Smt. Bhavnaben Hitesh Shah, Ahmedabad V. The Dy. CIT, Circle-1(1)(1), Ahmedabad

ITA 2495/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 1046 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2008-2009
• Appeal Filed On: 13-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed dividend
• Section: 271(1)(c)

Judgement Text

, . . IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.2495/AHD/2017 ( / ASSESSMENT YEAR : 2008-09) SMT. BHAVNABEN HITESHBHAI SHAH 202/203, SHYAMAK COMPLEX POLYTECHNIC ROAD AHMEDABAD / VS. THE DCIT CIRCLE-1(1)(1) AHMEDABAD ./ ./ PAN/GIR NO. : AGDPS 4189 F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : MS.URVASHI SHODHAN, AR / RESPONDENT BY : SHRI KAMLESH MAKWANA, SR.DR ! / DATE OF HEARING 13/03/2019 '#$% ! / DATE OF PRONOUNCEMENT 15/03/2019 / O R D E R PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : THE ASSESSEE IS IN APPEAL BEFORE US AGAINST THE O RDER OF LD.COMMISSIONER OF INCOME TAX(APPEALS)-1, AHMEDABAD [CIT(A) IN SHORT] DATED 29/09/2017 PASSED FOR ASSESSMENT YEAR (AY) 2008-09. 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT TH E LD.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.2,71,920/- WHICH WAS I MPOSED BY THE ITA NO.2495 /AH D/2017 SMT.BHAVNABEN HITESHBHAI SHAH VS. DCIT ASST.YEAR 2008-09 - 2 - ASSESSING OFFICER U/S.271(1)(C) OF THE INCOME TAX A CT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HA S FILED HER RETURN OF INCOME ON 30/07/2008 DECLARING TOTAL INCOME OF RS.7 ,08,050/-. 4. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT APCL HAD ADVANCED RS.8 LAKHS TO THE APPELLANT WHICH WAS TREATED AS DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT IN THE HAND S OF THE ASSESSEE. THE ADDITION OF THIS AMOUNT STANDS CONFIRMED UPTO T HE ITAT IN ITA NO.2668/AHD/2014. THE LD.AO HAS INITIATED PENALT Y PROCEEDINGS U/S.271(1)(C) OF THE ACT AND ULTIMATELY IMPOSED A P ENALTY OF RS.2,71,920/-. 5. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 6. WE HAVE DULY CONSIDERED RIVAL CONTENTIONS AND GO NE THROUGH THE RECORD CAREFULLY. SECTION 271(1)(C) OF THE INCOME T AX ACT, 1961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT I S PERTINENT TO TAKE NOTE OF THIS SECTION AS UNDER: '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTIC ES, CONCEALMENT OF INCOME, ETC. ITA NO.2495 /AH D/2017 SMT.BHAVNABEN HITESHBHAI SHAH VS. DCIT ASST.YEAR 2008-09 - 3 - (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPE ALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT , IS SATISFIED 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 WHIC H SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS 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 O FFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (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. 7. A BARE PERUSAL OF THIS SECTION WOULD REVEAL THA T FOR VISITING ANY ASSESSEE WITH THE PENALTY, THE ASSESSING OFFICER OR THE LEARNED ITA NO.2495 /AH D/2017 SMT.BHAVNABEN HITESHBHAI SHAH VS. DCIT ASST.YEAR 2008-09 - 4 - 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 FURNISHIN G INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF T HIS SECTION IS DEEMING 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 TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OF FER 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 ITA NO.2495 /AH D/2017 SMT.BHAVNABEN HITESHBHAI SHAH VS. DCIT ASST.YEAR 2008-09 - 5 - WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATIO N OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED CIT( APPEALS) BY GIVING A CATEGORICAL FINDING 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 OF THE ASSESSEE TO SUBSTANTIATE HIS EXP LANATION IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME AN D 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 COMPUTATION OF THE TOTAL INCOME HAVE BEEN DISCLOSED BY THE ASSESSE E. THESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SE CTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALL OWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SEC TION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICULARS HAVE BEEN FURNISHED. 8.1 IN THE LIGHT OF THE ABOVE, LET US EXAMINE THE FACT S OF THE CASE. A PERUSAL OF THE RECORD WOULD INDICATE THAT ASSESSEE WAS OWNER OF THE PREMISES OCCUPIED BY APCL. AN ADVANCE OF RS.8 LAK HS WAS GIVEN TO THE ASSESSEE FOR CARRYING OUT RENOVATION WORK. A RESOL UTION BY THE BOARD OF DIRECTORS OF APCL FOR GRANTING ADVANCE OF RS.8 LAKH S WAS PASSED. SHE FAILED TO CARRY OUT THE RENOVATION WORK AND RETURNE D THE MONEY. THE QUESTION WAS WHETHER IT WAS A BUSINESS ADVANCE OR A LOAN SIMPLICITOR. IN ITA NO.2495 /AH D/2017 SMT.BHAVNABEN HITESHBHAI SHAH VS. DCIT ASST.YEAR 2008-09 - 6 - THE OPINION OF ASSESSEE, IT IS A BUSINESS ADVANCE W HICH WAS RETURNED ON HER FAILURE TO CARRY OUT NECESSARY RENOVATION WORK . THIS VIEW POINT OF THE ASSESSEE DID NOT MEET APPROVAL OF ASSESSING OFF ICER WHO TREATED THIS ADVANCE AS A LOAN AND CONSIDERED IT AS A DEEMED DIV IDEND. 8.2. CONSIDERING THE ABOVE FACTS, WE ARE OF THE VIE W THAT ASSESSEE HAS GIVEN EXPLANATION WHICH IS A BONAFIDE ONE AND, THER EFORE, DOES NOT DESERVE TO BE VISITED WITH PENALTY. WE ALLOW THE A PPEAL OF THE ASSESSEE AND DELETE THE PENALTY. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 15 TH MARCH-2019 AT AHMEDABAD. SD/- S D/- ( PRADIP KUMAR KEDIA) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 15/ 03 /2019 (!.., .*../ T.C. NAIR, SR. PS !'#$#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. +,- . / CONCERNED CIT 4. . ( ) / THE CIT(A)-1, AHMEDABAD 5. 123 * *,- , ! ,-% , + / DR, ITAT, AHMEDABAD 6. 356 7 / GUARD FILE. / BY ORDER, 1 * //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD