Shri Baldevbhai M. Choudhary, Gandhinagar V. The Income Tax Officer, Ward-4, Mehsana

ITA 2485/AHD/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6367 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 28-12-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Assessee Lawyers: AARTI N SHAH
• Keywords: Unexplained cash credit
• Section: 271(1)(c); 68

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ ITA NO. 2485/AHD/2018 / ASSESSMENT YEAR: 2008-09 SHRI BALDEVBHAI M. CHAUDHARY CHAUDHARY VAS AT & POST : PALIYAD, TAL: KALOL DIST. GANDHINAGAR 382 735. PAN : AATPC 3015 A VS ITO, WARD-4 MEHSANA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SMT.AARTI N. SHAH, AR REVENUE BY : SHRI S.K. DEV, SR.DR / DATE OF HEARING : 01/05/2019 /DATE OF PRONOUNCEMENT : 07 /05/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A), GANDHINAGAR DATED 5.1.2018 PASSED FOR THE ASSTT.YEAR 2008-10. 2. SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CI T(A) HAS ERRED IN CONFIRMING PENALTY OF RS.2.04.905/- IMPOSED BY THE AO UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT. 3. BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS AN INDIVIDUAL AND SALARIED EMPLOYEE OF THE DEPARTMENT OF POST. HE HAS FILED R ETURN OF INCOME SHOWING TOTAL INCOME AT RS.2,04,660/-. THE CASE OF THE ASSESSEE WAS REOPENED AND NOTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. IN THE ASSESSMENT UNDER SECTION 143(3 ) ONE OF THE ADDITIONS ITA NO.2485/AHD/2018 - 2 - MADE WAS ON ACCOUNT OF UNEXPLAINED CASH CREDIT OF R S.8,49,500/-. THIS ADDITION WAS CHALLENGED UPTO THE TRIBUNAL, AND THE TRIBUNAL ULTIMATELY CONFIRMED THE SAME. AGAINST THIS CONFIRMATION, THE LD.AO INITIATED PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) OF THE ACT. IN THE PENALTY PROCEEDINGS, IT WAS EXPLAINED BY THE ASSESSEE THAT THE ASSESSEE HAS NOT CONCEALED INCOME NOR FURNISHED ANY INACCURATE PARTI CULARS OF INCOME; THAT THE IMPUGNED ADDITION OF RS.8,49,500/- REPRESE NTED BORROWAL FROM FRIENDS AND RELATIVES FOR FINANCING HIS SONS USA V ISA. THE ASSESSEE HAS FURNISHED DETAILS OF LENDERS WITH SUPPORTING EVIDEN CES. STATEMENT OF THE LENDERS HAVE ALSO RECORDED BY THE AO AND THEY C ONFIRMED ADVANCING OF LOAN TO THE ASSESSEE; THEY ALSO PRODUCED FORM NO . 7/12 TO SHOW EARNING OF INCOME FROM AGRICULTURE PRODUCE. HOWEVE R, THE LD.AO DID NOT ACCEPT THE CONTENTIONS OF THE ASSESSEE AND IMPO SED PENALTY UNDER SECTION 271(1)(C) BY REJECTING CONFIRMATIONS FILED BY THE DEPOSITORS ON THE GROUND THAT DEPOSITORS WERE NOT CAPABLE OF ADVANCIN G SUCH SUM. HE IMPOSED PENALTY OF RS.2,94,895/-. APPEAL BEFORE T HE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE, HENCE, ASSESSEE I S NOW BEFORE THE TRIBUNAL. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE REITE RATED SUBMISSIONS MADE BEFORE REVENUE AUTHORITIES, WHILE LD.DR SUPPOR TED THE ORDERS OF AO AND THE CIT(A). 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND GONE TH ROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS D IRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTI NENT TO TAKE NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. ITA NO.2485/AHD/2018 - 3 - (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SA TISFIED THAT ANY PERSON (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME-TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CL AUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF T AX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICU LARS 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 O FFERS 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 MATERIA L TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR SUCH PE RSON AS A RESULT THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF TH IS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 6. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T 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 EVA DED 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 ITA NO.2485/AHD/2018 - 4 - PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SEC TION NOT ONLY 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 I TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOT AL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED CIT(APPEAL); AND, (B) WHERE IN R ESPECT OF ANY FACT, MATERIAL TO THE COMPUTATION OF TOTAL INCOME UNDER T HE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE E XPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS B ONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO TH E SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UNDER FIRST SI TUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED T O GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATIO N OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED C IT(APPEALS) BY GIVING A CATEGORICAL FINDING TO THE EFFECT THAT EXPLANATIO N GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICT ION WOULD COME TO PLAY BY THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOM E AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EX PLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIA L TO THE COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMIN G FICTION COMES INTO ITA NO.2485/AHD/2018 - 5 - PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE A SSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS H AVE BEEN FURNISHED. 7. IN THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FAC TS OF THE PRESENT CASE, IT WOULD REVEAL THAT THE ASSESSEE WAS A SALAR IED EMPLOYEE WORKING WITH POSTAL DEPARTMENT. ACCORDING TO HIM, THESE LO ANS WERE TAKEN FOR THE PURPOSE OF OBTAINING VISA FOR HIS SON. HE HAS WITHDRAWN THE MONEY FROM HIS BANK ACCOUNT AND REPAID TO THE CREDI TORS IN CASH. HIS EXPLANATION WAS NOT ACCEPTED IN THE QUANTUM PROCEED INGS, PROBABLY HE FAILED TO SUBSTANTIATE HIS EXPLANATION, BUT AGAINST THE ORDER OF THE ITAT, APPEAL OF THE ASSESSEE STANDS ADMITTED BEFORE THE H ONBLE HIGH COURT. IT IS SETTLED POSITION OF LAW THAT WHEN THE EVIDENC ES AND EXPLANATION FURNISHED BY THE ASSESSEE IN SUPPORT OF CASH CREDIT S ARE NOT ACCEPTABLE BY THE DEPARTMENT, THEN ADDITION UNDER SECTION 68 CAN BE MADE, BUT PENALTY UNDER SECTION 271(1)(C) OF THE ACT IS NOT AUTOMATIC . THUS, FROM THE MATERIAL AVAILABLE ON RECORD, WE ARE OF THE VIEW TH AT THE EXPLANATION OF THE ASSESSEE WAS NOT FOUND TO BE FALSE, BUT IT COUL D NOT BE ACCEPTED ON ACCOUNT OF SUBSTANTIATION OF HIS CLAIM WITH HELP OF SOME SOLID EVIDENCES. THEREFORE, IT IS NOT A FIT CASE FOR VISITING THE AS SESSEE WITH PENALTY. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE IMP UGNED PENALTY. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON 7 TH MAY, 2019. SD/- SD/- (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER AHMEDABAD; DATED, 07/05/2019