE 4 ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE LOAN CREDITORS. REFERRING TO THE BANK STATEMENT AS WELL AS THE LEDG ER ACCOUNT OF THE 2 LOAN CREDITORS THE LD. COUNSEL FOR THE ASSESSEE SUB MITTED THAT THE ASSESSEE HAS REPAID AN AMOUNT OF RS.4 LAKHS TO MR. JAYWANT PATIL, I.E. RS.3 LAKHS ON 20-12-2007 AND ANOTHER RS.1 LAKH ON 2 5-03-2008. THE BALANCE AMOUNT OF RS.1 LAKH WAS REPAID ON 03-08-200 9. SIMILARLY, IN THE CASE OF MR. DHARMENDRA RATNANI, LOAN OF RS.2 LAKHS HAVE BEEN PAID ON 26-05-2009 OUT OF RS.5 LAKHS. HE SUBMITTED THAT ON LY TO BUY PEACE OF MIND AND TO AVOID LITIGATION THE ASSESSEE HAD AGREE D FOR THE ADDITION AND DID NOT FILE ANY APPEAL. HE SUBMITTED THAT THE LD. CIT(A) WITHOUT CONSIDERING THE VARIOUS DETAILS FURNISHED BY THE AS SESSEE SUSTAINED THE PENALTY LEVIED BY THE ASSESSING OFFICER. HE SUBMIT TED THAT MR. DHARMENDERA RATNANI HOLDS 34 ACRES OF LAND AND HAD GIVEN A LOAN OF RS.5 LAKHS. HOWEVER, NOTHING HAS BEEN STATED ABOUT HIS LAND HOLDING AND HIS AGRICULTURAL INCOME. MERELY BECAUSE THE LOAN C REDITORS WHO HAD EXTENDED THE LOAN FACILITY TO THE ASSESSEE AT THE T IME OF NECESSITY DO NOT HAVE PAN, THE SAME CANNOT BE A GROUND TO REJECT THE EXPLANATION FOR NON-LEVY OF PENALTY. RELYING ON A NUMBER OF DECISI ONS HE SUBMITTED THAT THE PENALTY LEVIED BY THE ASSESSING OFFICER AND SUS TAINED BY THE CIT(A) SHOULD BE DELETED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND HEAVILY RELIED ON THE ORDER OF THE CIT(A). SHE SUBMITTED T HAT SINCE THE LOAN WAS NOT GENUINE THE ASSESSEE OFFERED THE SAME FOR ADDIT ION TO THE TOTAL INCOME. THEREFORE, UNDER THE FACTS AND CIRCUMSTANC ES OF THE CASE THIS IS A FIT CASE FOR LEVY OF PENALTY. 5 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY B OTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAV E ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. THERE IS NO DIS PUTE TO THE FACT THAT THE ASSESSEE IN THE INSTANT CASE HAS TAKEN LOAN OF RS.5 LAKHS EACH FROM 2 PERSONS TOTALLING TO RS.10 LAKHS. THERE IS ALSO NO DISPUTE TO THE FACT THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSEE REQUESTED THE ASSESSING OFFICER TO MAKE THE ADDITION AND OFFERED TO PAY THE TAXES. IN THE SAID LETTER, THE ASSESSEE HAD ALSO REQUESTED TH E ASSESSING OFFICER NOT TO LEVY PENALTY U/S.271(1)(C) OF THE I.T. ACT. FRO M THE DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK WE FIND THE FIRST NOTICE U/S.143(2) DATED 01-09-2008 WAS ISSUED AND SERVED ON THE ASSES SEE ON 05-09-2008. WE FURTHER FIND FROM THE DETAILS FURNISHED BY THE A SSESSEE THAT HE HAS REPAID AN AMOUNT OF RS.5 LAKHS TO MR. JAYWANT PATIL ON THE FOLLOWING DATES : 20-12-2007 RS. 3 LAKHS 25-03-2008 RS. 1 LAKH 03-08-2009 RS 1 LAKH FROM THE ABOVE IT IS SEEN THAT THE ASSESSEE HAS REP AID AN AMOUNT OF 4 LAKHS PRIOR TO THE ISSUE OF FIRST NOTICE U/S.143(2) ON 01-09-2008. SIMILARLY, WE FIND AN AMOUNT OF RS.2 LAKHS HAS BEEN REPAID TO MR. DHARMENDRA RATNANI ON 26-05-2009. WE FURTHER FIND AT NO POINT OF TIME THE ASSESSING OFFICER ASKED THE ASSESSEE TO PRODUCE THE LOAN CREDITORS AS NOTHING IS COMING OUT OF THE ASSESSMENT ORDER THAT THE ASSESSING OFFICER HAS EVEN ASKED FOR THE SAME AND THE ASSESSEE WAS UN ABLE TO PRODUCE THE LOAN CREDITORS. FURTHER, ACCORDING TO THE LD. AR ONE OF THE LOAN CREDITORS MR. DHARMENDRA RATNANI OWNS 34 ACRES OF L AND AND NOTHING 6 HAS BEEN MENTIONED ABOUT HIS CREDIT WORTHINESS EITH ER BY THE ASSESSING OFFICER OR BY THE CIT(A). CONSIDERING THE TOTALITY OF THE FACTS OF THE CASE, WE FIND THE ADDITION IS JUSTIFIED IN VIEW OF THE ADMISSION MADE BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEE DINGS FOR ADDITION OF THE SAME. HOWEVER, THIS IS NOT A FIT CASE FOR VISI TING THE PROVISIONS OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. IN THIS VIE W OF THE MATTER, WE ARE OF THE CONSIDERED OPINION THAT THE PENALTY LEVIED B Y THE ASSESSING OFFICER AND SUSTAINED BY THE CIT(A) UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IS NOT JUSTIFIED. WE ACCORDINGLY SET-ASID E THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO CANCEL T HE PENALTY. THE APPEAL FILED BY THE ASSESSEE IS ACCORDINGLY ALLOWED . 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 28 TH DAY OF JUNE 2013 SD/- SD/- (R.S.PADVEKAR) (R.K. PANDA) JUDICIAL MEMBER ACCOUNT ANT MEMBER PUNE DATED: 28 TH JUNE 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, PUNE 4 CIT-I, PUNE 5. THE D.R, A PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE