Shri Kantibhai Naranbhai Prajapati, Anand V. The Income Tax Officer, Ward-2, Anand

ITA 2880/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6042 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 30-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K DEV
• Keywords: Unexplained cash credit; Peak credit; Initiation of penalty proceedings
• Section: 143(3); 144

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD , , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.2880/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) SHRI KANTIBHAI NARANBHAI PRAJAPATI PROP. OF M/S.KHODIYAR TRANSPORT NEAR SUDARSHANPARK NH NO.8, VAGHASI ANAND 388 320 / VS. THE INCOME TAX OFFICER WARD-2 ANAND # ./ ./ PAN/GIR NO. : AEQPP 4858 P ( #% / APPELLANT ) .. ( &#% / RESPONDENT ) #%' / APPELLANT BY : SHRI SULABH PADSHAH, AR &#%(' / RESPONDENT BY : SHRI S.K. DEV, SR.DR )*(+ / DATE OF HEARING 12/01/2018 ,-./(+ / DATE OF PRONOUNCEMENT 15/02/2018 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTA NCE OF THE ASSESSEE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-IV, BARODA [CIT(A) IN SHORT] DATED 11/08/2014 ARISING IN THE ASSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 ITA NO.2880/AHD /2014 KANTIBHAI NARANBHAI PRAJAPATI VS.ITO ASST.YEAR 2009-10 - 2 - (HEREINAFTER REFERRED TO AS 'THE ACT') DATED 20/12 /2011 RELEVANT TO ASSESSMENT YEAR (AY) 2009-10. 2. IN ITS APPEAL, THE ASSESSEE HAS SOUGHT TO ASSAI L THE IMPOSITION OF PENALTY AMOUNTING TO RS.4,36,330/- UNDER S.271(1)(C ) ON THE ALLEGED UNEXPLAINED CASH DEPOSITS. 3. BRIEFLY STATED, THE ASSESSEE, AN INDIVIDUAL, FI LED ITS RETURN OF INCOME DECLARING TOTAL INCOME AT RS.4,28,000/-. TH E RETURN WAS SUBJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF SCRUTINY ASSESSMENT, IT WAS INTER-ALIA OBSERVED BY THE ASSESSING OFFICER (A O) THAT AS PER ANNUAL INFORMATION REPORT (AIR), ASSESSEE HAS MADE CERTAIN CASH DEPOSITS AGGREGATING TO RS.31,77,775/- IN SB ACCOUN T WITH ORIENTAL BANK OF COMMERCE. ON ACTUAL VERIFICATION OF THE BANK ST ATEMENT, IT WAS FOUND THAT THE CASH DEPOSIT WAS IN FACT RS.33,77,395/-. THE ASSESSEE MADE CERTAIN REPLIES TO JUSTIFY THE SOURCE OF CASH DEPOS IT. IT WAS INTER ALIA SUBMITTED THAT FROM THE SAID BANK ACCOUNT THERE WER E CASH WITHDRAWALS ALSO WHICH ACCOUNT FOR RE-DEPOSITS. SECONDLY, AS I NCOME HAS BEEN OFFERED UNDER S.44AE OF THE ACT, CASH DEPOSITS FROM TRANSPORTATION BUSINESS CANNOT BE SEPARATELY ASSESSED. IT WAS ALS O CONTENDED THAT THE ASSESSEE HAD SOME CASH BALANCE AT THE BEGINNING OF THE YEAR. THE AO HOWEVER FOUND SERIOUS INFIRMITIES IN THE EXPLANATIO N OFFERED BY THE ASSESSEE AND AFTER GIVING ALLOWANCES FOR THE CASH W ITHDRAWALS ETC., THE ITA NO.2880/AHD /2014 KANTIBHAI NARANBHAI PRAJAPATI VS.ITO ASST.YEAR 2009-10 - 3 - AO FOUND THAT THE ASSESSEE HAS FAILED TO PROVIDE EX PLANATION OR TO PROVE THE SOURCES OF CASH DEPOSITS TO THE EXTENT OF RS.25 ,37,395/-. THE AFORESAID AMOUNT OF UNEXPLAINED CASH CREDIT WAS ADD ED TO THE TOTAL INCOME OF THE ASSESSEE AS UNEXPLAINED INCOME. THE PENALTY PROCEEDINGS WERE ALSO SIMULTANEOUSLY INITIATED TOWARDS THE AFOR ESAID ADDITION UNDER S.271(1)(C) OF THE ACT. 4. THE QUANTUM ADDITIONS MADE IN THE ASSESSMENTS PROCEEDINGS WERE APPEALED BEFORE THE CIT(A). THE CIT(A) GRANTED PAR TIAL RELIEF AND ADMITTED THE CONTENTION OF THE ASSESSEE TOWARDS APP LYING PEAK CREDIT THEORY ON SUCH DEPOSITS. THE CIT(A) ACCORDINGLY B ROUGHT DOWN THE ADDITIONS TO RS.12,98,533/- IN PLACE OF RS.25,37,39 5/- BASED ON PEAK CREDIT THEORY. 5. THE AO IMPOSED PENALTY OF RS.4,36,330/- ON TH E ADDITION TOWARDS UNEXPLAINED CASH DEPOSITS SUSTAINED BY THE CIT(A) A T RS.12,98,533/-. 6. THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE SEEKING FROM PENALTY ON UNEXPLAINED CASH DEPOSITS SO DETERMINED. THE RELEVANT OPERATIVE PARAS OF THE CIT(A)S ORDER ARE REPRODUC ED HEREUNDER:- 6. DECISION: 6.1 THE FIRST GROUND OF APPEAL PERTAINS TO THE LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT ON THE GROUND THAT THE REASONS FOR LEVY OF PENALTY WHETHER FOR ITA NO.2880/AHD /2014 KANTIBHAI NARANBHAI PRAJAPATI VS.ITO ASST.YEAR 2009-10 - 4 - CONCEALMENT OF INCOME OR FILING INACCURATE PARTICUL ARS OF INCOME IS NOT PROVIDED IN THE NOTICE ISSUED BY THE ASSESSING OFFI CER. THE SAME GROUND WAS TAKEN BY THE APPELLANT BEFORE THE ASSESSING OFFICER ALSO WHO VIDE PARA 5 OF THE ORDER HAS DISPOSED OFF THE OBJECTION. THE ASSESSING OFFICER HAS RELIED UPON THE CLAUSE 1(B) INSERTED BY THE FINANCE ACT, 2008 IN SE CTION 271 (1) WHEREIN IT IS STATED THAT WHERE ANY AMOUNT IS ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR LOSS OF AN ASSESSEE IN ANY ORDER OF ASSES SMENT OR REASSESSMENT AND THE SAID ORDER CONTAINS A DIRECTION FOR INITIATION OF PENALTY PROCEEDINGS UNDER CLAUSE 'C' OF SUB SECTION 1, SUCH AN ORDER OF ASSES SMENT OR REASSESSMENT SHALL BE DEEMED TO BE CONSTRUED SATISFACTION OF THE ASSES SING OFFICER FOR INITIATION OF THE PENALTY PROCEEDINGS UNDER THE SAID CLAUSE V. TH US, AS PER LAW THE ASSESSING OFFICER WAS PERFECTLY JUSTIFIED IN LEVYIN G THE PENALTY BY ISSUING RELEVANT NOTICE FOR THE SAME. DURING THE APPELLANT PROCEEDINGS, THE AUTHORIZED REPRESENTATIVE OF THE APPELLANT MR. MANISH BAXI SUB MITTED THAT THE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. 282 ITR 642 HAS CLEARLY HELD THAT IN CASE THERE IS NO CLEAR CUT FIN DING WITH REGARD TO THE CONCEALMENT AND THE INACCURATE PARTICULARS, PENALTY COULD NOT BE SUSTAINED. I HAVE CONSIDERED THE DECISION OF THE HON'BLE GUJAR AT HIGH COURT RELIED UPON BY THE APPELLANT. IT IS NOTICED THAT IN THE AB OVE REFERRED CASE, THE ASSESSMENT WAS COMPLETED U/S. 144 OF THE ACT WHEREA S IN THE PRESENT CASE, THE ASSESSMENT IS COMPLETED U/S. 143(3) OF THE ACT. THU S, THE FACTS OBTAINABLE FROM CASE LAW RELIED UPON BY THE AUTHORIZED REPRESENTATI VE OF THE APPELLANT ARE CLEARLY DISTINGUISHABLE AB INITIO. IF ASSESSMENT PR OCEEDINGS ARE COMPLETED U/S. 144, THE ASSESSING OFFICER THOUGH LEGALLY EMPOWERED TO ISSUE NOTICE ON THE BASIS OF DISALLOWANCES / ADDITIONS MADE IN THE ORDE R, IT WOULD HAVE BEEN PREMATURE TO GO TO THE SPECIFIC WITH REGARD TO THE TWO LIGAMENTS OF THE PROVISION AS THE DETAILS WERE NOT AVAILABLE ON RECO RD DUE TO THE ASSESSMENT BEING FRAMED U/S. 144 OF THE ACT. THUS, THIS GROUND OF APPEAL TAKEN BY THE APPELLANT IS DISMISSED. 6.2. WITH REGARD TO THE SECOND GROUND OF APPEAL, T HE AUTHORIZED REPRESENTATIVE HAS ONLY PLACED RELIANCE ON THE VARI OUS CASE LAWS WHICH ARE AGAIN NOT RELEVANT TO THE FACTS OF THE CASE. IT IS A CASE WHERE THE ASSESSING OFFICER HAS MADE AN ADDITION OF RS. 25,60,088/- U/S . 69 OF THE ACT WHICH THE CIT(A) RESTRICTED TO RS.12,98,533/-. THE CIT(A) VID E ORDER DATED 15/10/2012 WORKED OUT THE PEAK CREDIT IN THE BANK ACCOUNT OF T HE APPELLANT WHEREIN THE ITA NO.2880/AHD /2014 KANTIBHAI NARANBHAI PRAJAPATI VS.ITO ASST.YEAR 2009-10 - 5 - MONEY IN QUESTION WAS DEPOSITED AND WITHDRAWN. IN F ACT, THE APPELLANT HAS GIVEN THE WORKING OF PEAK CREDIT HIMSELF AND ON THE BASIS OF THIS THAT THE ADDITION WAS RESTRICTED TO RS. 12,98,533/-. IN THIS REGARD IT IS IMPORTANT TO RELY UPON THE DECISION OF DELHI HIGH COURT IN THE CASE O F ZOOM COMMUNICATION PVT. LTD. 327 ITR 510 IN THE ABOVE REFERRED CASE, W HICH HAS DISTINGUISHED THE CASE OF RELIANCE PETRO PRODUCTS LTD 322 ITR 158, (R ELIED UPON BY THE AUTHORIZED REPRESENTATIVE). THE HON'BLE COURT HAS H ELD THAT IF THE APPELLANT MAKES A CLAIM WHICH IS NOT ONLY INCORRECT IN LAW BU T IS ALSO WHOLLY WITHOUT ANY BASIS AND THE EXPLANATION FURNISHED BY HIM FOR MAKI NG SUCH A CLAIM IS NOT FOUND TO BE BONAFIDE, IT WOULD BE DIFFICULT TO SAY THAT THE ASSESSEE WOULD STILL NOT BE LIABLE TO PENALTY U/S. 271(1)(C) OF THE ACT. IT IS A CASE WHERE NO TWO VIEWS WITH REGARD TO THE ADDITION SUSTAINED BY THE CIT(A) ARE POSSIBLE AS THE ADDITION SUSTAINED WAS IN THE LIGHT OF THE DEBIT AN D CREDIT IN THE BANK ACCOUNT WHICH WAS NOT DISCLOSED IN THE BOOKS AND THE CIT(A) HAS SUSTAINED ONLY THAT ADDITION WHICH IS THE MOST REASONABLE ONE IN AS MUC H AS IT IS DRAWN FROM THE THEORY OF PEAK CREDIT. ACCORDINGLY, THE PENALTY U/S . 271(L)(C) OF THE ACT IS CLEARLY LEVIABLE FOR FURNISHING INACCURATE PARTICUL ARS AND THUS, CONCEALING THE INCOME. THIS GROUND OF APPEAL IS ALSO DISMISSED. 7. IN VIEW OF THE DISCUSSIONS ABOVE THE APPEAL OF THE APPELLANT IS DISMISSED. 7. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE TRIBUNAL. 8. WE STRAIGHT AWAY FIND THAT THE AO VIDE PENALTY O RDER DATED 25/11/2013 UNDER S.271(1)(C) OF THE ACT IMPOSED P ENALTY ON ADDITIONS MADE ALLEGING CONCEALMENT OF PARTICULARS OF INC OME. HOWEVER, THE CIT(A), ON THE OTHER HAND, HAS CONFIRMED THE PENALT Y ON THE GROUND OF FURNISHING INACCURATE PARTICULARS OF INCOME. APP ARENTLY, THE BASIS AND FOUNDATION FOR IMPOSITION OF PENALTY HAS BEEN ALT ERED BY THE CIT(A). IT IS THUS OSTENSIBLE THAT FINDINGS RECORDED BY THE CIT(A) SHOW THAT PENALTY HAS BEEN CONFIRMED ON A DIFFERENT PREMISE A ND THE ORIGINAL ITA NO.2880/AHD /2014 KANTIBHAI NARANBHAI PRAJAPATI VS.ITO ASST.YEAR 2009-10 - 6 - SATISFACTION FOR IMPOSITION OF PENALTY HAS BEEN ALT ERED OR MODIFIED BY THE APPELLATE AUTHORITY. IN SUCH CIRCUMSTANCES, WHERE THE ORIGINAL BASIS OF IMPOSITION OF PENALTY HAS BEEN ALTERED IN A SIGNIFI CANT WAY BY THE FIRST APPELLATE AUTHORITY, THE VERY BASIS FOR SUSTAINING THE PENALTY IS RENDERED NON-EXISTENT. NEEDLESS TO SAY, THE IMPOSITION OF P ENALTY IS SOLELY DEPENDENT UPON THE SATISFACTION OF THE AO [UNLESS INITIATED BY CIT(A)] AND NON-ELSE. THE GROUND FOR ACTION BY AO WAS ALLE GATION OF CONCEALMENT. THIS GROUND HAS BEEN SUBSTITUTED BY CIT(A) TO FURNISHING INACCURATE PARTICULARS OF INCOME WHILE CONFIRMING THE PENALTY QUANTIFIED BY THE AO. THUS, IN THE ABSENCE OF CONTINUITY IN THE FINDINGS OF THE AO AND THE CIT(A), THE ORDER OF THE PENALTY PASSED BY THE AO IS LIABLE TO BE STRUCK DOWN ON THIS GROUND ALONE . FOR SUCH A VIEW, WE USEFULLY REFER TO THE DECISION OF THE HONBLE GUJAR AT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING COMPANY VS. CIT (2 006) 282 ITR 642 (GUJ.) AND CIT VS. MANU ENGINEERING WORKS (1980) 12 2 ITR 306 (GUJ.). SIMILAR VIEW HAS BEEN TAKEN BY THE COORDINATE BENCH OF THE TRIBUNAL IN GIAN CHAND BATIA VS. DCIT 61 ITD 24(ALL.). THEREFO RE, WHERE CONCURRENT I.T.AUTHORITIES ARE NOT SURE ABOUT NATUR E OF DEFAULT, THE PENAL ACTION UNDER S.271(1)(C) OF THE ACT IS NOT SUSTAINA BLE IN LAW. 9. CONSEQUENTLY, THE PENALTY ORDER OF THE AO DATED 25/11/2013 IS SET ASIDE AND PENALTY IMPOSED THEREBY IS CANCELLED. ITA NO.2880/AHD /2014 KANTIBHAI NARANBHAI PRAJAPATI VS.ITO ASST.YEAR 2009-10 - 7 - 10. SINCE THE IMPOSITION OF PENALTY STANDS DELETED ON THE AFORESAID LEGAL GROUND, WE ARE NOT INCLINED TO DEAL WITH OTHE R ASPECTS OF THE ARGUMENTS RAISED ON BEHALF OF THE ASSESSEE FOR DEL ETION OF PENALTY. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. THIS ORDER PRONOUNCED IN OPEN COURT ON 15/ 02/2018 SD/- SD/- () ( ) (RAJPAL YADAV) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 15/ 02 /2018 3..),.)../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #% / THE APPELLANT 2. &#% / THE RESPONDENT. 3. 456+ 7+ / CONCERNED CIT 4. 7+ ( ) / THE CIT(A)-IV, AHMEDABAD 5. 89:+)56 , 56/ , 4 / DR, ITAT, AHMEDABAD 6. :<* / GUARD FILE. / BY ORDER, &8++ //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD