Shri Manishkumar M.Punjabi, Anand V. The Income tax Officer,Ward-1, Anand

ITA 2456/AHD/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0966 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 24-06-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 02-11-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Unexplained cash credit
• Section: 143(3); 133A; 131; 68

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER ./ ITA.NO.2456 AND 2457/AHD/2012 / ASSTT. YEAR: 2005-2006 AND 2006-2007 SHRI MANISHKUMAR M. PUNJAB I PROP: OM INVESTMENT F/311, KAVITA SHOPPING CENTRE GPO ROAD, ANAND 388 001. PAN : AFMPP 8137 L ITO, WARD - 1 ANAND. ! / (APPELLANT) '# ! / (RESPONDENT) ASSESSEE BY : SHRI TUSHAR HEMANI REVENUE BY : SHRI DINESH SINGH, SR.DR / DATE OF HEARING : 24/06/2016 / DATE OF PRONOUNCEMENT: 01/08/2016 $%/ O R D E R PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDERS OF THE LD.CIT(A) DATED 6.8.2012 AND 16.8.2012 PASSED FOR THE ASSTT.YEARS 2005-06 AND 2006-07. 2. GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.54,321/- AND RS.8,30,5 60/- IN THE ASSTT.YEARS 2005-06 AND 2006-07 RESPECTIVELY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME FOR THE ASSTT.YEARS 2005-06 ON 30.10.2005 DE CLARING TOTAL INCOME AT RS.18,759/-. AN ASSESSMENT ORDER WAS PAS SED UNDER SECTION ITA NO.2456 AND 2457/AHD/2012 2 143(3) VIDE WHICH INCOME OF THE ASSESSEE WAS DETERM INED AT RS.9,55,280/-. PENALTY IN THE ASSTT.YEAR 2005-06 H AS BEEN INITIATED FOR TWO ADDITIONS VIZ. (A) ON ACCOUNT OF CASH CREDIT UN DER SECTION 68 OF RS.3,20,000/- AND (B) ON ACCOUNT OF UNACCOUNTED STO CK AT RS.1,14,188/-. THE ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITS STANDS DELETED BY THE LD.CIT(A). THEREFORE, THE LD.FIRST APPELLATE AUTHORITY HAS CONFIRMED THE PENALTY QUA THE ADDITION MADE ON ACCOUNT OF UNACCOUNTED STOCK OF RS.1,14,188/-. THIS WAY PENALTY HAS BEEN CONFIRMED AT RS.53,321/- IN THE ASSTT.YEAR 2005-06. 4. IN THE ASSTT.YEAR 2006-0-7, THE ASSESSEE HAS FIL ED HIS RETURN OF INCOME ON 30.12.2006 DECLARING NIL INCOME. THE ASS ESSMENT ORDER WAS PASSED UNDER SECTION 143(3) ON 29.12.2008 AND INCOM E OF THE ASSESSEE WAS DETERMINED AT RS.25 LAKHS. PENALTY HAS BEEN IN ITIATED AGAINST THE ASSESSEE QUA TWO ADDITIONS VIZ. (A) ON ACCOUNT OF CASH CREDIT U NDER SECTION 68 RS.25 LAKHS, AND (B) ON ACCOUNT OF CLOSI NG STOCK OF RS.3,80,918/-. 5. LET ME FIRST TAKE APPEAL FOR THE ASSTT.YEAR 2006 -07. IN THIS YEAR, FIRST AMOUNT CONSIDERED BY THE AO FOR VISITING THE ASSESSEE WITH PENALTY IS ON ADDITION OF RS.25 LAKHS. 6. BRIEF FACTS OF THE CASE ARE THAT SURVEY UNDER SE CTION 133A WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 23.8 .2005. THE STATEMENT OF THE ASSESSEE UNDER SECTION 131 WAS RECORDED ON 2 98.2005 AND 2.9.2005. THE ASSESSEE HAS ADMITTED UNACCOUNTED IN COME OF RS.25 LAKHS BEING DEPOSITED IN VIJAYBANK, SARDARGUNJ, ANAND. W HEN THE ASSESSEE ITA NO.2456 AND 2457/AHD/2012 3 FILED RETURN OF INCOME, HE DID NOT INCLUDE THIS UNA CCOUNTED INCOME ADMITTED DURING THE COURSE OF SURVEY. THE AO CONFR ONTED THE ASSESSEE WITH REGARD TO THE ALLEGED DEPOSITS IN THE VIJAY BA NK. THE ASSESSEE CONTENDED THAT HE IS A PARTNER IN THE FIRM, M/S.MAN ISHKUMAR & CO. AND MONEY WAS WITHDRAWN FROM M/S.MANISHKUMAR & COMPANY WHICH WAS DEPOSITED IN THE BANK ACCOUNT. THIS EXPLANATION OF THE ASSESSEE WAS REJECTED IN THE LIGHT OF THE STATEMENT GIVEN DURING THE COURSE OF SURVEY AND ADDITION OF RS.25 LAKHS WAS MADE. 7. I FIND THAT SIMILAR ADDITION WAS MADE IN THE ASS TT.YEAR 2005-06, WHICH IS BEING DELETED BY THE LD.CIT(A). THE FINDI NG OF THE LD.CIT(A) IN THE ASSTT.YEAR 2005-06 ON THIS ISSUE READS AS UNDER : 2. FIRST GROUND OF APPEAL IS REGARDING ADDITION OF RS.3,20,000/- U/S.68. THE ASSESSING OFFICER FOUND THAT APPELLANT HAD CREDITED RS.6,70,000/-, OUT OF WHICH RS.2,85,000/- WAS OFFER ED AS INCOME, BEING UNEXPLAINED CASH CREDIT, FOR TAXATION. SINCE THE APPELLANT COULD NOT EXPLAIN SATISFACTORILY SOURCE OF THE BALA NCE AMOUNT, ADDITION OF RS.3,20,000/- U/S.68 WAS MADE. 2.1. BEFORE ME, APPELLANT SUBMITTED THAT HE WAS A P ARTNER IN M/S. MANISHKUMAR & CO. AND HAD INTRODUCED THE CASH IN HI S CAPITAL ACCOUNT FOR BUSINESS BY WITHDRAWING FROM THE FIRM. APPELLANT FILED THE RELEVANT PAGES OF CASH BOOK OF M/S. MANISHKUMAR & CO. APPELLANT ALSO FILED COPY OF LETTER DATED 30.11.200 7 FILED BEFORE THE ASSESSING OFFICER, SUBMITTING THAT THE CASH WAS BRO UGHT FROM M/S. MANISHKUMAR & CO. APPELLANT FURTHER FILED CASH BOOK EXTRACTS FROM BOOKS OF MANISHKUMAR &. CO. AND CERTIFIED THAT THE SAME WERE FILED BEFORE THE ASSESSING OFFICER DURING ASSE SSMENT PROCEEDINGS. 2.2. I HAVE CONSIDERED THE MATTER. ASSESSING OFFICE R MADE THE ADDITION ON THE GROUND THAT NATURE OF SOURCE OF RS. 3,20,000/- ITA NO.2456 AND 2457/AHD/2012 4 COULD NOT BE SATISFACTORILY EXPLAINED BY THE APPELL ANT. HOWEVER, THE APPELLANT HAD EXPLAINED THE SOURCE TO BE FROM M/S.MANISHKUMAR & CO., THE FIRM. THE CASH BOOK OF T HIS FIRM SHOWED SUFFICIENT CASH BALANCE ON 2.2.2005, WHEN RS .3,20,000/- WERE PAID TO APPELLANT. ADDITION OF RS.3,20,000/- I S DELETED. 8. I WILL REFER TO THE FACT LATER ON. LET ME CONSI DER OTHER AMOUNT IN THE ASSTT.YEAR 2006-07 AS WELL AS IN THE ASSTT.YEAR 2005-06. THE SECOND AMOUNT FOR WHICH PENALTY HAS BEEN IMPOSED UP ON THE ASSESSEE IN BOTH THE YEARS IS COMMON. THE ASSESSEE FAILED TO I NCLUDE A SUM OF RS.1,14,188 AND RS.3,80,918/- IN THE CLOSING ACCOUN T. THE EXPLANATION OF THE ASSESSEE WITH REGARD TO THE ALLEGED NON-DISC LOSURE OF THE CLOSING STOCK OF SHARES WAS THAT THE ACCOUNTANT INADVERTENT LY LEFT OUT TO INCLUDE THE VALUE OF CERTAIN SHARES IN THE TRADING AND PROF IT & LOSS ACCOUNT. THE ASSESSEE FURTHER CONTENDED THAT IT WAS INSIGNIFICAN T FROM THE POINT OF THE REVENUE BECAUSE THE CLOSING STOCK OF ONE YEAR WAS N OTHING BUT THE OPENING STOCK OF IMMEDIATELY SUCCEEDING YEAR. ACC ORDING TO THE ASSESSEE, THE ADDITION IS ULTIMATELY REVENUE NEUTRA L. BUT THIS EXPLANATION WAS REJECTED BY THE LD.AO WHILE VISITING THE ASSESS EE WITH PENALTY. 9. THE LD.COUNSEL FOR THE ASSESSEE, WHILE IMPUGNING THE ORDERS OF THE REVENUE AUTHORITIES, RAISED TWO FOLD SUBMISSIONS. IN HIS FIRST FOLD OF CONTENTIONS, HE POINTED OUT THAT THE PENALTY WAS IN ITIATED BY THE AO FURNISHING OF INACCURATE PARTICULARS OF INCOME, BUT ULTIMATELY, IT WAS LEVIED FOR CONCEALING THE INCOME. THEREFORE, IT IS NOT SUSTAINABLE IN THE EYES OF LAW. THE LD.COUNSEL FOR THE ASSESSEE MADE REFERENCE TO THE DECISION OF THE FULL BENCH OF THE HONBLE PUNJAB & HARYANA HIGH COURT AND OTHER DECISIONS WHICH HAVE BEEN MENTIONED IN TH E SUBMISSIONS OF ITA NO.2456 AND 2457/AHD/2012 5 THE ASSESSEE FILED BEFORE THE FIRST APPELLATE AUTHO RITY WHICH HAS BEEN REPRODUCED FROM PAGE NOS.5 TO 13 O THE IMPUGNED ORD ER IN THE ASSTT.YEAR 2006-07. 10. IN HIS SECOND FOLD SUBMISSIONS, HE CONTENDED TH AT THOUGH THE ADDITION OF RS.25 LAKHS WAS MADE BY THE AO ON THE B ASIS OF THE STATEMENT GIVEN BY THE ASSESSEE DURING THE COURSE O F SURVEY, BUT THE STAND OF THE ASSESSEE TAKEN DURING THE COURSE OF AS SESSMENT PROCEEDINGS WAS NOT CONSIDERED. THE LD.AO DID NOT VERIFY THE F ACTS WHETHER SUFFICIENT CASH BALANCE WAS AVAILABLE WITH THE FIRM , M/S.MANISHKUMAR & CO. WHERE THE ASSESSEE IS PARTNER AND THE AMOUNT HA D TRAVELLED TO VIJAY BANK ACCOUNT FROM THIS FIRM. THE EXPLANATION OF TH E ASSESSEE WAS NOT FOUND TO BE FALSE. 11. THE LD.DR, ON THE OTHER HAND, CONTENDED THAT AS FAR AS FIRST FOLD OF SUBMISSION IS CONCERNED, THE LD.AO HAS INITIATED TH E PROCEEDINGS FOR FURNISHING INACCURATE PARTICULARS AND CONCEALMENT O F INCOME. BUT WHILE IMPUGNING PENALTY, THE LD.AO HAS RECORDED A SPECIFI C FINDING THAT THE ASSESSEE HAS CONCEALED THE INCOME, AND THEREFORE, P ENALTY HAS BEEN IMPOSED FOR CONCEALING THE INCOME. THERE IS NO AMB IGUITY IN THE FINDING OF THE AO. 12. SECTION 271(1)(C) OF THE ACT HAS A DIRECT BEARI NG ON THE CONTROVERSY WHICH READS AS UNDER : '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) OR THE CIT IN THE OF COURSE OF ANY PROCEE DINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON ITA NO.2456 AND 2457/AHD/2012 6 (A) AND (B) ** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIREC T THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLA USE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL N OT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULA RS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INAC CURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: EXPLANATION 1- WHERE IN RESPECT OF ANY FACTS MATERI AL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OF FERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMM ISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS N OT ABLE TO SUBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATI ON IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MAT ERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOT AL INCOME OR SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INC OME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED.' 13. A BARE PERUSAL OF THIS SECTION WOULD REVEAL TH AT FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS B EFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUA NTIFICATION OF THE PENALTY IS CONCERNED, THE PENALTY IMPOSED UNDER THI S SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNIS HING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF T HIS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SEC TION NOT ONLY ITA NO.2456 AND 2457/AHD/2012 7 COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CON CEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUAT ION, EVEN WITHOUT THERE BEING ANYTHING TO INDICATE SO, STATUTORY DEEMING FI CTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION-1 TO SECTION 271(1)(C) POSTULATES TWO S ITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COM PUTATION OF THE TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSE E FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSES SEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEA L); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT S UCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FA CTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME . UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY I F THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MA TERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASS ESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDIN G TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE O F THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATIO N OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITU ATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES I T CLEAR THAT THAT ITA NO.2456 AND 2457/AHD/2012 8 WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE AB OVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUT ING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C ) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INAC CURATE PARTICULARS HAVE BEEN FURNISHED. 14. IN THE LIGHT OF THE ABOVE, IF I EXAMINE THE FAC TS OF THE PRESENT CASE, THEN IT WOULD REVEAL THAT IN THE ASSTT.YEAR 2005-06 , THE ADDITION OF RS.3.20 LAKHS WAS MADE BY THE AO UNDER SECTION 68 O F THE INCOME TAX ACT. THE EXPLANATION OF THE ASSESSEE IN THAT YEAR WAS THAT HE HAD WITHDRAWN THE CASH FROM THIS FIRM, M/S.MANISHKUMAR & CO., WHICH WAS INTRODUCED IN THE CAPITAL ACCOUNT FOR BUSINESS. TH IS EXPLANATION OF THE ASSESSEE WAS ACCEPTED BY THE LD.CIT(A). ACCORDING TO THE LD.CIT(A), THE ASSESSEE HAS EXPLAINED THE SOURCE TO BE FROM TH E FIRM, M/S.MANISHKUMAR & CO. ON SIMILAR ITEMS, THE EXPLAN ATION WAS NOT THOROUGHLY EXAMINED BY THE AO IN A.Y.2006-07. THUS , THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND TO BE FALSE. THE ASS ESSEE HAS GIVEN AN EXPLANATION THAT MONEY WAS WITHDRAWN FROM THE FIRM, AND IT WAS DEPOSITED IN THE VIJAY BANK. 15. AS FAR AS NON-DISCLOSURE OF CERTAIN SHARES IN T HE CLOSING STOCK IS CONCERNED, THE STAND OF THE ASSESSEE IS THAT INADVE RTENT MISTAKE WAS HAPPENED AT THE END OF THE ACCOUNTANT. THIS IS THE ITEM WHICH IS REVENUE NEUTRAL AND IT WAS NOT GOING TO AFFECT MATERIALLY T O THE REVENUE. THIS EXPLANATION WAS REJECTED BY THE REVENUE AUTHORITIES ON THE GROUND THAT IT IS DIFFICULT TO ACCEPT AS TO HOW THE ACCOUNTANT HAS COMMITTED THE MISTAKE. TO MY MIND, THIS WILL ALWAYS BE A DIFFICU LT QUESTION, BECAUSE, ITA NO.2456 AND 2457/AHD/2012 9 THERE IS NO SCIENTIFIC INSTRUMENT WHICH CAN TESTS T HE MIND OF AN INDIVIDUAL AS TO HOW HE HAS COMMITTED A PARTICULAR NEGLIGENCE AT A PARTICULAR TIME. IT IS VERY SUBJECTIVE ASPECT, AND IT WILL ALWAYS BE DIFFICULT TO BRING DEMONSTRATIVE EVIDENCE OF A PART ICULAR STATE OF MIND WHILE COMMITTING SUCH MISTAKE. BUT FROM CIRCUMSTAN TIAL EVIDENCE, IT CAN ALWAYS BE CONCLUDED THAT WHETHER THERE WAS A MALA FIDE INTENTION FOR NOT INCLUDING THE VALUE OF PARTICULAR SHARES IN THE CLOSING TOCK. NO SUCH CIRCUMSTANCE HAVE BEEN BROUGHT ON RECORD FOR FALSIF YING THE EXPLANATION OF THE ASSESSEE. THEREFORE, IN VIEW OF THE ABOVE D ISCUSSION, I AM OF THE VIEW THAT THE ASSESSEE DOES NOT DESERVES TO BE VISI TED WITH PENALTY. I ALLOW BOTH THE APPEALS AND DELETE THE IMPUGNED PENA LTY. 16. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLO WED. ORDER PRONOUNCED IN THE COURT ON 1 ST AUGUST, 2016 AT AHMEDABAD. SD/- (RAJPAL YADAV) JUDICIAL MEMBER