Shri Dinesh B.Thakkar, Ahmedabad V. The Dy.CIT.,Cent.Circle-2(2), Ahmedabad

ITA 2717/AHD/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 8736 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 18-01-2010
• Assessment Year: 2000-2001
• Appeal Filed On: 30-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: S DIVATIA
• Keywords: Gift; Bonafide belief
• Section: 153A

Judgement Text

ITA.2716-17/09-DCA ITA.2716-17-3077/09-DCA IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI BHAVNESH SAINI, JM AND D.C.AGRAWAL, A M SHRI DINESH B.THAKKAR, 10 ELLIPHANTA SOCIETY, NR. D.K.HALL, NARANPURA, AHMEDABAD. V/S . THE ASSTT.COMMISSIONER OF INCOME-TAX, CENT.CIR.2(2),3 RD FLOOR, AAYAKAR BHAVAN, ASHRAMROAD,AHMEDABAD. (APPELLANT) .. (RESPONDENT) AND THE ASSTT.COMMISSIONER OF INCOME-TAX, CENT.CIR.2(2),3 RD FLOOR, AAYAKAR BHAVAN, ASHRAMROAD,AHMEDABAD. SHRI DINESH B.THAKKAR, 10 ELLIPHANTA SOCIETY, NR. D.K.HALL, NARANPURA, AHMEDABAD. PAN NO.AATPT 3154 D APPELLANT BY :- SHRI S.DIVATIA RESPONDENT BY:- SHRI M.C. PANDIT,SR.D.R. O R D E R PER SHRI D.C. AGRAWAL, A.M . THESE ARE THREE APPEALS ON LEVY OF PENALTY UNDER S ECTION 271(1)(C), ONE IS FILED BY THE ASSESSEE FOR A.Y. 1999-00 AND O THER TWO ARE FILED FOR A.Y. 2000-01 AND ARE CROSS APPEALS ONE FILED BY THE ASSESSEE AND THE OTHER FILED BY THE REVENUE ARISING FROM THE ORDER O F LD. CIT (A) DATED 10- 8-2009. ITA NO. 2716/AHD/2009(A.Y.1999-00) & ITA.NO.2717/AHD./2009.(A.Y.2000-01) ITA NO. 3077/AHD/2009(A.Y.2000-01) ITA.2716-17-3077/09 2 ITA.NO.2716/09 (A.Y. 1999-00) . 2. THE FACTS OF THE CASE ARE THAT ASSESSEE IS AN IN DIVIDUAL. A SEARCH WAS CARRIED OUT BY THE AHMEDABAD POLICE ON 26.8.200 3 AT THE PREMISES KNOWN AS M/S. KALGI FROM WHERE CASH, GOLD, JEWELLER Y AND VARIOUS DOCUMENTS WERE FOUND AND SEIZED. LATER ON THESE DOC UMENTS WERE REQUISITIONED U/S. 132A BY THE I.T. DEPARTMENT. STA TEMENT OF ONE SHRI TARUN KARIA, WHO WAS UNDER EMPLOYMENT OF THE ASSESS EE WAS RECORDED BY THE POLICE AUTHORITIES. SHERI TARUN KARIA, HAS STAT ED THAT HE IS ENGAGED IN THE BUSINESS OF CRICKET BAITING. ON THE BASIS OF SE ARCH AND SEIZED MATERIAL NOTICE UNDER SECTION 153A WAS GIVEN TO THE ASSESSEE . THE RETURN OF INCOME WAS FILED AT RS.1,59,480/-. THE A.O. PROPOSE D AN ADDITION OF RS.2,50,000/- BEING THE SHORT TERM CAPITAL LOSS ON FORFEITURE OF ADVANCE GIVEN BY THE ASSESSEE TO SOME POWER OF ATTORNEY HOL DER/LAND OWNERS FOR PURCHASE OF LAND WHICH WAS NOT FINALLY PURCHASED BY THE ASSESSEE. THE OTHER ISSUE IS ABOUT GIFT OF RS.1,42,845/- CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE FROM ONE SHRI BIRAL M. PATEL. THE G IFT WAS NOT FOUND GENUINE AND ACCORDINGLY ADDITION WAS PROPOSED. THE LD. CIT(A) CONFIRMED BOTH THE ADDITIONS. THE MATTER TRAVELED T O THE TRIBUNAL WHICH VIDE THEIR ORDER OF EVEN DATE HAVE ALSO CONFIRMED THE ADDITION. 3. THE A.O. ISSUED A PENALTY NOTICE BEFORE LEVY OF PENALTY IN RESPONSE TO WHICH ASSESSEE HAS FURNISHED REPLY WHICH HAS BEE N REFERRED TO BY HIM IN HIS PENALTY ORDER. HE REJECTED THE EXPLANATION A ND HELD THAT ASSESSEE FAILED TO DISCHARGE THE ONUS CAST UPON HIM. THE SHO RT TERM CAPITAL LOSS CLAIMED BY THE ASSESSEE WAS TREATED AS BOGUS LOSS. THE ASSESSEE HAS FILED A VAGUE EXPLANATION. SIMILARLY, IN RESPECT OF OTHER ADDITION OF TREATING GIFT AS NOT GENUINE, THE A.O. REJECTED THE EXPLANATION O F THE ASSESSEE FILED IN ITA.2716-17-3077/09 3 RESPONSE TO PENALTY NOTICE AND HELD THAT ASSESSEE F AILED TO PROVE THE GENUINENESS OF THE GIFT. HE ACCORDINGLY, LEVIED PEN ALTY U/S.271(1)(C) IN RESPECT OF THESE TWO ADDITIONS. 4. THE LD. CIT(A) DELETED THE PENALTY IN RESPECT OF THE GIFT. HE OBSERVED THAT EXPLANATION FURNISHED BY THE ASSESSEE HAS NOT BEEN FOUND TO BE FALSE OR INACCURATE. HE ACCORDINGLY CANCELLED TH E PENALTY ON GIFT BUT CONFIRMED THE PENALTY IN RESPECT OF CLAIM OF SHORT CAPITAL LOSS BY HOLDING THAT ENTIRE TRANSACTION OF CLAIMING LOSS WAS SHAM A ND EXPLANATION/DETAILS FURNISHED WERE INACCURATE OR MALAFIDE. 5. AGAINST THIS LEARNED A.R. SUBMITTED THAT THERE I S NO MATERIAL WITH THE A.O. TO SHOW THAT CLAIM MADE BY THE ASSESSEE, O F SHORT TERM CAPITAL LOSS WAS SHAM/BOGUS OR MALAFIDE. THE ASSESSEE HAD ENTERED INTO AN AGREEMENT WITH THE LAND OWNERS/POWER OF ATTORNEY HO LDERS TO WHOM MONEY WAS PAID BY CHEQUE WHICH HAS NOT BEEN DOUBTED BY THE DEPARTMENT. IT WAS ONLY ON NON PAYMENT OF FINAL MO NEY AND NOT BEING ABLE TO GET THE PURCHASE DEED REGISTERED IN HIS NAM E, THAT CONSENT DEED WAS EXECUTED TO ACCEPT THE FORFEITURE OF ADVANCE GI VEN BY THE ASSESSEE. IN FACT, THE ASSESSEE WAS UNDER BONAFIDE BELIEF THAT A RIGHT HAS ACCRUED TO THE ASSESSEE TO PURCHASE THE LAND. SINCE THIS RIGHT IS EXTINGUISHED, A CAPITAL LOSS ACCRUED TO THE ASSESSEE WHICH WAS ACCORDINGLY CLAIMED BY HIM IN THE RETURN OF INCOME. IF THE DEPARTMENT DOES NOT ACCEPT THE VIEW OF THE ASSESSEE THEN IT CANNOT BE MATTER FOR LEVY OF PENAL TY. THE DEPARTMENT IS EXPECTED TO BRING SOME POSITIVE MATERIAL ON RECORD TO SHOW THAT MONEY IN ALLEGED ADVANCE ACTUALLY DID NOT PASS OR IT HAS FIN ALLY COME BACK TO THE ASSESSEE. EXCEPT DISBELIEVING NATURE OF TRANSACTION , THERE IS NO MATERIAL TO HOLD THAT ENTIRE TRANSACTION OF GIVING ADVANCE AND FORFEITURE WAS SHAM. ITA.2716-17-3077/09 4 6. AGAINST THIS LD. D.R. RELIED ON THE ORDERS OF LD . C.I.T.(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN RESPECT OF LEVY OF PENALTY EXPLANATION 1 TO SECTION 271(1)(C ) READS AS UNDER :- 271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICE S, CONCEALMENT OF INCOME, ETC.--(1) IF THE ASSESSING OFFICER OR THE C OMMISSIONER (APPEALS) 3 OR THE COMMISSIONER IN THE COURSE OF ANY PROCEEDING S UNDER THIS ACT, IS SATISFIED THAT ANY PERSON-- XXXXXXXXXXX XXXXXXXXXXX (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,-- (III) IN THE CASES REFERRED TO IN CLAUSE (C), IN AD DITION TO ANY TAX PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHI CH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR THE FUR NISHING OF INACCURATE PARTICULARS OF SUCH INCOME. EXPLANATION 1.--WHERE IN RESPECT OF ANY FACTS MATER IAL 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) 3 OR THE COMMISSIONER 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 T HE TOTAL INCOME OF SUCH PERSON AS A RESULT THEREOF SHALL, FOR THE PURP OSES OF CLAUSE (C) OF THIS SUB-SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 8. THE EXPLANATION 1A OF SECTION 1 WILL NOT BE APPL ICABLE IN THE PRESENT CASE AS ASSESSEE HAS FURNISHED EXPLANATION WHICH HAS BEEN REFERRED TO BY THE A.O. IN HIS PENALTY ORDER AND TH IS EXPLANATION HAS NOT ITA.2716-17-3077/09 5 BEEN FOUND FALSE IN RESPECT OF ANY ITEM. THEREFORE, THE CASE OF THE ASSESSEE MIGHT FALL WITHIN THE MEANING OF CLAUSE 1( B). FOR LEVY OF PENALTY UNDER EXPLANATION 1B TO SECTION 271(1)(C), FOLLOWING THREE INGREDIENTS ARE REQUIRED TO BE SATISFIED CUMULATIVE LY AND SIMULTANEOUSLY NAMELY :- (I) THE ASSESSEE OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE. (II) HE FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND (III) THAT ALL THE FACTS RELATING TO THE SAME AND M ATERIAL TO THE COMPUTATION OF TOTAL INCOME HAVE BEEN DISCLOSED BY HIM. 9. IN THE INSTANT CASE THE ASSESSEE HAS OFFERED AN EXPLANATION WHICH ON THE FACE OF IT APPEARS TO BE BONAFIDE IN AS MUCH AS ASSESSEE HAS FURNISHED THE DETAILS OF THE PERSONS TO WHOM ADVANC E WAS GIVEN IN ADDITION TO THE AGREEMENT TO PURCHASE THE LAND AND CONSENT DEED. THERE IS NO FINDING BY THE A.O. THAT IDENTITY OF THE PERSONS WITH WHOM TRANSACTIONS WERE ENTERED INTO WERE FICTITIOUS OR T HAT THEY DID NOT HAVE THE LAND OR THAT THEY HAVE RETURNED THE MONEY OF ADVANC E TO THE ASSESSEE. THE PAYMENT OF ADVANCE WAS GIVEN THROUGH CHEQUE. UNLESS IT IS FOUND THAT MONEY AS PER THE CHEQUE DID NOT REALLY GO TO THE PA YEE, IT CANNOT BE PRESUMED THAT PAYMENT SO MADE WAS ACTUALLY NOT MADE . THE A.O. OUGHT TO HAVE CARRIED OUT THE INQUIRIES FURTHER, AND SHOU LD HAVE RECORDED THE STATEMENTS OF THE POWER OF ATTORNEY HOLDERS/LAND OW NERS TO FIND OUT WHETHER TRANSACTION WAS REAL OR WAS ONLY SHAM. WHAT AUTHORITIES BELOW HAVE DONE IS TO DRAW INFERENCES AND DISBELIEVE ON T HE DOCUMENTARY EVIDENCE IN THE FORM OF AGREEMENT TO PURCHASE AND C ONSENT DEED SUBMITTED BY THE ASSESSEE THAT THEY ARE BOGUS OR TR ANSACTIONS ARE SHAM. EVEN IF THERE ARE CONTRADICTIONS IN THE DEED DRAWN BY THE PARTIES AND ITA.2716-17-3077/09 6 SUBMITTED TO THE A.O. THEY BY THEMSELVES DO NOT LEA D TO INFERENCE THAT THEY ARE SHAM. EVEN IN A GENUINE TRANSACTION DOCUME NTS SO DRAWN CAN CONTAIN CONTRADICTIONS OR INCONSISTENCIES. NO-DOUBT CONTRADICTIONS OR INCONSISTENCIES IN THE DOCUMENTS DRAWN, ARE RELEVAN T FACTORS AS AO/CIT(A) HAVE FOUND, BUT THEY ARE NOT SUFFICIENT T O HOLD THAT ENTIRE TRANSACTIONS ARE SHAM. SOMETHING MORE IS REQUIRED T O BE SHOWN, IN ADDITION TO INCONSISTENCIES AND CONTRACTIONS, SUCH AS, THAT PARTIES DID NOT REALLY ENTER INTO THE TRANSACTIONS PURPORTED TO BE SHOWN FOR TAX PURPOSES. THIS CAN BE DONE BY INTERROGATING THE OTHER CONCERN ED PARTIES, WHETHER CIRCUMSTANCES EXISTED WHICH WOULD COMPEL THE LAND O WNERS TO DISPOSE OF THEIR LAND OR WHETHER THEY HAVE NEGOTIATED WITH OTH ER PARTIES TO DISPOSE OFF THEIR LAND OR ASSESSEE HAD ANY INTENTION TO HOL D THE LAND AS INVESTMENT, OR HAD ENOUGH RESOURCES TO ENABLE HIM TO PURCHASE T HE LAND, OR WHETHER ASSET AS SUCH WAS CAPABLE OF BEING TRANSFERRED, OR WHETHER ASSET UNDER TRANSFER EXISTED AT ALL. 10. SINCE NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE A.O. TO SHOW THAT TRANSACTIONS OF ENTERING INTO PURCHASE AGREEME NT OR CONSENT DEED WAS IN FACT SHAM, WE ARE UNABLE TO UPHOLD THIS INFERENC E OF THE AUTHORITIES BELOW. ONCE THIS INFERENCE IS TAKEN OUT OF THE REAS ONING GIVEN BY THE A.O. OR LD. CIT (A) FOR LEVY OF PENALTY THEN NOTHING SUR VIVES TO HOLD THAT THE CASE OF THE ASSESSEE FALLS WITHIN THE EXPLANATION-1 (B) TO SECTION 271(1)(C). IN FACT, ASSESSEE HAS OFFERED AN EXPLAN ATION AND HE HAS SUBSTANTIATED BY WAY OF DOCUMENTARY EVIDENCE. THERE IS NOTHING TO HOLD THAT EXPLANATION OF THE ASSESSEE IS NOT BONAFIDE AN D ALSO THERE IS NOTHING TO HOLD THAT ANY MATERIAL FACT FOR COMPUTATION OF I NCOME HAS BEEN WITHHELD BY THE ASSESSEE FROM THE TAX AUTHORITIES. IN VIEW OF THE ABOVE, THERE IS NO CASE FOR LEVY OF PENALTY ON EITHER COUN T. ACCORDINGLY, THE PENALTY LEVIED BY THE A.O. AND CONFIRMED BY THE LD. CIT (A) IS CANCELLED. ITA.2716-17-3077/09 7 ITA.NO.2717/AHD/09 (A.Y. 2000-01). 11. IN THIS CASE, THE PENALTY IS LEVIED ON TWO GROU NDS; ONE IS AGAINST CLAIM OF CAPITAL LOSS AT RS.6.5 LACS AND GIFT OF RS .12 LACS. THE LD. CIT (A) HAS CANCELLED THE PENALTY IN RESPECT OF GIFT OF RS. 12 LACS WHEREAS HE HAS CONFIRMED THE PENALTY IN RESPECT OF CAPITAL LOSS OF RS.6.5 LACS. THE FACTS AND CIRCUMSTANCES OF THE CASE ARE THE SAME AS IN TH E A.Y. 1999-00. FOLLOWING OUR REASONING FOR THAT YEAR WE HOLD THAT THERE IS NO CASE FOR LEVY OF PENALTY ON EITHER OF THE TWO ADDITIONS. AS A RESULT PENALTY LEVIED AND CONFIRMED BY LD. CIT (A) IS CANCELLED. APPEALS FOR BOTH THE YEARS ARE ALLOWED. ITA.NO.3077/AHD/09 (A.Y.2000-01) . 12. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST LEVY OF PENALTY OF RS.6,12,994/- ON THE ADDITION OF RS.12.5 LACS BEING GIFT FROM BIRAL M. PATEL CLAIMED TO HAVE BEEN RECEIVED BY THE ASSESSEE BUT HAS NOT BEEN ACCEPTED AS GENUINE BY THE A.O. ADDITION IN RESPECT OF THIS AMOUNT HAS BEEN CONFIRMED BY THE LD. C.I.T.(A) AS WELL AS BY T HE TRIBUNAL. 13. WE HAVE HEARD THE PARTIES. THE FACTS RELATING T O LEVY OF PENALTY OF THIS AMOUNT ARE SIMILAR TO THE FACTS FOR A.Y. 1999- 00. PENALTY HAS BEEN LEVIED UNDER EXPLANATION 1B TO SECTION 271(1)(C). W E NOTICE THAT EXCEPT REJECTING THE EXPLANATION OF THE ASSESSEE, A.O. HAS NOT BROUGHT ANY POSITIVE MATERIAL ON RECORD TO SUGGEST THAT GIFT RE CEIVED BY THE ASSESSEE WAS NOT GENUINE. TO REJECT THE EXPLANATION OF THE A SSESSEE IS ONE THING AND TO SHOW BY POSITIVE MATERIAL THAT CLAIM OF THE ASSESSEE IS NOT GENUINE IS ANOTHER THING. PENALTY CAN BE SUSTAINED ONLY WHE N A.O. BRINGS SOME ITA.2716-17-3077/09 8 POSITIVE MATERIAL ON RECORD TO SHOW THAT ARRANGEMEN T MADE BY THE ASSESSEE IS NOT REAL BUT SHAM. SO LONG AS THERE IS NO MATERIAL ON RECORD BROUGHT IN BY THE A.O. CONTRADICTING OR NEGATIVING THE CLAIM OF THE ASSESSEE, IT CANNOT BE SAID THAT ASSESSEE HAS FAILE D TO SUBSTANTIATE ITS EXPLANATION PARTICULARLY WHEN HE HAS FURNISHED DOCU MENTARY EVIDENCE IN THE FORM OF CONFIRMATION BY THE FATHER OF THE DONOR AND ASSET STATEMENT OF THE DONOR. THERE ARE INFERENCES DRAWN BY THE TRIBUN AL IN THE ORDER OF EVEN DATE FOR THE ASSESSMENT YEAR 2000-01 BUT THESE INFERENCES ARE ONLY FOR SUSTAINING THE ADDITION BY REJECTING THE EXPLAN ATION OF THE ASSESSEE BUT THEY ARE NOT SUFFICIENT FOR LEVY OF PENALTY. DETAIL ED REASONING HAS BEEN GIVEN BY US IN THE ASSESSMENT YEAR 2000-01 WHILE D ISCUSSING EXPLANATION 1B TO SECTION 271(1)(C). FOLLOWING THA T ORDER WE HOLD THAT THE LD. C.I.T.(A) WAS JUSTIFIED IN CANCELING THE PE NALTY. WE ACCORDINGLY UPHELD HIS ORDER. THEREFORE, APPEAL FILED BY THE RE VENUE IS DISMISSED. IN THE RESULT APPEALS FILED BY THE ASSESSEE ARE AL LOWED WHEREAS APPEAL OF REVENUE IS DISMISSED. SD/- SD/- (BHAVNESH SAINI) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 31 -03-2010 PATKI ORDER PRONOUNCED IN OPEN COURT ON 31 03 - 2010 ITA.2716-17-3077/09 9 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD