D.Vijayagandhi, Coimbatore V. ACIT, Coimbatore

ITA 1588/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64131 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 08-08-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 23-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: A ARJUNARAJ
• Keywords: Unexplained cash credit; Gift; Business income
• Section: 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1588/MDS/2011 ASSESSMENT YEAR : 2005-06 SMT. D. VIJAYAGANDHI, 57, N.G. RAMASAMY STREET, P.N. PALAYAM, COIMBATORE 641 023. PAN : ABRPV7125P (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE III, COIMBATORE. (RESPONDENT) APPELLANT BY : SHRI A. ARJUNARAJ, CA RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JUNIOR STANDING COUNSEL DATE OF HEARING : 08.08.2012 DATE OF PRONOUNCEMENT : 08.08.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVAN CE IS THAT CIT(APPEALS) UPHELD THE ORDER OF THE A.O. LEVYING P ENALTY UNDER SECTION 271(1)(C) OF INCOME-TAX ACT, 1961 (IN SHORT 'THE AC T'). 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, PROPRIETO R OF A CONCERN MANUFACTURING ROUGH CASTINGS AND ALSO DOING FABRICA TION OF STEEL ANGLES, 2 I.T.A. NO. 1588/MDS/11 HAD FILED HER RETURN OF INCOME, FOR IMPUGNED ASSESS MENT YEAR, DECLARING AN INCOME OF ` 6,68,730/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER POINTED OUT TO T HE ASSESSEE THAT SHE HAD DEPOSITED A SUM OF ` 11,60,407/- IN A SAVINGS BANK ACCOUNT WITH M/S INDUS IND BANK LTD., WHICH WAS NOT REFLECTED IN THE BALANCE SHEET ATTACHED TO THE RETURN FILED. REPLY OF THE ASSESSE E WAS THAT SHE WAS HAVING TWO ACCOUNTS, ONE OF WHICH WAS CURRENT ACCOU NT IN CANARA BANK, WHICH ALONE WAS DISCLOSED IN THE BALANCE SHEE T. ACCORDING TO ASSESSEE, SAVINGS BANK ACCOUNT IN INDUS IND BANK LT D. WAS NOT DISCLOSED SINCE DEPOSITS DID NOT CONSIST OF ANY INC OME EARNED, NOR IT HAD ANYTHING TO DO WITH HER BUSINESS. ACCORDING TO ASS ESSEE, THE DEPOSITS IN THE SAVINGS BANK ACCOUNT WERE GIFTS RECEIVED FROM O NE SHRI D. DAMODHARASAMY AND SHRI D. SABRIRAJ. SHRI D. DAMODH ARASAMY WAS THE HUSBAND OF THE ASSESSEE AND HE WAS ALSO ASSESSED IN THE SAME CIRCLE. HOWEVER, THE ASSESSING OFFICER NOTED THAT THE BOOKS OF ACCOUNTS PRODUCED BY THE ASSESSEE DID NOT SHOW THE S.B. ACCO UNT, NOR THE DEPOSITS MADE IN SUCH ACCOUNT. ASSESSEE THEREUPON PRODUCED A CASH FLOW STATEMENT AND PROOF FOR HAVING RECEIVED ` 11 LAKHS AS GIFT FROM HER HUSBAND, AND AN AGREEMENT FOR SALE DATED 17.5.2004 ENTERED BY SHRI D. DAMODHARASAMY FOR HAVING RECEIVED ` 5.5 LAKHS EACH ON 17.5.2004 AND 7.10.2004. HOWEVER, ASSESSING OFFICER WAS NOT IMPR ESSED. ACCORDING 3 I.T.A. NO. 1588/MDS/11 TO HIM, THE GIFTS ALLEGED TO HAVE BEEN RECEIVED FRO M HER HUSBAND WERE NOT REFLECTED IN THE BOOKS OF EITHER OF THE PARTIES . EXPLANATIONS GIVEN WERE ONLY AN AFTERTHOUGHT WHEN THE BANK STATEMENT O F S.B. ACCOUNT WAS SHOWN TO THE ASSESSEE. FURTHER, AS PER THE A.O., T HE DEPOSITS WERE MADE IN PIECEMEAL IN THE BANK ACCOUNT, WHEREAS, HER HUSBAND HAD RECEIVED ` 11 LAKHS IN TWO INSTALMENTS ON 17.5.2004 AND 7.10. 2004. HE THUS CAME TO A CONCLUSION THAT ASSESSEE WAS UNABLE TO EXPLAIN A DIRECT NEXUS BETWEEN GIFTS RECEIVED AND DEPOSITS MADE IN T HE BANK ACCOUNT. HE ALSO NOTED THAT EVEN INTERESTS RECEIVED FROM DEP OSITS WERE NOT SHOWN. HE THUS MADE AN ADDITION OF ` 11,60,000/- AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT. 3. THEREAFTER PROCEEDINGS FOR LEVY OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT WERE INITIATED. EXPLANATION OF THE ASSE SSEE WAS THAT THERE WAS NO DELIBERATE NON-COMPLIANCE WITH ANY OF THE PR OVISIONS OF THE ACT. ACCORDING TO ASSESSEE, SHE HAD NOT CONCEALED ANY IN COME AND WHATEVER INCOME EARNED WAS SHOWN IN THE RETURN OF I NCOME FILED. HOWEVER, THE A.O. WAS NOT IMPRESSED. ACCORDING TO H IM, ASSESSEE HAD DELIBERATELY CONCEALED HER INCOME BY NOT DISCLOSING THE BANK ACCOUNT WITH INDUS IND BANK LTD. AT THE TIME OF FILING RETU RN AND ALSO AT THE TIME OF ASSESSMENT. AS PER THE A.O., EXPLANATIONS GIVEN BY THE ASSESSEE WERE NOT BELIEVABLE, NOR COULD SHE GIVE A SATISFACTORY E XPLANATION REGARDING 4 I.T.A. NO. 1588/MDS/11 THE SOURCE OF DEPOSITS. THUS, ACCORDING TO HIM, AS SESSEE HAD CONDUCTED IN A MANNER WHICH WAS IN CONSCIOUS DISREG ARD OF HER OBLIGATION TOWARDS PROVISIONS OF LAW. HE THUS, REL YING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF UNION OF INDIA V. DHARMENDRA TEXTILE PROCESSORS (306 ITR 277), HELD THAT A LEVY OF PENAL TY WAS REQUIRED UNDER SECTION 271(1)(C) OF THE ACT. SUCH LEVY WAS 100% O F TAX SOUGHT TO BE EVADED, WHICH CAME TO ` 4,14,720/-. 4. IN HER APPEAL BEFORE CIT(APPEALS), CONTENTION OF THE ASSESSEE WAS THAT SHE HAD SUBMITTED DETAILED EXPLANATIONS FOR TH E DEPOSITS IN INDUS IND BANK LTD. BY FURNISHING CASH FLOW STATEMENT, DE CLARATION OF GIFT BY HER HUSBAND AND A COPY OF SALE AGREEMENT ENTERED BY HER HUSBAND ON 17.5.2004. AS PER THE ASSESSEE, SHE HAD ALSO FILED CONFIRMATION FROM THE BUYERS, NAMELY, SHRI P.S. MUTHUSAMY AND SMT. M. MANIMEGALAI IN RESPECT OF THE PROPERTY. DESPITE SUCH CREDIBLE EVI DENCES, SOURCE WAS NOT ACCEPTED AND CREDITS IN BANK ACCOUNT WERE TAXED . AS PER THE ASSESSEE, SHE HAD DISCHARGED HER ONUS FOR PROVING T HE SOURCE OF CREDITS IN THE BANK ACCOUNT WITH INDUS IND BANK LTD., WHICH WAS PURELY OF PERSONAL NATURE AND THE DEPOSITS WERE GIFTS GIVEN B Y HER HUSBAND. BOOKS OF ACCOUNTS PRODUCED PERTAINED TO HER PROPRIE TORY BUSINESS AND, THEREFORE, THE PERSONAL BANK ACCOUNT WAS NOT INCLUD ED THEREIN. HER HUSBAND WAS ALSO ASSESSED TO TAX AND THE DETAILS OF GIFTS MADE BY HER 5 I.T.A. NO. 1588/MDS/11 HUSBAND WERE VERY MUCH AVAILABLE BEFORE THE ASSESSI NG OFFICER. ASSESSING OFFICER HAD IGNORED VARIOUS EVIDENCE PROD UCED BY THE ASSESSEE AND MADE THE ADDITION. LEVY OF PENALTY WA S MADE BY REJECTING THE EXPLANATION OFFERED. 5. CIT(APPEALS) WAS NOT IMPRESSED BY THE CONTENTION S OF ASSESSEE. ACCORDING TO HIM, PLEA OF THE ASSESSEE THAT AMOUNTS RECEIVED WERE GIFTS FROM HER HUSBAND WAS ONLY AN AFTERTHOUGHT. THE BOO KS PRODUCED BY THE ASSESSEE DID NOT REVEAL ANY SAVINGS BANK ACCOUNT. GIFTS RECEIVED FROM HER HUSBAND HAD NOT BEEN SHOWN, NOR HAD HE SHOWN AN Y ADVANCE RECEIVED FROM SALE OF IMMOVABLE PROPERTY. THUS, AC CORDING TO HIM, INTENTION OF THE ASSESSEE WAS TO CONCEAL INCOME WIT H REGARD TO SAVINGS BANK ACCOUNT. HE THUS CONFIRMED THE LEVY OF PENALT Y. 6. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT ASSESSEE HAD PROD UCED SUFFICIENT EVIDENCES FOR JUSTIFYING THE DEPOSITS IN THE BANK A CCOUNT AND THE PENALTY WAS LEVIED SIMPLY BASED ON THE ADDITION DONE IN THE ASSESSMENT. ACCORDING TO HIM, ON PREPONDERANCE OF PROBABILITY, AN ASSESSMENT OF INCOME COULD BE JUSTIFIED, BUT, FOR LEVY OF PENALTY , STRICT EVIDENCE HAD TO BE ADDUCED BY THE REVENUE. ACCORDING TO HIM, LOWER AUTHORITIES WERE UNABLE TO SHOW ANY MALAFIDE INTENTION ON THE PART O F THE ASSESSEE. FURTHER ACCORDING TO HIM, PENALTY WAS UNJUSTIFIABLY LEVIED. 6 I.T.A. NO. 1588/MDS/11 7. PER CONTRA, LEARNED D.R. SUBMITTED THAT BUT FOR AIR INFORMATION, WHICH CAME TO THE NOTICE OF ASSESSING OFFICER, ASSE SSEE WOULD HAVE NEVER DISCLOSED HER BANK ACCOUNT. ACCORDING TO HIM , THE CLAIM OF GIFTS FROM HER HUSBAND WAS ONLY AN AFTERTHOUGHT. WHEN TH E DEPOSITS WERE ALL MADE IN PIECEMEAL BASIS, GIFTS HAD BEEN RECEIVED IN TWO INSTALMENTS OF 5.5 LAKHS EACH. SO, THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT A BONAFIDE ONE AND IT WAS UNBELIEVABLE. THEREFORE, A SSESSEE HAD FURNISHED INACCURATE PARTICULARS WITH REGARD TO HER INCOME AND LEVY OF PENALTY WAS JUSTIFIED. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT ASSESSEE WAS RUNNING A BUS INESS AND WHICH WAS MANUFACTURING OF ROUGH CASTINGS AND FABRICATION OF STEEL ANGLES. THERE IS ALSO NO DISPUTE THAT ASSESSEE HAD FILED RE TURN OF INCOME FOR IMPUGNED ASSESSMENT YEAR ALONG WITH BALANCE SHEET A ND COMPUTATION OF INCOME. IT IS ALSO AN ADMITTED POSITION THAT SA VINGS BANK ACCOUNT OF THE ASSESSEE WITH INDUS IND BANK LTD. IN WHICH DEPO SITS WERE MADE, WHICH WAS CONSIDERED FOR AN ADDITION UNDER SECTION 68 OF THE ACT, LEADING TO LEVY OF PENALTY, WAS NOT DISCLOSED IN SU CH BALANCE SHEET FILED ALONG WITH THE RETURN. NEVERTHELESS, ASSESSEE HAD IN SUCH BALANCE SHEET DULY SHOWN HER CURRENT ACCOUNT WITH REGARD TO HER BUSINESS. THE QUESTION TO BE ANSWERED IS WHETHER EVERY ASSESSEE, WHO IS HAVING A 7 I.T.A. NO. 1588/MDS/11 SAVINGS BANK ACCOUNT, WHICH HAS NO RELEVANCE WHATSO EVER WITH HER OR HIS BUSINESS, IS OBLIGED TO SHOW SUCH ACCOUNT IN TH E BALANCE SHEET OF HIS/HER BUSINESS. IN OUR OPINION, THE ANSWER IS A NO. ALL ALONG, THE ASSESSEE HAD MAINTAINED THAT THE SAVINGS BANK ACCOU NT WAS A PERSONAL ONE AND NOT LINKED TO HER BUSINESS OPERATI ONS. ASSESSEE, WHO WAS RUNNING A BUSINESS AND WHO PREPARED BALANCE SHE ET OF SUCH BUSINESS, WAS NOT OBLIGED TO SHOW THOSE BANK ACCOUN TS, WHICH WERE NOT RELATED TO HER BUSINESS AND WHICH REFLECTED THEREIN HER PERSONAL SAVINGS OR DEPOSITS FROM SOURCE OTHER THAN BUSINESS INCOME. HERE, ASSESSEE HAD EXPLAINED THAT THE DEPOSITS IN BANK ACCOUNT WER E COMING OUT OF GIFTS GIVEN BY HER HUSBAND. IT IS ALSO NOTED THAT GIFTS STATED TO HAVE BEEN RECEIVED FROM HER HUSBAND, HAD BEEN CONFIRMED BY HE R HUSBAND SHRI D. DAMODHARASAMY. EXPLANATION WAS ALSO GIVEN BY SHRI D. DAMODHARASAMY THAT THE AMOUNTS HAD COME OUT OF ADVA NCES RECEIVED AGAINST A SALE OF PROPERTY. CONFIRMATION FROM THE CONCERNED BUYERS WERE ALSO PRODUCED BY THE ASSESSEE. NO DOUBT, THE DEPOSITS IN THE BANK ACCOUNT MIGHT HAVE BEEN IN PIECEMEAL. HOWEVER , IN OUR OPINION, ASSESSEE HAD REASONABLY PROVED THE SOURCE OF ` 11 LAKHS, ESPECIALLY SINCE CASH-FLOW STATEMENT WAS ALSO FURNISHED. NO F LAW IN SUCH CASH FLOW STATEMENT HAS BEEN POINTED OUT. IN A TRANSACTION B ETWEEN HUSBAND AND WIFE, RULES OF STRICT EVIDENCE CANNOT BE APPLIED WH EN CONJUGAL RIGHTS ARE IN PLACE. ESPECIALLY SO, WHEN HUSBAND IS ALSO AN A SSESSEE. IN SUCH 8 I.T.A. NO. 1588/MDS/11 CIRCUMSTANCES, WE ARE OF THE OPINION THAT ASSESSEE HAD PRODUCED REASONABLE DOCUMENTATION TO SHOW THE SOURCE OF DEPO SITS IN HER PERSONAL BANK ACCOUNT. WE CANNOT SAY THAT ASSESSEE HAD FAILED IN HER DUTY TO DISCLOSE ANY INFORMATION RELEVANT TO ASSESS MENT OF HER INCOME. WE ALSO CANNOT SAY THAT THERE WAS ANY INTENTION TO CONCEAL THE INCOME. EVIDENCE ADDUCED BY THE ASSESSEE MIGHT NOT HAVE MET THE STANDARDS OF QUALITATIVE DETERMINANTS APPLIED BY THE A.O. RESULT ING IN AN ADDITION UNDER SECTION 68 OF THE ACT. HOWEVER, IN OUR OPINI ON, SUCH EVIDENCE WAS GOOD ENOUGH TO ABSOLVE THE ASSESSEE FROM A LEVY OF PENALTY. HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V. DR. R. GOPALAKRISHNAN IN T.C. (APPEAL) NO.520 OF 2010 DATE D 5.7.2010, AFTER CONSIDERING THE DECISION OF HONBLE APEX COURT IN T HE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA), HAS HELD AS UNDER:- JUDGMENT IN UNION OF INDIA V. DHARMENDRA TEXTILE PRO CESSORS (306 ITR 277) WAS CLARIFIED IN SUBSEQUENT JUDGMENT IN UNION OF INDIA V. RAJASTHAN SPINNING AND WEAVING MILLS (23 DTR 158) WHER EIN IT HAS BEEN HELD THAT THERE HAS TO BE A SPECIFIC FINDING T HAT THE NON- DISCLOSURE OF INCOME IS WILLFUL AND DELIBERATE. TH IS JUDGMENT HAS BEEN FOLLOWED IN CCE PUNE V. SKF INDIA LTD. (239 ELT 385) THUS, IN VIEW OF THE OBSERVATIONS OF HONBLE JURISD ICTIONAL HIGH COURT AS ALSO FACTS OF THE CASE, WE ARE OF THE OPINION THAT LEVY OF PENALTY WAS NOT WARRANTED. SUCH LEVY IS DELETED. 9 I.T.A. NO. 1588/MDS/11 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON WEDNESDAY, THE 8 TH OF AUGUST, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 8 TH AUGUST, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, COIMBATORE (4) CIT-I, COIMBATORE (5) D.R. (6) GUARD FILE