Shri Abdul Razak Babubhai Kapadia, Navsari V. The Income tax Officer, Ward-1, Navsari

ITA 2446/AHD/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0254 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2009
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 22-10-2009
• Assessment Year: 1991-1992
• Appeal Filed On: 18-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANJAY RAI
• Keywords: Unexplained cash credit
• Section: 271(1)(c); 68

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : SMC BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, JUDICIAL MEMBER ) I.T.A. NOS. 2445 & 2446/AHD./2009 ASSESSMENT YEARS : 1990-1991 & 1991-1992 ABDUL RAZAK B. KAPADI, NAVSARI -VS.- INCOME TAX OFFICER, WARD-1, NAVSARI (P.A. NO. ABVPK 6345 A) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI HARDIK VORA RESPONDENT BY : SHRI SANJAY RAI O R D E R THESE TWO APPEALS BY THE ASSESSEE ARE AGAINST TWO SEPARATE ORDERS BOTH DATED 03-06- 2009 OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) -I, SURAT CONFIRMING THE PENALTY OF RS.92,560/- AND RS.61,624/- LEVIED BY THE A.O. UNDE R SECTION 271(1)(C) FOR THE ASSESSMENT YEARS 1990-91 AND 1991-92 RESPECTIVELY. 2. BRIEFLY STATED THE FACTS ARE THAT THE A.O. IN TH E ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 1990-91 MADE AN ADDITION OF RS.2,15,000/- UNDER SEC TION 68 FOR UNEXPLAINED CASH CREDIT STATED TO HAVE BEEN BORROWED FROM MRS. SABINA A. KAPADIA OF R S.1,45,000/-, M/S. SAPNA IMPEX OF RS.30,000/- AND M/S. ZUBIN STORES OF RS.40,000/-. T HIS ADDITION WAS MADE BY THE A.O. BECAUSE THE ALLEGED PERSONS WERE NOT PRODUCED BEFORE HIM FO R EXAMINATION. THE ADDITION SO MADE WAS CONFIRMED UP TO TRIBUNAL. ON THIS ADDITION, THE A.O . LEVIED THE PENALTY FOR ASSESSMENT YEAR 1990- 91 OF 92,560/- AND FOR ASSESSMENT YEAR 1991-92 OF R S.61,624/- BEING 100% OF TAX SOUGHT TO BE EVADED. 3. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS), IT WAS CONTENDED THAT CONFIRMATION OF MRS. SABINA A. KAPADIA AS WELL AS ACKNOWLEDGMENT OF HER RETURN OF INCOME WERE SUBMITTED AT THE TIME OF ASSESSMENT PROCEEDING S. IN RESPECT OF OTHERS ALSO, THE CONFIRMATIONS WERE FILED AND THE MERE FACT THAT THE ASSESSEE COULD NOT PRODUCE THE CREDITORS, IT CANNOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. IN THE IMPUGNED ORDER, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) REL YING ON THE RECENT JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEX TILE PROCESSORS REPORTED IN 295 ITR 244 CONFIRMED THE PENALTY. IN THE ASSESSMENT YEAR 1991- 92, ON IDENTICAL FACTS, THE PENALTY OF 2 RS.61,624/- WAS LEVIED AND IN THE IMPUGNED ORDER, T HE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE SAME FOLLOWING THE JUDGM ENT OF THE HON'BLE SUPREME COURT IN THE CASE OF DHARMENDRA TEXTILE PROCESSORS (SUPRA). IN T HAT YEAR, THE LOAN WAS TAKEN FROM TWO PERSONS, WHOSE CONFIRMATIONS WERE FILED, BUT THE AS SESSEE COULD NOT PRODUCE THE CREDITORS BEFORE THE A.O. FOR THIS ADDITION OF RS.1,60,980/-, BEFORE THE A.O., THE ASSESSEE EXPLAINED THAT SHRI SABBIRBHAI PATEL FROM WHOM THE LOAN OF RS.1,05,000/ - WAS TAKEN, WHO IS AN AGRICULTURIST HAVING AGRICULTURE LAND ADMEASURING 14 HECTORS. IN SUPPORT OF THIS, THE EXTRACT OF 7/12 AND VILLAGE JOGWADS TAL. CHIKHLI TALATIS CERTIFICATE OF CROPS WAS SUBMITTED. IT WAS ALSO EXPLAINED THAT CONFIRMATION OF SHRI SABBIRBHAI PATEL WAS ALSO FURN ISHED. THE IDENTITY, GENUINENESS AS WELL AS CREDITWORTHINESS OF THE CREDITOR WAS FURNISHED. THE ADDITION IN RESPECT OF TWO CREDITORS AMOUNTING TO RS.1,60,980/- WAS CONFIRMED UP TO TRIB UNAL. 4. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE SH RI HARDIK VORA APPEARED BEFORE ME AND VEHEMENTLY CONTENDED THAT PENALTY AND ASSESSMENT PR OCEEDINGS BOTH ARE DIFFERENT. IF THE ADDITION HAS BEEN MADE IN THE ASSESSMENT, IT COULD NOT CONCL UDE THAT THE ASSESSEE HAS CONCEALED THE INCOME OR HAS FILED ANY INACCURATE PARTICULARS OF I NCOME. IN THIS CASE, THE ASSESSEE HAS FURNISHED THE CONFIRMATIONS FROM ALL THE CREDITORS. THE NECES SARY EVIDENCE WITH REGARD TO CREDITWORTHINESS WAS ALSO FURNISHED. RELIANCE WAS ALSO PLACED ON THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES VS.- CIT REPORTED IN [2001] 249 ITR 125 (GUJ.) AND IT WAS CONTENDED THAT PENALTY LEVIED MAY BE DELETED. THE L D. COUNSEL OF THE ASSESSEE SUBMITTED THAT IN THE CASE OF NATIONAL TEXTILES (SUPRA), THE HON'BLE GUJARAT HIGH COURT HELD THAT IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTORS MUST CO-EXIST, I.E . (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASONABLE CONCLUSION THAT AMOUNT DOES REPRESENT THE ASSESSEES INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INCOME, AND TO THE CIRCUMSTANCES WAS THAT THERE WAS MUST HA VING CONSCIOUS CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME OF ASSESSEE. THUS IT WAS CONTENDED BY THE LD. A.R. THAT PENALTY BE DELETED. 5. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESEN TATIVE, SHRI SANJAY RAI VEHEMENTLY CONTENDED THAT THE ASSESSEE DID NOT DISCHARGE HIS O NUS IN PROVING THE CASH CREDIT AT THE TIME OF ORIGINAL ASSESSMENT. THE ASSESSEE COULD NOT PRODUCE THE CREDITORS. THE ADDITION MADE UNDER 3 SECTION 68 IS CONFIRMED UP TO TRIBUNAL. THEREFORE, IN VIEW OF THE RECENT JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF UNION OF INDIA & OTHER S VS.- DHARMENDRA TEXTILE PROCESSORS & ORS. (2008) 295 ITR 244 (SC), THE PENALTY UNDER SEC TION 271(1)(C) HAS RIGHTLY BEEN CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS). TH EREFORE, THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IN THIS REGARD BE UPHELD. 6. IN REPLY, THE LD. COUNSEL OF THE ASSESSEE SUBMIT TED THAT IN THE CASE OF OTHER FAMILY MEMBER, NAMELY ALLARAKHUBHAI BABUBHAI KAPADIA, ITAT , SMC BENCH IN ITA NO. 4346/AHD./2007 VIDE ORDER DATED 24.03.2008 ON IDENT ICAL FACTS CANCELLED THE PENALTY AMOUNTING TO RS.1,11,520/- LEVIED BY A.O. UNDER SECTION 271(1 )(C). THE FACTS OF THAT CASE ARE IDENTICAL, THEREFORE, FOLLOWING THIS JUDGMENT, PENALTY LEVIED UNDER SECTION 271(1)(C) IN RESPECT OF BOTH THE ASSESSMENT YEARS BE CANCELLED. 7. I HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RI VAL SUBMISSIONS MADE BEFORE ME AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. ON IDENTIC AL FACTS IN THE CASE OF ALLARAKHUBHAI BABUBHAI KAPADIA (SUPRA), THE PENALTY OF RS.1,11,520/- WAS L EVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. THE FACTS OF THIS CASE ARE ALMOST IDENTICA L. THE TRIBUNAL VIDE ORDER DATED 24.03.2008 CANCELLED THE PENALTY FOR THE DETAILED REASONS GIVE N IN PARA 6, WHICH ARE RE-PRODUCED HEREUNDER :- 6. I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF T HE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN MY OPINION, IF THE ADDITION HAS BEEN IIUUK : IN THE REGULAR ASSESSMENT PROCEEDINGS THAT V ML NOT AUTOMATICALLY JUSTIFY THE IMPOSITION OF THE PENALTY U/S.271(L)(C). NO DOUBT, AS PER EXPLANATION 1 OF SECTION 271(L)(C) OF THE ACT, THE ONUS IS ON THE ASSESSEE TO REBUT THE PRESU MPTION. ONCE THE ASSESSEE SUBMITS THE EXPLANATION, THE ONUS GETS SHIFTED ON T HE REVENUE TO PROVE THAT THE EXPLANATION OF THE ASSESSEE IS FALSE OR IS NOT BONA FIDE ONE. 1 HAVE GONE THROUGH THE DECISION OF THE HON'BLE SUPREME COURT UNION OF INDIA & ORS. V. DHARMENDRA TEXTILE PROCESSORS AND ORS. (2008) 295 I TR 244(SC), RELIED ON BY THE LEARNED DR. THE SAID DECISION, IN OUR OPINION. DOES NOT ASSIST THE STAND OF THE REVENUE AS THE ASSESSEE BEFORE US HAS NOT RAISE D ANY CONTENTION REGARDING MENS REA. FURTHER, IN THE SAID CASE MAILER AS LO WH ETHER PROVISION CONTAINING IMPOSITION OF MANDATORY PENALTY ON PERSONS WHO EVAD E PAYMENT OF TAX, SHOULD BE READ TO CONTAIN MENS REA AS AN ESSENTIAL REQUIRE MENT, HAS BEEN REFERRED TO A LARGER BENCH OF THE SUPREME COURT IN VIEW OF THE CO NFLICT OF OPINION IN THE JUDGMENTS OF THE DIVISION BENCHES OF THE SUPREME CO URT IN DILIP N. SHROFF -V.- JOINT CIT [2007] 291 ITR 519 AND CHAIRMAN. SEB1 V. SHRIRAM MUTUAL FUND 12006] 131 COMP CAS 591; [2006] 5 SCC 361. WE HAVE ALSO GONE THROUGH THE DECISION IN THE CASE OF NATIONAL TEXTILES V. CIT [2 001] 249 ITR 125 (GUJ.). WHEREIN HON'BLE JURISDICTIONAL HIGH COURT HAS OBSER VED AS UNDER : 'THE PROVISIONS OF SECTION 68 PERMITTING THE ASSESS ING OFFICER TO TREAT UNEXPLAINED CASH CREDIT AS INCOME ARE ENABLIN G PROVISIONS FOR MAKING CERTAIN ADDITIONS WHERE THERE IS FAILURE BY THE ASSESSEE TO 4 GIVE AN EXPLANATION OR WHERE THE EXPLANATION IS NOT TO THE SATISFACTION OF THE ASSESSING OFFICER. HOWEVER, THE ADDITION MADE ON THIS COUNT WOULD NOT AUTOMATICALLY JUSTIFY THE IMPO SITION OF PENALTY UNDER SECTION 271(L)(C) BY RECOURSE ONLY T O EXPLANATION 1 BELOW SECTION 271(L)(C). NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE EQUALLY CONSISTENT WITH THE HYPOT HESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E., IT IS NOT ACCEPTED BUT CIR CUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSE SSEE 'S CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMEN T BECAUSE THERE WILL 6C' NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE ' CONSIDERING THE FACTS OF THE CASE. 1 AM OF THE VIEW THAT THE CASE OF THE ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HON'BLE JURIS DICTIONAL HIGH COURT IN THE CASE OF NATIONAL TEXTILES V. C1T (SUPRA). NO CONTRARY DE CISION OF THE SAID DECISION OF HON'BLE JURISDICTIONAL HIGH COURT WAS BROUG HT BEFORE ME. THEREFORE, THE PENALTY OF RS.1,11,520/- IMPOSED U/S.271( 1 )(C) IS DELETED. 8. AS THE FACTS OF THE CASE IN RESPECT OF BOTH THE ASSESSMENT YEARS ARE IDENTICAL WITH THAT OF THE DECISION OF THIS TRIBUNAL IN RESPECT OF OTHER A SSESSEE, I.E. ALLARAKHUBHAI BABUBHAI KAPADIA (SUPRA), I FOLLOWING THE SAME CANCEL THE PENALTY OF RS.61,624/- FOR THE ASSESSMENT YEAR 1991-92 AND RS.92,560/- FOR THE ASSESSMENT YEAR 1990-91 LEV IED BY THE A.O. UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 9. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASS ESSEE ARE ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 22.10.2009 SD/- (T.K. SHARMA) JUD ICIAL MEMBER DATED : 22 / 10 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.