Shri Subhash Bechulal Soni, Ahmedabad V. The Income tax Officer,Ward-6(4), Ahmedabad

ITA 220/AHD/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4899 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-04-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2009-2010
• Appeal Filed On: 28-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V.K. SINGH
• Keywords: Unexplained cash credit; Capital asset; Cost of acquisition; Set aside; Capital Gains
• Section: 68; 271(1)(c); 143(3); 274

Judgement Text

आयकर अपीलीय अिधकरण, अहमदाबाद ᭠यायपीठ IN THE INCOME TAX APPELLATE TRIBUNAL, ‘’ SMC’’ BENCH, AHMEDABAD (CONDUCTED THROUGH VIRTUAL COURT AT AHMEDABAD) BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER And Ms MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ITA No. 220/AHD/2018 िनधाᭅरण वषᭅ/Asstt. Year: 2009-10 Subhash Bechulal Soni, B/h Shahwadi Bus Stand, Shahwadi, Narol, Ahmedabad-382405. PAN: ADZPS9498J Vs. I.T.O., Ward-6(4), Ahmedabad. (Applicant) (Respondent) Assessee by : Shri Tej Shah, A.R Revenue by : Shri V.K. Singh, Sr.D.R सुनवाई कᳱ तारीख/Date of Hearing : 16/03/2022 घोषणा कᳱ तारीख /Date of Pronouncement: 08/04/2022 आदेश/O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: The captioned appeal has been filed at the instance of the Assessee against the order of the Learned Commissioner of Income Tax(Appeals)-4, Ahmedabad, arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2009-10. ITA no.220/AHD/2018 A.Y. 2009-10 2 2. The assessee has raised the following grounds of appeal: That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in levying penalty of Rs.11,50,000/- u/s. 271(1)(c) of the Act. 3. The only effective issue raised by the assessee is that the learned CIT-A erred in confirming the penalty levied by the AO for Rs. 11,50,000.00 on account of concealment of income under the provisions of section 271(1)(c) of the Act. 4. In the present case, the assessment was framed under section 143(3) of the Act by the AO vide order dated 20 December 2011 after making certain additions to the total income of the assessee as detailed under: 1. Unexplained unsecured loans Rs.15,01,195/- 2. Addition on account of short term capital Gain Rs.13,50,000/- 3. Addition on account of disallowance of long term capital loss Rs.13,50,000/- 4. Unexplained capital addition Rs.2,25,000/- 5. Addition on account of income from other sources Rs.3,00,000/- 4.1 The above additions were also confirmed by the learned CIT-A vide order dated 28 June 2012 and thereafter the assessee has not preferred any appeal against the order of the learned CIT-A. Thus the order of the learned CIT-A for the quantum additions reached to the finality. 4.2 It was alleged by the AO during the quantum proceedings that the assessee with respect to the above income has concealed the particulars of income and therefore the penalty proceedings were initiated under section 271(1)© of the Act by issuing notice under section 274 read with section 271(1)© of the Act dated 20 December 2011. During the penalty proceedings, the assessee was given opportunities to place his points of contention with respect to the penalty proceedings initiated against him. But the assessee did not comply the same. In the absence of any reply from the side of the assessee, the AO concluded that the assessee has concealed the particulars of income to the extent of ₹ 34,34,249.00 ITA no.220/AHD/2018 A.Y. 2009-10 3 and levied penalty for ₹11,50,000 being 100% of the amount of tax sought to be evaded. 5. Aggrieved assessee preferred an appeal to the learned CIT-A 6. The assessee with respect to the addition, representing unexplained cash credit, made by the AO for ₹ 15,01,195.00 contended that details of the parties along with the confirmation and identification proof were duly submitted during the assessment proceedings except one party namely M/s Hariom Auto Electric Rep. Works from whom the loan of Rs. 2,39,117.00 was received. Thus according to the assessee, he has not furnished any inaccurate particulars of income or concealed any particulars of income. Accordingly, the questions of levying the penalty does not arise. 6.1 The assessee with respect to the addition made by the AO for ₹13.50 lakhs under the head capital gain treating the gross value of sale consideration admitted that he failed to furnish the supporting documents for the purchase and the sale of the properties. The relevant submission of the assessee before the learned CIT-A stands as under: “Due to some problem your appellant could not furnished the documents relating to purchase and sales of the said land.” 6.2 But, according to the assessee, the gross value of the sale consideration cannot be treated as income under the head capital gain after ignoring the cost of acquisition. 6.3 The assessee also submitted before the learned CIT-A that he has furnished the relevant papers relating to the purchase of the properties during the assessment proceedings. The relevant submission of the assessee before the learned CIT-A reads as under: During the course of the assessment proceedings, we have submitted papers relating to the purchase of the properties in the name of late Mr. Mehmudkhan Usmankhan Pathan and ITA no.220/AHD/2018 A.Y. 2009-10 4 also affidavits of his son of Mr. Mutakim Mehmudkhan Pathan regarding the genuineness of the transaction. 6.4 The assessee without prejudice to the above also submitted that the entire amount of gross value of sale consideration has been treated as income under the head capital gain without giving the benefit of cost of acquisition. As such the value of the cost of acquisition was treated as nil in the absence of necessary documents. According to the assessee, it is not possible to calculate the income under the head capital gain without having the cost of acquisition. Thus, no income under the head capital gain can be determined. Accordingly, the question of levying the penalty with respect to the addition made by the AO for ₹13.50 lakhs under the head capital gain does not arise. 6.5 The assessee with respect to the addition of ₹ 3 Lacs made by the AO, treating the gross value of the sale consideration as income under the head other sources admitted that he failed to furnish the supporting documents for the purchase and the sale of the properties. But, the assessee furnished the balance sheet for the year 2002-03 before the learned CIT-A to demonstrate that there was the investment shown by him (the assessee) in the land at village which was sold for ₹3 Lacs. 6.6 The assessee without prejudice to the above also submitted that the entire amount of gross value of sale consideration has been treated as income under the head capital gain without giving the benefit of cost of acquisition. As such the value of the cost of acquisition was treated as nil in the absence of necessary documents. According to the assessee, it is not possible to calculate the income under the head capital gain without having the cost of acquisition. Thus, no income under the head capital gain can be determined. Accordingly, the question of levying the penalty with respect to the addition made by the AO for ₹3.00 lakhs under the head capital gain does not arise. ITA no.220/AHD/2018 A.Y. 2009-10 5 6.7 However, the learned CIT-A disregarded the contention of the assessee and confirmed the penalty levied by the AO by observing as under: I have carefully considered the assessment order, facts of the case and the submissions made by the appellant. It is seen from the impugned order that the penalty has been levied on account of the additions made and confirmed on account of unexplained unsecured loans, short term capital gains, unexplained capital addition and income from other sources. The appellant has submitted that confirmations and ID proof had been furnished in the case of all the depositors and that there was no default on the part of the appellant. It is seen that wile adjudicating on the additions made by the AO during the assessment proceedings, the ld.CIT(A) in his order dated 28.06.2012 has very held that only the identity of the creditors has been established by the appellant and the genuineness of the transactions and creditworthiness of these depositors remain unexplained. Similarly, with respect to the addition made on account of capital gains, I find that the appellant has furnished only affidavits which are self-serving documents and do not bear any evidentiary value. Again, the source of credit of Rs.3,00,000/- in his books of accounts remain unexplained by the appellant. 7. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 8. The learned AR before us filed a paper book running from pages 1 to 197 and contended that the assessee has neither concealed nor furnished inaccurate particulars of income. According to the learned AR, there were, all the necessary details, furnished with respect to the cash credit entries which are available in the paper book. 8.1 The learned AR also submitted that there is no question of treating the entire gross amount of sale consideration as capital gain without allowing the benefit of the cost of acquisition. The necessary details with respect to the cost of acquisition were duly furnished before the authorities below and therefore it was incumbent upon the authorities to allow the same after necessary verification in the event of having any doubt. In either of the case, authorities below cannot treat the entire amount of sale consideration as income under the head capital gain/other sources without giving the benefit of the corresponding cost. ITA no.220/AHD/2018 A.Y. 2009-10 6 9. On the other hand the learned DR before us vehemently supported the order of the authorities below. 10. We have heard the rival contentions of both the parties and perused the materials available on record. In the present case, there were various additions made by the authorities below to the total income of the assessee which have been elaborated in the preceding paragraph. According to the Revenue, the assessee has concealed the particulars of income and therefore the penalty was levied/confirmed by the respective authorities. Now, we proceed for each item of addition with respect to which penalty was levied by the authorities below. i. Penalty with respect to the unexplained cash credit 10.1 The assessee has shown certain cash credit received in the year under consideration from various parties which could not pass the test as provided under the provisions of section 68 of the Act. Therefore, the addition was made by the authorities below and accordingly penalty was levied for concealment of income. Under the provisions of section 271(1)© of the Act, the penalty can be levied either for concealment or furnishing inaccurate particulars of income or under the deeming provisions as provided in explanation 1 to section 271(1)© of the Act. In the present case, the penalty was levied on account of concealment of income under the main provisions of section 271(1)© of the Act. The controversy arises whether the assessee has concealed the particulars of income in respect of the loan received by him being unexplained cash credit under the provisions of section 68 of the Act. Under the provisions of section 68 of the Act, there are certain receipts which are deemed as income in respective of the fact whether such receipt really represent the income of the assessee or not. In other words, certain receipts or deemed as income of the assessee. There is no dispute, the receipts to the tune of Rs. 15,01,195.00 have been deemed as income. It is a trite law that the penalty is not automatic meaning thereby any addition made during the quantum proceedings ITA no.220/AHD/2018 A.Y. 2009-10 7 does not become subject to penalty under the provisions of law. To levy the penalty, the revenue authorities have to establish that the assessee has concealed or furnished the inaccurate particulars of income. Merely, any addition made during the quantum proceedings does not authorise the revenue authorities to levy the penalty. What is to be seen is this that whether the assessee has concealed the particulars of income in the given facts and circumstances. Admittedly, all the credit entries shown by the assessee for duly reflected in the financial statements which was supported by the confirmation from all the parties except one M/s Hariom Auto Electric Rep. Works. This fact can be verified from the submission of the assessee before the learned CIT-A which is reproduced as under: It is humbly submitted to your honor that In respect of all the above loans necessary papers such as confirmations and ID proof of the depositor etc has been furnished to the A.O. from time to time. Further, in respect of, the unsecured loans taken from depositors of Hans Motor garage it is submitted that all the loan has been received by accounts payee cheque only in the bank account of your appellant. Since, all such loans received from party no. 1 to 4 in Hans Motor Garage were through cheques therefore the persons having identity and creditworthiness. Further, all other details like confirmations; identity proof etc. has been furnished except party to serial no. 4 ( Hariom Auto Electric Rep.Works). In respect of the loans amounting to Rs. 4,61,000/- received from the party at serial no. 1 to 24 in Hans Motor it is submitted with humble respect that the onus of your appellant to furnish confirmations and Identity proof has been duly discharged during the course of the assessment proceedings. However, the learned A.O. has rejected the said confirmations and considered said loans as unexplained simply on the ground that no source of the said depositor has been explained by your appellant Merely as your appellant could not explain the source of the depositor, the same cannot be the basis to treat the said loans as unexplained cash credit. 10.2 From the above, it is transpired that the assessee has furnished all the necessary details with respect to the credit entries which are placed on pages 12 to 44 of the paper book. Accordingly we hold that there was nothing which could lead to form believe that the assessee has concealed the particulars of income. In holding so we draw support and guidance from the judgment of Hon’ble Gujarat High Court in the case of Commissioner of Income-tax v. Bhuramal Manickchand reported in 130 ITR 129 wherein it was held as under: ITA no.220/AHD/2018 A.Y. 2009-10 8 The Tribunal had, however, held that the field of operation of section 68 was confined to the assessment proceedings and did not extend to the penalty proceedings and that there was nothing in its language to uphold the contention that the items added constituted income for all purposes. It is well-settled that any finding in the assessment order may constitute good evidence in the penalty proceedings, but that finding cannot be regarded as conclusive for the purpose of penalty proceedings. In this context, it was obligatory on the department's part to establish that the disputed amount constituted the assessee's income in the previous accounting year. The revenue gave no such finding even though it was pressed by the assessee. Therefore, the provision in section 68 is confined to assessment proceedings and could not be extended to penalty proceedings as well. 10.3 Moving ahead, we also note that the penalty proceedings are distinct and independent to the quantum proceedings. Therefore, any addition made during the quantum proceedings cannot lead to the penalty until and unless the independent verification carried out by the authorities below during the penalty proceedings. For example, if any addition has been made under the provisions of section 68 of the Act in the absence of non-reply from the loan party during the quantum proceedings. Now, during the penalty proceedings the same exercise has also to be carried out by the revenue authorities. As such the revenue authorities cannot rely the basis enumerating from the quantum proceedings for levying the penalty. In holding so we draw support and guidance from the judgment of national textiles reported in 249 ITR 125 wherein it was held that the assessee in the quantum proceedings failed to produce the accountant but the department also in penalty proceedings made no effort to summon him. 10.4 In view of the above, we are not inclined to uphold the order of the authorities below for levying the penalty under the provisions of section 271(1)© of the Act on account of concealment of income with respect to unexplained cash credit under section 68 of the Act. 10.5 Moving to the next amount of penalty levied on the addition of short-term capital gain and disallowance of long-term capital loss and treating the long-term capital gain as income from other sources. The assessee with respect to two pieces of land has shown short-term capital gain of ₹50,000 and 59,000.00. However, the AO has treated the entire gross value of the sale consideration as income under the ITA no.220/AHD/2018 A.Y. 2009-10 9 head capital gain on the reasoning that the assessee failed to furnish the necessary details for the cost of acquisition of such lands. The additions made by the AO were confirmed by the learned CIT-A which were not challenged before the higher forum by the assessee. In other words the additions made by the revenue authorities have reached to the finality. Based on that, the revenue authorities have levied the penalty for the additions made during the quantum proceedings. However we find that the assessee during the penalty proceedings have made the contentions that the benefit of cost of acquisition was not granted by the authorities on the reasoning that the assessee failed to furnish the necessary documentary evidence. However, we find that the assessee has furnished the purchase deeds during the penalty proceedings depicting the cost of acquisition of the land in dispute which are placed on pages 56 to 68 of the paper book. Besides the purchase deeds, there were also affidavits filed by the persons in connection with the purchase deeds which are placed on pages 52 to 55 of the paper book. From the preceding discussion, there is no dispute that the additions made by the authorities below have reached to the finality which were made in the absence of documentary evidence. But that does not mean that the assessee has furnished the inaccurate particulars of income. It is for the reason that the assessee has furnished the necessary details about the cost of acquisition of the lands in dispute which are placed in the paper book. The penalty proceedings being distinct and independent to the quantum proceedings, it is the duty of the revenue authorities to consider the documents filed by the assessee before them and thereafter reached to the conclusion and independent finding whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income. In other words, merely any addition made during the assessment proceedings does not authorise the revenue authorities to levy the penalty under the provisions of section 271(1)(c) of the Act. The Revenue authorities are under the obligation to carry out independent verification and consider the documents filed by the assessee for arriving to the satisfaction that the assessee has concealed the particulars of income. In other words, the documents filed by the assessee during the penalty proceedings cannot be brushed aside for ITA no.220/AHD/2018 A.Y. 2009-10 10 levying the penalty on the reasoning that such documents were not filed during the quantum proceedings. In the given case, the assessee has disclosed the capital gain income but failed to file the necessary documents during the assessment proceedings which were admittedly filed during the penalty proceedings in support of his transactions for the transfer of lands. 10.6 Likewise, we note that the long-term capital loss declared by the assessee for ₹58,000 against the sale of properties. The property was sold at a price of ₹3 Lacs and the capital loss was calculated after claiming the index cost of acquisition of the property. But, the AO disallowed the loss shown by the assessee and treated the sale consideration of ₹3 Lacs as income from other sources. The action of the AO was based on the reasoning that the assessee failed to furnish the supporting documentary evidence. Indeed, the assessee before the learned CIT-A during the assessment proceedings has furnished the balance sheet for the year 2002-03 wherein such investment was shown. Once the assessee has filed the supporting documents, the onus is shifted upon the revenue to disprove the contention of the assessee based on the documentary evidence. However, we note that the learned CIT-A without giving any cogent reason has not considered the financial statement filed by the assessee for the year 2002-03 which is placed on pages 45 to 50 of the paper book. As the penalty proceedings are distinct and independent to the quantum proceedings, in our considered view, penalty cannot be levied merely on the reasoning that some addition was made by the AO during the quantum proceedings. There has to be independent verification by the revenue authorities with respect to the additions made during the quantum proceedings to arrive at the satisfaction that the assessee has concealed the particulars of income. But we find that, the authorities below have not done so. Accordingly, in the given facts and circumstances we not inclined to uphold the finding of the authorities below qua the penalties levied with respect to short-term capital gain/long-term capital gain and the income from other sources. ITA no.220/AHD/2018 A.Y. 2009-10 11 10.7 The next issue of the penalty levied on the addition of capital contribution made by the assessee for Rs. 2,25,000.00. In this regard, we also find that the penalty has been levied by the revenue authorities merely on the reasoning that there was the quantum addition made during the quantum proceedings. The penalty proceedings being distinct and independent to quantum proceedings, the additions made during quantum proceedings cannot be subject to the penalty until and unless the necessary verification is a carried out by the revenue authorities. In view of the above and after considering the facts in totality, we are not convinced with the finding of the authorities below for levying the penalty under the provisions of section 271(1)(c) of the Act. Accordingly we set aside the finding of the learned CIT-A and direct the AO to delete the penalty levied by him. Hence the ground of appeal of the assessee is allowed. 11. In the result, the appeal filed by the assessee is allowed. Order pronounced in the Court on 08/04/2022 at Ahmedabad. Sd/- Sd/- (MADHUMITA ROY) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER (True Copy) Ahmedabad; Dated 08/04/2022 Manish