Shri Umesh Krishnani, Prop. of M/s. Swami Enterprise, Surat V. The Income tax Officer,Ward-2(3), Surat

ITA 2758/AHD/2012

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6013 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 11-07-2014
• Assessment Year: 2003-2004
• Appeal Filed On: 07-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV
• Keywords: Unexplained cash credit
• Section: 143(3); 68

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD (BEFORE SHRI G.C.GUPTA VICE PRESIDENT & SHRI ANIL C HATURVEDI, A.M.) I.T. A. NO. 2758/AHD/2012 (ASSESSMENT YEAR: 2003-04) SHRI UMESH KRISHNANI PROP. M/S. SWAMI ENTERPRISES 2002, JASH TEXTILE MARKET, RING ROAD, SURAT 395 002 V/S INCOME-TAX OFFICER, WARD 2(3), SURAT AAYKAR BHAVAN, MAJURA GATE, SURAT (APPELLANT) (RESPONDENT) PAN: ABQPK8062R APPELLANT BY : SHRI TUSHAR HEMANI RESPONDENT BY : SHRI B.L. YADAV, SR. D.R. ( )/ ORDER DATE OF HEARING : 11-07-2014 DATE OF PRONOUNCEMENT : 25-07-2014 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A)-II, SURAT DATED 14-09-2012 FOR A.Y. 2003-04. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON REC ORD ARE AS UNDER. 3. ASSESSEE IS AN INDIVIDUAL AND PROPRIETOR OF SWAM I ENTERPRISE AND IS ENGAGED IN THE ACTIVITY OF TRADING OF POLYESTER YARN. ASSES SEE FILED HIS RETURN OF INCOME FOR A.Y. 03-04 ON 20.10.2003 DECLARING TOTAL INCOME AT RS. 3,75,861/-. THE ITA NO 2758/ AHD/2012 . A.Y. 2003- 04 2 CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE A SSESSMENT WAS FRAMED 143(3) VIDE ORDER DATED 02.03.2006 AND THE TOTAL IN COME WAS DETERMINED AT RS. 17,32,160/-. WHILE COMPLETING THE ASSESSMENT, A PART FROM OTHER ADDITIONS, ADDITION WERE ALSO MADE ON ACCOUNT OF UN EXPLAINED CASH CREDIT (7,25,000/-) AND INTEREST EXPENSES IN RESPECT OF UN EXPLAINED CASH CREDIT (RS. 1,32,543). ON THE AFORESAID ADDITIONS, A.O VIDE PEN ALTY ORDER DATED 26.07.2010 LEVIED PENALTY OF RS. 2,42,825/- U/S. 27 1(1)(C) OF THE ACT. AGGRIEVED BY THE ORDER OF A.O, ASSESSEE CARRIED THE MATTER BEFORE CIT(A). CIT(A) CONFIRMED THE PENALTY BY HOLDING AS UNDER:- 6. I HAVE CAREFULLY CONSIDERED THE FACTS ON ISSUE A ND LEGAL POSITION ON IT. WHILE MAKING ADDITION ON ACCOUNT OF UNEXPLAINED CASH CREDITORS, AO HAS DISCU SSED IN DETAILS IN ASSESSMENT ORDER THAT HOW THESE CASH CREDITORS HAVE BEEN INTRODUCED IN THE BOOKS OF APPELLANT BY SHOWING THE FABRICATED DETAILS AND MANAGING THE WHOLE AFFAIRS JUST TO CONVERT THE UNEX PLAINED MONEY OF APPELLANT INTO EXPLAINED CREDITS. IT HAS BEEN CATEGORICALLY BROUGHT ON RECORD BY AO T HAT IN THE CASE OF EACH CREDITOR CASH AMOUNTS HAVE BEEN DEPOSITED JUST BEFORE ISSUING CHEQUES BY THOSE PERSONS TO THE APPELLANT. ALL THESE PERSONS ARE ME N OF NO MEANS AND ONLY SIGNIFICANT TRANSACTION IN THE IR BANK ACCOUNTS DURING THE YEAR UNDER CONSIDERATION HAS BEEN THE CASH DEPOSIT AND ISSUANC E OF CHEQUE TO THE APPELLANT. THOUGH THESE PERSONS HAVE FILED THEIR RETURNS OF INCOME BUT EVERYBODY IS HAVING BELOW TAXABLE INCOME SO NO TAXES HAVE BEEN PAID. IT MAKES CLEAR THAT THE RETURN OF INCOME HAVE GOT BEEN FILED BY THESE PERSONS JUST TO GIVE THE C OLOR OF GENUINENESS FOR EXPLAINING THE CASH CREDITS SHOW N BY APPELLANT. THE CREDIT WORTHINESS OF ALL THESE CREDITORS HAVE BEEN DOUBTED BY DIFFERENT AUTHORITIES, INCLUDI NG HON'BLE ITAT. THE WHOLE AFFAIRS HAS BEEN MANAGED BY APPELLANT IN SUCH A WAY THAT THE CO LOR OF GENUINENESS HAS BEEN GIVEN TO THE CREDITS INTRODUCED IN THE BOOKS OF ACCOUNT WITHOUT PAYING A NY TAXES ON IT. HOWEVER, NONE OF THE AUTHORITIES, A S MENTIONED ABOVE, HAVE ACCEPTED THE VERSION OF APPEL LANT. THEY ARE NOT CONVINCED AT ALL WITH THE AFFAIR S MANAGED BY APPELLANT. IN MY OPINION ALSO, THE APPEL LANT HAS WILLFULLY CONCEALED THE REAL FACTS AND TRIED TO EXPLAIN THE CASH CREDITS BY FURNISHING INA CCURATE PARTICULARS OF INCOME. THE DECISIONS OF DIFFERENT COURTS RELIED UPON BY APPELLANT ARE DISTI NGUISHABLE ON FACTS THEREFORE NOT APPLICABLE IN HIS CASE. IN VIEW OF THIS DISCUSSION, I HOLD THAT THE A O HAS RIGHTLY LEVIED THE PENALTY OF RS.2,42,825/- U /S. 271(L)(C) OF THE ACT. WHICH REQUIRES TO BE CONFIRME D. 4. AGGRIEVED BY THE ORDER OF CIT(A), ASSESSEE IS NO W IN APPEAL BEFORE US. 5. BEFORE US, LD. A.R. SUBMITTED THAT LD. A.O MADE ADDITION U/S. 68 ALLEGING UNEXPLAINED CASH CREDIT OF RS. 7,25,000/- AND THE I NTEREST THEREON OF RS. ITA NO 2758/ AHD/2012 . A.Y. 2003- 04 3 1,32,543/- WAS DISALLOWED. DURING THE COURSE OF ASS ESSMENT PROCEEDINGS, ITSELF ASSESSEE SUBMITTED THE DOCUMENTARY EVIDENCE LIKE NAME OF THE DEPOSITORS, COPY OF THE PAN, COPY OF THE DEPOSITORS , CONFIRMATION OF THE DEPOSITORS, ACKNOWLEDGEMENT OF RETURN OF INCOME AND COMPUTATION OF INCOME OF THE DEPOSITORS, BALANCE SHEET OF PROFIT AND LOSS ACCOUNT AND CAPITAL ACCOUNT OF THE DEPOSITORS AND THE COPY OF THE BANK PASS BOOK/BANK STATEMENTS OF THE DEPOSITORS. HE THEREFORE SUBMITTE D THAT ASSESSEE HAS FULLY DISCHARGED THE ONUS OF PROVING NOT ONLY THE IDENTIT Y OF THE DEPOSITORS BUT HAD ALSO ESTABLISHED THE GENUINENESS OF TRANSACTION AND THE CREDITWORTHINESS OF THE DEPOSITORS. A.O FURTHER CONSIDERED THE LOAN REC EIVED BY THE ASSESSEE AS NOT GENUINE FOR THE REASON THAT THE DEPOSITORS HAD DEPOSITED THE AMOUNTS IN CASH IN THEIR BANK ACCOUNTS BEFORE GRANTING LOAN TO THE ASSESSEE. THE LD. A.R. FURTHER SUBMITTED THAT ASSESSEE WAS NOT EXPECT ED TO PROVE SOURCE OF SOURCE OF THE DEPOSITS. HE THEREFORE SUBMITTED THAT IT IS NOT A CASE WHERE THE DETAILS FURNISHED BY THE ASSESSEE WERE FOUND TO BE FALSE NOR IS THE CASE WHERE THE DETAILS FURNISHED BY ASSESSEE HAVE BEEN F OUND TO BE FALSE. HE FURTHER SUBMITTED THAT THE ADDITION MADE U/S. 68 WO ULD NOT AUTOMATICALLY JUSTIFYING IN PENALTY U/S. 271(1)(C) OF THE ACT AS THE ASSESSMENT AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT. HE ALSO PLAC ED RELIANCE ON THE DECISION IN THE CASE OF MRALIDHAR LAHORIMAL VS. CIT (2006) 280 ITR 512 (GUJ) AND IN THE CASE OF CIT VS. PRAGATI CO-OP. BANK LTD. (2005) 278 ITR 170 (GUJ). HE THEREFORE SUBMITTED THAT THE PENALTY LEVIED BY T HE A.O BE DELETED. THE LD. D.R. ON THE OTHER HAND RELIED ON THE ORDER OF A.O A ND CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. IN THE PRESENT CASE, A.O HAS LEVIED PENALTY U/S. 271(1 )(C) ON THE ADDITION MADE U/S. 68 AND ON THE DISALLOWANCE OF INTEREST EXPENSE S OF UNEXPLAINED CASH CREDIT. 7. THE PENALTY UNDER SECTION. 271(L)(C) OF THE ACT IS LEVIABLE IF THE AO IS SATISFIED IN THE COURSE OF ANY PROCEEDINGS UNDER THE ACT THAT ANY PERSON HAS ITA NO 2758/ AHD/2012 . A.Y. 2003- 04 4 CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHE D INACCURATE PARTICULARS OF SUCH INCOME. IT IS WELL SETTLED THAT ASSESSMENT PRO CEEDINGS AND PENALTY PROCEEDINGS ARE SEPARATE AND DISTINCT AND THE FINDI NG IN THE ASSESSMENT PROCEEDINGS CANNOT BE REGARDED AS CONCLUSIVE FOR TH E PURPOSES OF THE PENALTY PROCEEDINGS. 8. THE NECESSARY INGREDIENTS FOR ATTRACTING EXPLN. 1 TO SECTION. 271(L)(C) ARE THAT (I) THE PERSON FAILS TO OFFER THE EXPLANATION, OR ( II) HE OFFERS THE EXPLANATION WHICH IS FOUND BY THE AO OR THE CIT(A) OR THE CIT T O BE FALSE, OR (III) THE PERSON OFFERS EXPLANATION WHICH HE IS NOT ABLE TO S UBSTANTIATE AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT A LL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY HIM. IF THE CASE OF ANY ASSESSEE FALLS IN ANY OF THESE THREE CATEGORIES, THEN ACCORDING TO THE DEEMI NG PROVISION PROVIDED IN EXPLN. 1 TO SECTION. 271(L)(C) THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME SHALL BE CONSIDERED AS THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED, FOR THE PURPOSES O F CLAUSE. (C) OF S. 271(1), AND THE PENALTY FOLLOWS. ON THE OTHER HAND, IF THE ASSESSEE IS ABLE TO OFFER AN EXPLANATION, WHICH IS NOT FOUND BY THE AUTHORITIES TO BE FALSE, AND ASSESSEE HAS BEEN ABLE TO PROVE THAT SUCH EXPLANATION IS BON A FIDE AND THAT ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED BY H IM, THEN IN THAT CASE PENALTY SHALL NOT BE IMPOSED. 9. IN THE PRESENT CASE THE ASSESSEE HAD DISCLOSED T HE MATERIAL FACTS NAMELY NAME OF THE DEPOSITORS COPY OF THEIR PAN CARD, CONF IRMATION OF THE DEPOSITOR AND THEIR ACKNOWLEDGEMENT OF RETURN OF INCOME. WHEN THE ASSESSEE HAS FURNISHED ALL THE MATERIAL FACTS RELEVANT THERETO, THE DISALLOWANCE OF SUCH CLAIM CANNOT AUTOMATICALLY LEAD TO THE CONCLUSION T HAT THERE WAS CONCEALMENT OF PARTICULARS OF HIS INCOME BY THE ASSESSEE OR FUR NISHING INACCURATE PARTICULARS THEREOF. WHAT IS TO BE SEEN IS WHETHER THE SAID CLAIM MADE BY THE ASSESSEE WAS BONA FIDE AND WHETHER ALL THE MATERIAL FACTS RELEVANT THERETO HAVE BEEN FURNISHED AND ONCE IT IS SO ESTABLISHED, THE ASSESSEE CANNOT BE ITA NO 2758/ AHD/2012 . A.Y. 2003- 04 5 HELD LIABLE FOR CONCEALMENT PENALTY UNDER S. 271(1) (C) OF THE ACT. IN THE PRESENT CASE SINCE ALL THE NECESSARY FACTS WERE FUR NISHED, WE ARE OF THE VIEW THAT SIMPLY BECAUSE THE ADDITION HAS BEEN MADE IT D OES NOT CALL FOR LEVY OF PENALTY UNDER S. 271(L)(C). WE THUS CANCEL THE PENA LTY LEVIED BY THE AO. THEREFORE, THIS GROUND OF ASSESSEE IS ALLOWED. 10. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN OPEN COURT ON 25 - 07 - 2014. SD/- SD/- (G.C.GUPTA) (ANIL CHATURVEDI) VICE PRESIDENT ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD