Shri Govindbhai K. Vadher, RAJKOT-GUJARAT V. The Asstt. Commr. Income Tax, Ward-2(1)(2), RAJKOT-GUJARAT

ITA 297/RJT/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2899 (ITAT-RAJKOT)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 13-08-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUHAS MISTRY
• Assessee Lawyers: RD LALCHANDANI
• Section: 271(1)(c); 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT BEFORE SHRI WASEEM AHMED , ACCOUNTANT MEMBER AND MS MADHUMITA ROY , JUDICIAL MEMBER ./ I.T. A. NO. 297 /RJT/2018 ( / ASSESSMENT YEAR 2007 - 08 ) SHRI GOVINDBHAI K.VADHER , C/O. M/S.R.K. SILVER, 3 - CHAMPAK NAGAR, SANT KABIR RAOD , RAJKOT . / VS. I.T.O. , WARD - 2 ( 1 ) (2) , RAJKOT . ./ ./ PAN/GIR NO. : A BJPV1005E ( / APPELLANT ) ( / RESPONDENT ) / APPELLANT BY : SHRI R.D. LALCHANDANI , A.R / RESPONDENT BY : SHRI SUH A S MISTRY , SR . D . R. / DATE OF HEARING 27 /02 /20 20 / DATE OF PRONOUNCEMENT 28 / 0 2 /20 20 / O R D E R PER BENCH : THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMIS SIONER OF INCOME TAX (APPEALS) - 2 , RAJKOT [ LD. CIT(A) IN SHORT] DATED 02/07 /2018 ARISING IN THE MATTER OF PENALTY ORDER PASSED UNDER S. 271(1)(C) OF THE INCOME TAX ACT, 1961 (HEREINAFTER R EFERRED TO AS 'THE ACT') DATED 30/01/2018 RELEVANT TO THE ASSESSMENT YEAR S (A . Y . ) 2007 - 08 . 2. THE ASSESSEE IN THIS APPEAL HAS CHALLENGED THE PENALTY LEVIED BY THE LEARNED CIT (A) FOR RS. 1,06,481/ - UNDER SECTION 271(1)(C) OF THE ACT. ITA NO. 297 /RJT / 20 1 8 A.Y.20 07 - 08 - 2 - 3. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE PRESENT CASE IS AN INDIVIDUAL AND PARTNER IN A FIRM NAMELY M/S R.K. SILVER. THE ASSESSEE IN THE YEAR UNDER CONSIDERATION HAS SOLD THE PROPERTY GIVING RISE TO THE LONG - TERM CAPITAL GAIN OF RS. 5,33,505/ - WHICH WAS NOT OFFERED BY HIM IN THE INCOME TAX RETURN. ACCORDINGLY THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3 ) READ WITH SECTION 147 OF THE ACT AFTER MAKING THE ADDITION TO THE TOTAL INCOME OF THE ASSESSEE VIDE ORDER DATED 30/09/2014. THE AO SIMULTANEOUSLY ISSUED NOTICES UNDER SECTION 274/271(1)(C) OF THE ACT FOR INITIATING THE PENALTY ON ACCOUNT OF FURNISHING IN ACCURATE PARTICULARS OF INCOME. THE AO SUBSEQUENTLY IN HIS ORDER DATED 30/01/2018 LEVIED THE PENALTY OF RS. 1,06,481/ - BEING 100% OF THE AMOUNT OF TAX SOUGHT TO BE EVADED. 4. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD. CIT (A) WHO CONFIRMED THE ORD ER OF THE AO. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT (A) THE ASSESSEE IS IN APPEAL BEFORE US. 5. THE LEARNED AR BEFORE US SUBMITTED THAT THE PROPERTY IN DISPUTE WAS TRANSFERRED TO THE 6 FAMILY MEMBERS BEING THE LEGAL HEIRS ON THE DEMISE OF THE FATHER. HOWEVER, THE ENTIRE ADDITION OF THE CAPITAL GAIN WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. AS SUCH, THE ASSESSEE FURTHER CLAIMED THAT ALL THE FAMILY MEMBERS HAD FOREGONE THE OTHER RIGHTS IN THE PROPERTY FOR OBTAINING THE HEIR SHIP CERTIFICATE IN HIS NAME. AS SUCH, THE ENTIRE AMOUNT OF CAPITAL GAIN WAS TO BE TAXED IN THE HANDS OF ALL THE 6 MEMBERS. THUS THE ASSESSEE CONTENDED THAT THERE CANNOT BE ANY PENALTY IN HIS HANDS MERELY ON THE REASONING THAT THE QUANTUM ADDITION HAS BEEN CONFIRMED IN HIS HANDS BY THE ITAT IN ITA NO. 429/RJT/2016 DATED 20 TH JUNE 2017. ITA NO. 297 /RJT / 20 1 8 A.Y.20 07 - 08 - 3 - 6. ON THE OTHER HAND, T HE LEARNED DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AO. 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. IT IS SETTLED LA W THAT THE PENALTY PROCEEDINGS ARE DISTINCT FROM THE ASSESSMENT PROCEEDINGS. THEREFORE, THE ADDITION MADE DURING THE ASSESSMENT PROCEEDINGS DOES NOT AUTHORIZE THE AO IPSO FACTO TO LEVY THE PENALTY UNDER SECTION 271(1)(C) OF THE ACT. AS SUCH THE AO IS UNDER THE OBLIGATION TO CARRY OUT THE NECESSARY VERIFICATION BEFORE REACHING TO THE CONCLUSION THAT THE ASSESSEE HAS FURNISHED ANY INACCURATE PARTICULAR OF INCOME OR CONCEALED THE PARTICULARS OF INCOME. IN THE INSTANT CASE, THE PENALTY WAS INITIATED ON ACCOUNT OF THE ENTIRE ADDITION MADE ON ACCOUNT OF CAPITAL GAIN ON THE SALE OF THE PROPERTY BELONGING TO THE FATHER HAVING 6 LEGAL HAIRS. THE AO WAS AWARE OF THE ADDRESSES AND OTHER DETAILS OF THE OTHER LEGAL HEIRS. BUT THE AO WITHOUT VERIFYING THE GENUINENESS OF T HE CONTENTION OF THE ASSESSEE HAS LEVIED THE PENALTY MERELY ON THE GROUND THAT THE ENTIRE ADDITION ON ACCOUNT OF CAPITAL GAIN HAS BEEN MADE IN THE HANDS OF THE ASSESSEE IN THE QUANTUM PROCEEDINGS. 7.1 AS SUCH THE PENALTY PROCEEDINGS BEING DISTINCT AND SE PARATE FROM THE ASSESSMENT PROCEEDINGS, THE AO IS UNDER THE OBLIGATION TO CARRY OUT THE FRESH VERIFICATION AS HELD BY THE HON BLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES REPORTED 249 ITR 125. THE RELEVANT EXTRACT OF THE JUDGMENT IS EXTRACTED BE LOW: IN THE INSTANT CASE, THE CASH CREDITS WERE NOT SATISFACTORILY EXPLAINED BY EVIDENCE AND DOCUMENTS. THE PARTIES WHO HAD ADVANCED THE ALLEGED TEMPORARY LOANS WERE NEITHER DISCLOSED WITH THEIR PARTICULARS NOR ANY SUPPORTING DOCUMENTS WERE ON RECORD. ON LY TWO ENTRIES WERE EXPLAINED. THE ACCOUNTANT WHO HAD ARRANGED THE LOAN WAS NOT PRODUCED STATING THAT HE HAD LEFT THE SERVICE AND RELATIONS WITH HIM WERE STRAINED. ON THIS STATE OF ACCOUNTS AND EVIDENCE IN THE QUANTUM PROCEEDINGS, THE DEPARTMENT WAS JUSTIF IED IN TREATING THE CASH CREDITS AS INCOME OF THE ASSESSEE BUT MERELY ON THAT BASIS BY RECOURSE TO EXPLANATION 1, PENALTY UNDER SECTION 271(1)(C) COULD NOT HAVE BEEN IMPOSED WITHOUT THE DEPARTMENT MAKING ANY OTHER EFFORT TO COME TO A CONCLUSION THAT THE CA SH CREDITS COULD IN NO CIRCUMSTANCES HAD BEEN AMOUNTS RECEIVED AS TEMPORARY LOANS FROM VARIOUS PARTIES. THE ASSESSEE IN THE QUANTUM PROCEEDINGS FAILED TO PRODUCE THE ACCOUNTANT BUT THE DEPARTMENT ALSO IN PENALTY PROCEEDINGS MADE NO EFFORT TO SUMMON HIM. AP PLYING THE TEST (II) DISCUSSED ABOVE, THEREFORE, IT WAS A CASE WHERE THERE WAS NO CIRCUMSTANCE TO LEAD TO A REASONABLE ITA NO. 297 /RJT / 20 1 8 A.Y.20 07 - 08 - 4 - AND POSITIVE INFERENCE THAT THE ASSESSEE S CASE, THAT THE CASH CREDITS WERE ARRANGED AS TEMPORARY LOANS, WAS FALSE. THE FACTS AND CIRCUMS TANCES WERE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT IT COULD HAVE BEEN SUNDRY LOANS IN SMALL AMOUNTS OBTAINED FROM DIFFERENT PARTIES. THEREFORE, EVEN TAKING RECOURSE TO EXPLANATION 1, THE CIRCUMSTANCE OR STATE OF EVIDENCE ON WHICH THE CASH CREDITS WERE TREATED AS INCOME, COULD NOT BY THEMSELVES JUSTIFY IMPOSITION OF PENALTY WITHOUT ANYTHING MORE ON RECORD PRODUCED BY THE ASSESSEE OR THE DEPARTMENT. IT WAS, ACCORDINGLY, HELD THAT THE TRIBUNAL WAS NOT JUSTIFIED IN LAW IN CONFIRMING THE PENALTY LEVIED UNDE R SECTION 271(1)(C). IN VIEW OF THE ABOVE, WE HOLD THAT THE AO CANNOT JUST LEVY THE PENALTY MERELY ON THE GROUND THAT THE ADDITIONS WERE MADE DURING THE QUANTUM PROCEEDINGS. AS SUCH THE AO HAS TO CARRY OUT NECESSARY VERIFICATION BY ISSUING THE NOTICE TO THE OTHER LEGAL HAIRS BEFORE LEVYING THE PENALTY AS CONTENDED BY THE ASSESSEE. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT NO PENALTY CAN BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT FOR THE REASONS AS STATED ABOVE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 28 / 02 /20 20 - SD - - SD - ( MADHUMITA ROY ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER RAJKOT, DATED 28 /02 /20 20 MANISH