ITO, CHENNAI V. Shri P.Ramesh, CHENNAI

ITA 1957/CHNY/2010

• Counselvise Citation: [2011] 135 COUNSELVISE.COM (IT) 1053 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-02-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 18-11-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Unexplained investment; Business income
• Section: 271(1)(c); 68

Judgement Text

IN THE INCOMETAX APPELLATE TRIBUNAL: C - BENCH:CHEN NAI (BEFORE SHRI ABRAHAM P. GEORGE. ACCOUNTANT M EMBER AND SHRI GEORGE MATHAN, JUDICIAL MEM BER) ITA NO. 1957/ MDS/10 ASST. YEAR 2007-08 THE ITO, BUSINESS WARD IV(3), CHENNAI VS . SHRI P.RAMESH, 110 TNHB COMPLEX SHOP NO.1, ASHOKNAGAR, CHENNAI 600083 (PAN ADJPR4813Q) (APPELLANT) (RESPONDENT) APPELLANT BY RESPONDENTS BY: SHRI TAPAS KUMAR DUTTA,CIT(DR) SHRI K.BALASUBRAMANIAN ITA NO. 1957/MDS /10 2 ORDER PER SHRI ABRAHAM P.GEORGE, A.M: IN THIS APPEAL FILED BY REVENUE, WHICH IS DIRECTED AGAINST THE ORDER DATED 31-08-2010 OF THE CIT(A)-III, CHENNAI, ITS GR IEVANCE IS THAT CIT(A) HAD DELETED A PENALTY OF ` 6,18,985/- LEVIED ON THE ASSESSEE BY AO; UNDER SEC. 271(1)(C) OF THE INCOME-TAX ACT, 1961 (THE AC T FOR SHORT). ACCORDING TO THE REVENUE, ASSESSEE DID NOT FURNISH ANY EXPLA NATION REGARDING SOURCE OF CASH DEPOSIT OF ` 17,88,250/- IN HIS BANK ACCOUNT NOR DID HE FURNISH THE BANK ACCOUNT STATEMENT, BUT ON THE OTHE R HAND, GAVE ONLY VAGUE AND GENERAL CLAIM THAT THE DEPOSIT REPRESENTE D HIS TURNOVER AND ADVANCES RECEIVED FROM CUSTOMERS IN REAL ESTATE BUS INESS. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN THE BUSINESS OF RUNNING A BEAUTY SALOON AND ALSO DOING BUSINESS AS REAL ESTATE AGENT, HAD FILED HIS RETURN FOR THE IMPUGNED ASSESSMENT YEAR A DMITTING INCOME OF ` 3,72,776/-. AO WAS IN RECEIPT OF AIR INFORMATION TH AT ASSESSEE HAD MADE CASH DEPOSITS OF ` 17,88,250/- IN A BANK ACCOUNT IN ASSESSEES NAME WI TH AXIS BANK LTD. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, ASSESSEE WAS REQUIRED TO FURNISH DETAILS OF THE CASH DEPOSIT AND ALSO OF CREDIT CARD ITA NO. 1957/MDS /10 3 BILL PAYMENT OF ` 3,49,449/-. THOUGH ASSESSEE PROMISED TO PRODUCE SUC H BANK ACCOUNT, IT SEEMS, HE FAILED TO DO SO. SINCE B ANK STATEMENTS WERE NOT FURNISHED AND NO EXPLANATIONS WERE OFFERED BY ASSES SEE FOR THE SOURCE OF THE CASH DEPOSIT AND PAYMENT OF CREDIT CARD BILLS, AO CONSIDERED SUCH AMOUNTS AS UNDISCLOSED INCOME UNDER SEC. 68 OF THE ACT AND MADE AN ADDITION. THERE WAS NO APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE AO. 3. THEREAFTER THE AO INITIATED PROCEEDINGS UNDER SE C. 271(1)(C) OF THE ACT, WHICH CULMINATED IN A LEVY OF PENALTY ON THE A BOVE ADDITION. ACCORDING TO THE AO ASSESSEE COULD NOT PRODUCE COPY OF THE BA NK STATEMENT OR FURNISH ANY EXPLANATION REGARDING THE DEPOSITS MADE IN THE BANK ACCOUNT. HE WAS, THEREFORE, OF THE OPINION THAT THERE WAS CO NCEALMENT OF INCOME UNDER SEC. 271(1)(C) OF THE ACT. LEVY OF PENALTY WA S AT THE MINIMUM SCALE OF 100% OF THE TAX SOUGHT TO BE EVADED. 4. ASSESSEE MOVED IN APPEAL BEFORE THE CIT(A) AGAIN ST THE PENALTY ORDER. HIS EXPLANATION WAS THAT WHEN THE ASSESSMENT PROCEEDINGS WERE ON HE HAD MET WITH AN ACCIDENT WITH SLIGHT FRACTURE IN BONE WHICH KEPT HIM IMMOBILIZED. ACCORDING TO THE ASSESSEE ,COMPLETE BE D REST WAS ADVISED BY THE DOCTOR. IT WAS ALSO PLEADED THAT ASSESSEES WIF E WAS ALSO BEDRIDDEN IN THE MONTHS OF FEBRUARY AND MARCH 2010 AND COPIES O F MEDICAL CERTIFICATES WERE FILED BEFORE CIT(A) IN THIS REGARD. HENCE, AS PER THE ASSESSEE HE ITA NO. 1957/MDS /10 4 COULD NOT ATTEND TO THE PENALTY PROCEEDINGS NOR COU LD HE FILE AN APPEAL AGAINST ASSESSMENT. FURTHER PLEADING WAS THAT BANK HAD NOT GIVEN HIM A STATEMENT OF ACCOUNT DESPITE REPRESENTATION MADE TO THE BANK IN THIS REGARD ON 02-12-2009. ASSESSEE ALSO FILED A COPY OF THE LETTER GIVEN BY HIM TO THE BANK BEFORE THE CIT(A). WITH REGARD TO THE D EPOSIT IN THE BANK ACCOUNT, EXPLANATION OF THE ASSESSEE WAS THAT HE WA S ACTING AS AN AGENT IN REAL ESTATE BUSINESS AND ADVANCES RECEIVED FRO M INTENDING BUYERS AND ALSO DAILY RECEIPTS FROM THE BEAUTY SALOON BUSINESS WERE BEING DEPOSITED IN THE BANK ACCOUNT. NAMES OF FOUR PARTIES NAMELY, SHRI SIVAKUMAR, SHRI AYYAVOO, SHRI RAJENDRAN AND SHRI V.G.S.RAJESH WERE ALSO GIVEN TO THE CIT(A). FURTHER AS PER ASSESSEE, HE HAD ADMITTED A REAL ESTATE BUSINESS INCOME OF ` 3,87,800/- AND HAD TURNOVER OF ` 20,42,680/- IN ADDITION TO AGRICULTURAL INCOME. SUMMARY OF HIS CONTENTION WAS THAT TURNOVER AND ADVANCE RECEIVED FROM BUYERS WERE BANKED IN THE ACC OUNT AND, THEREFORE, THE CREDITS STOOD EXPLAINED. CIT(A) WAS APPRECIATI VE OF THESE CONTENTIONS. ACCORDING TO HIM, EXPLANATION GIVEN BY THE ASSESSEE COULD NOT BE CONSIDERED AS FALSE AND THEREFORE, THE EXPLANATION- 1 TO SEC. 271(1)(C) OF THE ACT WAS NOT ATTRACTED. FURTHER AS PER THE CIT(A ) MERE AGREEMENT FOR ADDITION DID NOT MEAN THAT THERE WAS FRAUDULENT OR WILLFUL NEGLIGENCE ON THE PART OF THE ASSESSEE SO AS TO LEVY OF PENALTY. AS P ER THE CIT(A), PENALTY MERELY BASED ON QUANTUM ASSESSMENT COULD NOT BE SUS TAINED AND PROCEEDINGS FOR ASSESSMENT AND PROCEEDINGS FOR PEN ALTY WERE DIFFERENT. ITA NO. 1957/MDS /10 5 RELYING ON THE DECISION OF HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF CIT VS. S.I PARIPUSHPAM (249 ITR 550) AND CIT VS. INDIAN BISLERS (240 ITR 943), HONBLE SUPREME COURT IN THE CASE OF SIR SHADILAL SUGAR & GENERAL MILLS LTD. V. CIT (168 ITR 705), HONBLE D ELHI HIGH COURT IN THE CASE OF CIT VS. MRS. BALJEET JOLLY (263 ITR 239), AND HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. MATA PRASAD (278 ITR 354), LD.CIT(A) DELETED LEVY OF PENALTY. 5. NOW BEFORE US, LD. DR ASSAILING THE ORDER OF THE CIT(A) SUBMITTED THAT THIS WAS A CASE WHERE THERE WAS CLEAR CONCEALM ENT OF PARTICULARS SINCE ASSESSEE HAD FAILED TO OFFER ANY EXPLANATION. 6. PER CONTRA, LD. AR SUPPORTED THE ORDER OF THE LD . CIT(A). ACCORDING TO HIM, ASSESSEE COULD NOT FILE HIS BANK ACCOUNT BEFOR E AO ONLY FOR A REASON THAT THE BANK DID NOT GIVE THE STATEMENT DESPITE SP ECIFIC REQUEST DATED 02- 12-2009 IN THIS REGARD. FURTHER ACCORDING TO HIM, A LONG WITH THIS, ASSESSEES INCAPACITATION DUE TO INJURY, WHEN CONSI DERED, IT WOULD CLEARLY SHOW THAT THIS WAS NOT A CASE WHERE ASSESSEE OFFER ED ANY EXPLANATION WHICH WAS FALSE OR WHICH COULD NOT BE SUBSTANTIATED , WHICH COULD LEAD TO LEVY OF PENALTY. ITA NO. 1957/MDS /10 6 7. WE HAVE PERUSED THE ORDERS AND HEARD BOTH THE CO UNSEL. IN THE FIRST PLACE WE NOTE FROM THE ASSESSMENT ORDER THAT ASSESS EE WAS REPRESENTED BY A CHARTERED ACCOUNTANT WHO APPEARED SEVERAL TIM ES BEFORE THE AO. THERE IS NO CASE FOR THE ASSESSEE THAT THE BANK BAL ANCE IN HIS AXIS BANK ACCOUNT ON WHICH AIR INFORMATION WAS RECEIVED BY TH E AO, WAS REFLECTED IN HIS BALANCE SHEET. HAD THE BANK ACCOUNT WITH AXI S BANK, BEEN USED FOR DEPOSITING TURNOVER AND RECEIPT OF THE ASSESSEEFROM HIS BUSINESS, WITHOUT DOUBT THE BALANCE OF SUCH ACCOUNT WOULD HAVE FOUND A PLACE IN HIS BALANCE SHEET. THOUGH ASSESSEE HAD RELIED ON HIS PR OFIT AND LOSS ACCOUNT AND BALANCE SHEET FOR PLEADING THAT THERE WAS TURNO VER OF `20,42,680/- HE WAS UNABLE TO EXPLAIN WHY THE BANK ACCOUNT WITH M/S A XIS BANK WAS NOT REFLECTED IN HIS BOOKS. BUT FOR THE RECEIPT OF AIR INFORMATION, THE DEPOSITS IN THE BANK ACCOUNT WITH AXIS BANK WOULD HAVE DEFINITELY GONE UNNOTICED. ASSESSEES PLEADING THAT HE HAD FILED A LETTER ON 02- 12-2009 WITH THE BANK BUT THE BANK HAD FAILED TO GI VE A STATEMENT OF BANK ACCOUNT, CANNOT BE STAND THE TEST OF REASONING. O BTAINING A STATEMENT OF ACCOUNT FROM THE BANK IS THE RIGHT OF A CUSTOMER AND THERE IS NOTHING ON RECORD TO SHOW THAT ASSESSEE HAD AT A NY TIME PURSUED THE MATTER WITH THE BANK. EVEN OTHERWISE, NOT HING STOPPED THE ASSESSEE FROM EXPLAINING HIS DEPOSITS IN THE BANK WITH SUFFICIENT AND NECESSARY EVIDENCE. NOTHING OF THIS SORT WAS DONE. T HOUGH ASSESSEE HAD PLEADED THAT HE WAS IMMOBILIZED DUE TO AN INJURY, WE ARE ITA NO. 1957/MDS /10 7 UNABLE TO ACCEPT THIS PLEADING, AS THE ASSESSEE NEVER FIL ED AN APPEAL AGAINST THE ASSESSMENT EVEN BELATEDLY, DESPITE BEING AD VISED BY QUALIFIED CHARTER ACCOUNTANT. IN FACT, ASSESSEE NEVER F ILED AN APPEAL AGAINST THE ASSESSMENT BUT HAD STARTED PAYING TAXES DEMAN DED. THUS, THE CONCLUSION OF THE AO THAT NON PRODUCTION OF BANK STATEMENT WAS ONLY FOR A REASON THAT ASSESSEE HAD NO PLAUSIBLE EXPLANA TION FOR THE DEPOSITS, APPEAR TO BE TRUE. EVEN BEFORE US LD. AR W AS UNABLE TO GIVE ANY EXPLANATION REGARDING THE SOURCE FOR THE DEPOSITS IN THE BANK ACCOUNT, EXCEPT FOR A PLEADING THAT THE CREDITS REPR ESENTED ASSESSEES TURNOVER. WITHOUT DOUBT, ASSESSEE HAD FAILED TO OFFER AN EXP LANATION WHICH HE WAS ABLE TO SUBSTANTIATE NOR WAS HE ABLE T O PROVE THAT HE HAD DISCLOSED ALL THE FACTS MATERIAL FOR THE COMPUTATIO N OF HIS TOTAL INCOME. IN OUR VIEW EXPLANATION-1 TO SEC. 271(1)(C) OF THE ACT CLEARLY APPLIED AND DEPOSITS IN THE BANK ACCOUNT FOR WHICH NO REASONAB LE EXPLANATION COULD BE DEEMED TO REPRESENT INCOME FOR WHICH PARTICULARS WERE CONCEALED. 8. BEFORE PARTING WITH THE MATTER, IT WILL BE INAPP ROPRIATE IF WE DO NOT DEAL WITH THE VARIOUS DECISIONS RELIED ON BY LD. CI T(A) FOR CANCELING THE PENALTY LEVIED ON THE ASSESSEE. 9. FIRST IS THAT OF HONBLE JURISDICTIONAL HIGH C OURT IN THE CASE OF S.I.PARIPUSHPAM (249 ITR 550). THERE, IT WAS AN AGR EED ADDITION WHERE ASSESSEE HAD AGREED FOR SUCH ADDITION DURING THE CO URSE OF ASSESSMENT ITA NO. 1957/MDS /10 8 PROCEEDINGS BEFORE THE AO. IT WAS FOR THIS REASON T HAT THE HONBLE JURISDICTIONAL HIGH COURT HELD THAT AGREEMENT TO AN ADDITION WOULD NOT BY ITSELF ESTABLISH FRAUD OR WILLFUL NEGLECT. HERE, ON THE OTHER HAND, ADDITION WAS NOT AT ALL AN AGREED ONE BUT ON THE OTHER HAND, MADE BY THE AO SINCE THE ASSESSEE FAILED TO GIVE EXPLANATION ABOUT HIS DEPOSITS IN BANK ACCOUNT. AS FOR THE DECISION OF HONBLE APEX COURT IN THE CASE OF SIR SHADILAL SUGAR & GEN. MILLS LTD. (168 ITR 705), THE RE THE ASSESSEE HAD AGAIN ADMITTED TO THE ADDITION DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AND IT WAS ALSO A CASE OF EXCESS CLAIM OR IN OTHER WORDS, DISALLOWANCE. HERE ON THE OTHER HAND, THERE WAS NO ADMISSION BY THE ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S THAT THE DEPOSITS IN HIS AXIS BANK ACCOUNT WERE HIS INCOME. ON THE OT HER HAND, ASSESSEE WAS PLEADING THAT THE DEPOSITS WERE ITS TURNOVER F ROM BUSINESS WITHOUT IN ANY WAY ESTABLISHING IT. IT WAS NEITHER A CASE OF E XCESS CLAIM OR DISALLOWANCE. NEXT CASE RELIED ON BY LD. CIT(A) IS THAT OF JURISDICTIONAL HIGH COURT IN THE CASE OF INDIAN BISLERS (SUPRA). THERE, IT WAS A DISALLOWANCE OF CERTAIN DEDUCTIONS CLAIMED BY THE ASSESSEE AND PENA LTY WAS LEVIED ON SUCH DISALLOWANCE. DISALLOWANCE OF EXPENDITURE WAS MADE FOR A REASON THAT IT WAS NOT INCURRED FOR THE PURPOSE OF ASSESSE ES BUSINESS. IT WAS ON ACCOUNT OF THIS REASON THAT HONBLE JURISDICTIONAL HIGH COURT HELD THAT THERE WAS NO GUILTY OR FRAUDULENT NEGLECT ON THE PART OF THE ASSESSEE. ON THE OTHER HAND, ASSESSEE HERE NEVER GAVE AN EXPLANATION FOR HIS DEPOSITS AND ITA NO. 1957/MDS /10 9 THIS WAS NEITHER A CASE OF ANY DISALLOWANCE. COMING TO THE NEXT CASE RELIED ON BY LD. CIT(A), WHICH IS THAT OF HONBLE D ELHI HIGH COURT IN THE CASE OF BALJEET JOLLY (263 ITR 239), THE LOANS ON W HICH ADDITIONS WERE MADE WERE SEEN TO HAVE BEEN RECEIVED BY MEANS OF BA NK DRAFTS AND IT WAS FOR THIS REASON THAT HONBLE DELHI HIGH COURT UPHELD THE ORDER OF THE TRIBUNAL DELETING THE LEVY OF PENALTY. HERE, ON THE OTHER HAND, IT WAS NOT A CASE OF LOAN TAKEN BY ASSESSEE AND THERE WAS NO SUC H PLEADING AT ALL. COMING TO LAST DECISION WHICH S THAT OF HONBLE ALL AHABAD HIGH COURT IN THE CASE OF MATA PRASAD (SUPRA), THERE WAS UNEXPLAINED INVESTMENT OF ` 38,000/- IN BUSINESS., WHICH ASSESSEE HAD EXPLAINED TO BE THE CREDIT OBTAINED IN HIS BUSINESS, ROTATED OVER A PERIOD OF TWO TO THREE MONTHS. HERE, ON THE OTHER HAND, THERE WAS NO CLAIM OF ANY ROTATION NOR WAS THE DEPOSIT IN THE BANK EXPLAINED AS INVESTMENT IN THE BUSINESS OF THE ASSESSEE. 10. THUS, WE FIND THAT THE CASES RELIED ON BY LD. C IT(A) FOR DELETING PENALTY WERE ON TOTALLY DIFFERENT SET OF FACTS. WE ARE, THEREFORE, OF THE OPINION THAT THE CIT(A) FELL IN ERROR IN DELETING T HE PENALTY. ORDER OF THE CIT(A) IS QUASHED AND PENALTY LEVIED ON THE ASSESSE E BY AO IS REINSTATED. 11. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED . ITA NO. 1957/MDS /10 10 ORDER PRONOUNCED IN OPEN COURT ON 11 - 02-2011. SD/- SD/- (GEORGE MATHAN) JUDICIAL MEMBER (ABRAHAM P.GEORGE) ACCOUNTANT MEMBER CHENNAI: 11TH FEBRUARY, 2011. NBR CC: ASSESSEE/ ASSESSING OFFICER/ CIT(A)/ CIT/ D .R/ GUARD FILE.