Shri Manharlal Ratilal Modi, Ahmedabad V. The Income Tax Officer, Ward-2, Valsad

ITA 2670/AHD/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 2297 (ITAT-SURAT)
• Duration Of Justice: 3 year(s) 9 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 01-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Assessee Lawyers: SURESH K KABRA
• Keywords: Gift; Bonafide belief; Initiation of penalty proceedings
• Section: 131; 68; 271(1)(c)

Judgement Text

SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 1 OF 8 , , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT . . , . . , BEFORE SHRI C.M.GARG, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO. 2670/AHD/2014/SRT / ASSESSMENT YEAR :2008-09 SHRI M ANHARLAL RATILAL MODI, 306 SKANDND VINAYAK APARTMENT, HALAR ROAD NEAR WATER TANK, VALSAD 396 001. [PAN: AJDPM 0364 K] V S . INCOME TAX OFFICER, WARD- 2, VALSAD. APPELLANT /RESPONDENT /ASSESSEE BY SHRI SURESH K. KABRA, CA /REVENUE BY SHRI R. P. RASTOGI, SR. D.R. / DATE OF HEARING: 31 - 07 - 2018 /PRONOUNCEMENT ON 07 - 08 - 2018 /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-VALSAD (IN SHORT THE CIT (A)) DATED 22.08.201 PERTAINING TO ASSESSMENT YEAR 2008-09, WHICH IN TURN HAS ARISEN FROM THE PENALTY ORDER PASSED UNDER SECTION 271(1)(C) DTD. 14.02.2014 OF INCOME TAX ACT,1961 SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 2 OF 8 (IN SHORT THE ACT) BY THE INCOME TAX OFFICER, WARD-2 VALSAD (IN SHORT THE AO). 2. GROUND NO.1 AND 2 STATES THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, AS WELL AS ON THE SUBJECT, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN CONFIRMING THE PENALTY OF RS.2,51,710/- UNDER SECTION 271(1)(C) OF THE ACT. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE AO MADE ADDITION OF RS.14.22 LAKH AS CASH DEPOSITS IN THE BANK ACCOUNT OF THE ASSESSEE AND INITIATED PENALTY PROCEEDINGS IN RESPECT OF SAID ADDITIONS. HOWEVER, CIT (A) HAS REDUCED THE SAID ADDITION TO RS.8,79,750/-. THOUGH THIS ADDITION WAS SUSTAINED BUT NO INCOME IN REAL SENSE WAS EARNED BY THE ASSESSEE. THE COUNSEL ARGUED THAT ADVANCE OF RS.5.51 LAKH WAS RECEIVED FROM MR. PRAVUNBHAI DAMODARBHAI AHIR, AN AGRICULTURIST, AGAINST THE PROPOSED SALE OF HOUSE. AN AFFIDAVIT FROM MR.PRAVINBHAI DAMODARBHAI AHIR DTD. 12.01.2018 WAS ALSO FILED BEFORE THE CIT (A) [PB-1-2] CONFIRMING THE ADVANCE GIVEN TO THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO FILED A CASH FLOW STATEMENT FOR THE PERIOD OF DEPOSIT [PB-4] WHEREIN SOURCE OF CASH DEPOSITS OF RS.14.22 LAKHS HAS BEEN EXPLAINED. IT WAS SUBMITTED THAT AN AMOUNT OF RS.3.28 LAKH IS OUT OF CASH GENERATED FROM PROFESSION SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 3 OF 8 DURING THE YEAR AND RS.3.22 LAKH IS GIFT RECEIVED FROM SHRI RAJENDRA GANDHI OF UK, BROTHER IN LAW OF THE ASSESSEE, OF WHICH CONFIRMATION LETTER WITH RELEVANT BANK ACCOUNT WAS FILED. HOWEVER, THE AO LEVIED PENALTY AS THE ADDITION TO THE EXTENT OF RS.8.79 LAKH HAS BEEN CONFIRMED BY THE CIT(A) AND THE ASSESSEE HAS NOT FILED AN APPEAL AGAINST SAID CONFIRMATION BEFORE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT NON FILING OF APPEAL BEFORE TRIBUNAL DOES NOT MEAN THAT THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME. THE ASSESSEE HAS DULY EXPLAINED THE SOURCE OF CASH DEPOSITS, HOWEVER, THE SAME IS NOT FOUND ACCEPTABLE BY THE AUTHORITIES. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED IN THE CASE OF SAKET AGARWAL V. ITO [2013] 36 TAXMANN.COM 298 (DELHI) /147 ITD 686 (DELHI) WHEREIN IT WAS HELD THAT ORDER OF ASSESSMENT WAS NOT CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED IN THE HANDS OF THE ASSESSEE WAS IN FACT INCOME OF THE ASSESSEE AND THERE WAS A CONSCIOUS CONCEALMENT BY THE ASSESSEE, THEREFORE, IMPOSITION OF PENALTY WAS NOT JUSTIFIED. THE ASSESSEE HAS OFFERED AN EXPLANATION WHICH IS NOT FOUND ACCEPTABLE DOES NOT MEAN THAT THE ASSESSEE HAD CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE COUNSEL ALSO RELIED IN THE CASE OF CIT V. JALARAM OIL MILLS [2002] 121 TAXMAN 682 SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 4 OF 8 (GUJARAT) AND CIT V. ORISSA CORPORATION (P) LTD. [1986] 159 ITR 78 (SC)/ 25 TAXMAN 80(SC) IN SUPPORT OF HIS CONTENTIONS. THE LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT THE ASSESSEE HAS FILED AN ADDITIONAL LEGAL GROUND, CHALLENGING THAT NOTICE UNDER SECTION 271(1)(C) WHICH HAS BEEN ISSUED WITHOUT STRIKING OUT WHETHER THE ASSESSEE HAS CONCEALED THE PARTICULARS OF INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME, HENCE, INITIATION OF PENALTY PROCEEDINGS IS ITSELF INVALID AND NOT SUSTAINABLE IN LAW IN VIEW OF THE RATIO LAID DOWN IN THE CASE OF CIT V. SSA`S EMERALD MEADOWS [2016] 73 TAXMANN.COM 248 (SC) [2016] 8 TMI 1145(SC) AND CIT V. MANJUNATH COTTON GINNING FACTORY [2013] 359 ITR 565 (KAR)/263 CTR 153/ 93 DTR 111(KARN). 4. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF LOWER AUTHORITIES AND SUBMITTED THAT THE ASSESSEE HAS NOT FILED ANY APPEAL AGAINST THE ADDITION SUSTAINED BY THE CIT (A) THAT AMOUNTS THAT THE ASSESSEE HAS FAILED TO EXPLAIN THE SOURCE OF CASH DEPOSITS AND HENCE, CONCEALED THE INCOME. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS MADE ADDITION ON ACCOUNT OF CASH DEPOSITS EVEN THOUGH THE ASSESSEE HAS PROVIDED POSSIBLE EXPLANATION AND SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 5 OF 8 THE PENALTY ORDER SHOWS THAT THE AO LEVIED PENALTY OF RS.8.79 LAKH THE AMOUNT CONFIRMED BY THE CIT (A). THE ASSESSEE HAS CLAIMED THAT THE AMOUNT OF RS.5.51 LAKH REPRESENTS ADVANCE RECEIVED FROM MR. PRAVINBHAI DAMODABHI AHIR ON ACCOUNT OF PROPOSED SALE OF HOUSE. IN SUPPORT OF THIS CONTENTION THE ASSESSEE HAS ALSO FILED AN AFFIDAVIT FROM SHRI PRAVINBHAI AHIR. SIMILARLY, BALANCE OUT OF RS.8.79 LAKH REPRESENTS CASH GENERATED OUT OF PROFESSION RECEIPTS DURING THE YEAR UNDER CONSIDERATION. THUS, THE ASSESSEE HAS PROVIDED AN EXPLANATION AND ALSO SUBSTANTIATED THE SAME WITH DOCUMENTARY EVIDENCE. HOWEVER, THE TAX AUTHORITIES DID NOT BELIEVE THE SAID EXPLANATION AS THEY HAD A DIFFERENT OPINION FROM THE POINT OF VIEW OF THE ASSESSEE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECIDING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RELIED IN THE CASE OF SAKET AGARWAL V. ITO [2013] 36 TAXMANN.COM 298 (DELHI) /147 ITD 686 (DELHI) WHEREIN IT WAS HELD THAT ORDER OF ASSESSMENT WAS NOT CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 6 OF 8 IN THE HANDS OF THE ASSESSEE WAS IN FACT INCOME OF THE ASSESSEE AND THERE WAS A CONSCIOUS CONCEALMENT BY THE ASSESSEE, THEREFORE, IMPOSITION OF PENALTY WAS NOT JUSTIFIED. EXPLANATION 1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO ATTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFERED, OR EXPLANATION OFFERED IS FOUND TO BE FALSE. IN THIS CASE THE ASSESSEE HAS OFFERED EXPLANATION, BUT THE AO FAILED TO CONSIDER THE SAME. HOWEVER, THE SAID EXPLANATION OFFERED WAS NOT FOUND TO BE FALSE AND ACCORDINGLY ITS CASE IS NOT COVERED BY CLAUSE (A) OF EXPLANATION 1. CLAUSE (B) OF EXPLANATION 1 PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS LEVIABLE. AS THE CLAIM OF THE ASSESSEE IS DULY SUPPORTED BY DOCUMENTARY EVIDENCE AND FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO CONCEALED INCOME. THIS BEING THE FACTUAL POSITION, THEREFORE PENALTY U/S 271(1) (C) IS NOT LEVIABLE. JUST BECAUSE APPELLANTS EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT THE APPELLANT WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOUS EVIDENCES AND JUDICIAL OPINIONS. EXPLANATION 1 DOES THEREFORE, NOT COVER THE CASE OF THE SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 7 OF 8 APPELLANT. BASED ON THE ABOVE FACTS OF THE CASE, IT CAN BE HELD THAT THE APPELLANT HAD MADE ALL THE NECESSARY DISCLOSURES ON A BONAFIDE BELIEF, WHICH IS NOT AGREEABLE TO THE AO, IT WILL NOT AUTOMATICALLY LEAD TO A CASE FOR PENALTY UNDER SECTION 271(1)(C) OF THE IT ACT, 1961. 6. WE ARE THEREFORE OF THE CONSIDERED VIEW THAT THE PENALTY IS NOT SUSTAINABLE IN VIEW OF DECISION OF THE HONBLE SUPREME COURT IN CASE CIT V. ORISSA CORPORATION (P) LTD. [1986] 159 ITR 78 (SC)/ 25 TAXMAN 80(SC), WHEREIN THE HON`BLE SUPREME COURT OBSERVED THAT WHEN THE ASSESSEE FURNISHES NAMES AND ADDRESSES OF THE ALLEGED CREDITORS AND THE GIR NUMBERS, THE BURDEN SHIFTS TO THE DEPARTMENT TO ESTABLISH THE REVENUES CASE AND IN ORDER TO SUSTAIN THE ADDITION THE REVENUE HAS TO PURSUE THE ENQUIRY AND TO ESTABLISH THE LACK OF CREDITWORTHINESS AND MERE NON-COMPLIANCE OF SUMMONS ISSUED BY THE ASSESSING OFFICER UNDER SECTION 131 BY THE ALLEGED CREDITORS WILL NOT BE SUFFICIENT TO DRAW AN ADVERSE INFERENCE AGAINST THE ASSESSEE. FURTHER THE HON`BLE JURISDICTIONAL HIGH COURT OF GUJARAT IN THE CASE OF CIT V. JALARAM OIL MILLS [2002] 121 TAXMAN 682 (GUJARAT) HELD THAT MERELY BECAUSE ADDITION HAS BEEN MADE BY INVOKING PROVISIONS OF SECTION 68 , PENALTY UNDER SECTION 271(1)(C) WOULD NOT FOLLOW AS A NATURAL COROLLARY THEREFORE, PENALTY WAS HELD SHRI MAHENDRA RATILAL MODI V. ITO W-2- VALSAD/I.T.A. NO.2670/AHD/2014/A.Y.:08-09 PAGE 8 OF 8 TO BE UNSUSTAINABLE. IN THE LIGHT OF ABOVE DISCUSSION, THE PENALTY LEVIED AT RS.2,51,710/- IS DELETED. THEREFORE, GROUND NO. 1 AND 2 OF APPEALS ARE ALLOWED. THE ASSESSEE HAS ALSO FILED AN ADDITIONAL GROUND OF APPEAL, SINCE WE HAVE ALLOWED THE APPEAL OF THE ASSESSEE HENCE, SAME BECOMES INFRUCTUOUS HENCE, NOT BEING ADJUDICATED HENCE, IT IS TREATED AS DISMISSED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. ORDER PRONOUNCED IN THE OPEN COURT ON 07.08.2018. SD/- SD/- ( . . /C.M. GARG) ( . . /O.P.MEENA) /JUDICIAL MEMBER /ACCOUNTANT MEMBER DATED: 7 TH AUGUST, 2018/ OPM / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) THE CIT(A)4. / PR. CIT 5. , / D.R. (ITAT) 6. / GUARD FILE ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT