Smt. Varsha Rohit Ravani, RAJKOT-GUJARAT V. The Income Tax Officer, Ward-5(2), RAJKOT-GUJARAT

ITA 302/RJT/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0228 (ITAT-RAJKOT)
• Duration Of Justice: 3 year(s) 1 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 12-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MJ RANPURA
• Keywords: Corroborative evidences
• Section: 271(1)(c); 5(2); 201

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , RAJKOT BENCH, RAJKOT BEFORE SHRI RAJPAL YADAV , HON BLE JUDICIAL MEMBER AND SHRI WASEEM AHMED HON BLE ACCOUNTANT MEMBER ITA NO. 302 / RJT /201 6 / ASSTT. YEAR: 201 1 - 1 2 SMT. VARSHA ROHIT RAVANI SARDA , 12 - NUTAN NAGAR KALAWAD ROAD RAJKOT. VS . ITO, WARD - 5(2) RAJKOT. ( APPLICANT ) ( RESPONENT ) ASSESSEE BY : SHRI M.J. RANPURA, AR REVENUE BY : SHRI ANIL KUMAR DAS, DR / DATE OF HEARING : 1 9 / 0 9 / 201 9 / DATE OF PRONOUNCEMENT: 19 / 0 9 /201 9 / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT( A) - 3, RAJKOT DATED 28.6.2016 2. SOLITARY GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE PENALTY OF RS.1,44,488/ - LEVIED UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED HER RETURN OF INCOME ON 4.2.2012 DECLARING TOTAL INCOME AT RS.7,26,800/ - . ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE AO THAT THE ASSESSEE HAS SOLD PROPERTY FOR RS.55 LAKH S AND DERIVED SHOR T TERM CAPITAL GAIN ON THAT TRANSACTION. THE ITA NO. 302 /RJT/20 16 2 ASSESSEE ALLEGED TO HAVE PURCHASED THIS PROPERTY FOR A SUM OF RS.12,28,919/ - AND FURTHER CLAIMED DEDUCTION OF RS.30,28,000/ - ON DEVELOPMENT AND IMPROVEMENT. THE AO PARTLY DISALLOWED THE EXPENDITURE CLAIMED BY THE ASSESSEE. HE INITIATED PENALTY PROCEEDINGS. 4 . IT EMERGES OUT FROM THE RE C ORD THAT THE EXPENDITURE OF RS.3,81,000/ - WAS DISALLOWED OUT OF THE CLAIM MADE BY THE ASSESSEE , AND ON THIS AMOUNT A PENALTY HAS BEEN IMPOSED BY THE AO. 5 . APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 6 . WE HAVE HEARD BOTH THE SIDES AND GONE THROUGH THE RECORD. SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961 HAS DIRECT BEARING ON THE CONTROVERSY. THEREFORE, IT IS PERTINENT TO TAKE NOTE OF THE SECTION. '271. FAILURE TO FURNISH RETURNS, COMPLY WITH NOTICES, CONCEALMENT OF INCOME, ETC. (1) THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT IN THE COURSE OF ANY PROCEEDINGS UNDER THIS ACT, IS SATISFIED THAT ANY PERSON (A) AND (B)** ** ** (C) HAS CONCEALED THE PARTICULARS OF HIS INCOME OR FURNISHED INACCURATE PARTICU LARS OF SUCH INCOME. HE MAY DIRECT THAT SUCH PERSON SHALL PAY BY WAY OF PENALTY. (I)AND (INCOME - TAX OFFICER,)** ** ** (III) IN THE CASES REFERRED TO IN CLAUSE (C) OR CLAUSE (D), IN ADDITION TO TAX, IF ANY, PAYABLE BY HIM, A SUM WHICH SHALL NOT BE LESS THAN, BUT WHICH SHALL NOT EXCEED THREE TIMES, THE AMOUNT OF TAX SOUGHT TO BE EVADED BY REASON OF THE CONCEALMENT OF PARTICULARS OF HIS INCOME OR FRINGE BENEFIT THE FURNISHING OF INACCURATE PARTICULARS OF SUCH INCOME OR FRINGE BENEFITS: ITA NO. 302 /RJT/20 16 3 EXPLANATION 1 - WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL INCOME OF ANY PERSON UNDER THIS ACT, (A) SUCH PERSON FAILS TO OFFER AN EXPLANATION OR OFFERS AN EXPLANATION WHICH IS FOUND BY THE ASSESSING OFFICER OR THE COMMISSIONER (APPEALS) OR THE CIT TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO P ROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF HIS TOTAL INCOME HAVE BEEN DISCLOSED BY HIM, THEN, THE AMOUNT ADDED OR DISALLOWED IN COMPUTING THE TOTAL INCOME OR SUCH PERSON AS A RESUL T THEREOF SHALL, FOR THE PURPOSES OF CLAUSE (C) OF THIS SUB - SECTION, BE DEEMED TO REPRESENT THE INCOME IN RESPECT OF WHICH PARTICULARS HAVE BEEN CONCEALED. 7 . A BARE PERUSAL OF THIS SECTION WOULD REVEAL THAT FOR VISITING ANY ASSESSEE WITH THE PENALTY, T HE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) DURING THE COURSE OF ANY PROCEEDINGS BEFORE THEM SHOULD BE SATISFIED, THAT THE ASSESSEE HAS; (I) CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME. AS FAR AS THE QUANTIFICATION OF THE PENALT Y IS CONCERNED, THE PENALTY IMPOSED UNDER THIS SECTION CAN RANGE IN BETWEEN 100% TO 300% OF THE TAX SOUGHT TO BE EVADED BY THE ASSESSEE, AS A RESULT OF SUCH CONCEALMENT OF INCOME OR FURNISHING INACCURATE PARTICULARS. THE OTHER MOST IMPORTANT FEATURES OF TH IS SECTION IS DEEMING PROVISIONS REGARDING CONCEALMENT OF INCOME. THE SECTION NOT ONLY COVERED THE SITUATION IN WHICH THE ASSESSEE HAS CONCEALED THE INCOME OR FURNISHED INACCURATE PARTICULARS, IN CERTAIN SITUATION, EVEN WITHOUT THERE BEING ANYTHING TO INDI CATE SO, STATUTORY DEEMING FICTION FOR CONCEALMENT OF INCOME COMES INTO PLAY. THIS DEEMING FICTION, BY WAY OF EXPLANATION I TO SECTION 271(1)(C) POSTULATES TWO SITUATIONS; (A) FIRST WHETHER IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTAL I NCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE FAILS TO OFFER AN EXPLANATION OR THE EXPLANATION OFFERED BY THE ASSESSEE IS FOUND TO BE FALSE BY THE ASSESSING OFFICER OR LEARNED ITA NO. 302 /RJT/20 16 4 CIT(APPEAL); AND, (B) WHERE IN RESPECT OF ANY FACT, MATERIAL TO THE COMPUT ATION OF TOTAL INCOME UNDER THE PROVISIONS OF THE ACT, THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE THE EXPLANATION AND THE ASSESSEE FAILS, TO PROVE THAT SUCH EXPLANATION IS BONA FIDE AND THAT THE ASSESSEE HAD DISCLOSED ALL THE FACTS RELATING TO THE SAME AND M ATERIAL TO THE COMPUTATION OF THE TOTAL INCOME. UNDER FIRST SITUATION, THE DEEMING FICTION WOULD COME TO PLAY IF THE ASSESSEE FAILED TO GIVE ANY EXPLANATION WITH RESPECT TO ANY FACT MATERIAL TO THE COMPUTATION OF TOTAL INCOME OR BY ACTION OF THE ASSESSING OFFICER OR THE LEARNED CIT(APPEALS) BY GIVING A CATEGORICAL FINDING TO THE EFFECT THAT EXPLANATION GIVEN BY THE ASSESSEE IS FALSE. IN THE SECOND SITUATION, THE DEEMING FICTION WOULD COME TO PLAY BY THE FAILURE OF THE ASSESSEE TO SUBSTANTIATE HIS EXPLANATIO N IN RESPECT OF ANY FACT MATERIAL TO THE COMPUTA TION OF TOTAL INCOME AND IN ADDITION TO THIS THE ASSESSEE IS NOT ABLE TO PROVE THAT SUCH EXPLANATION WAS GIVEN BONA FIDE AND ALL THE FACTS RELATING TO THE SAME AND MATERIAL TO THE COMPUTATION OF THE TOTAL IN COME HAVE BEEN DISCLOSED BY THE ASSESSEE. THESE TWO SITUATIONS PROVIDED IN EXPLANATION 1 APPENDED TO SECTION 271(1)(C) MAKES IT CLEAR THAT THAT WHEN THIS DEEMING FICTION COMES INTO PLAY IN THE ABOVE TWO SITUATIONS THEN THE RELATED ADDITION OR DISALLOWANCE IN COMPUTING THE TOTAL INCOME OF THE ASSESSEE FOR THE PURPOSE OF SECTION 271(1)(C) WOULD BE DEEMED TO BE REPRESENTING THE INCOME IN RESPECT OF WHICH INACCURATE PARTICU LARS HAVE BEEN FURNISHED. 8 . I N THE LIGHT OF THE ABOVE, IF WE EXAMINE THE FACTS OF THE PRESENT CASE , THEN IT WOULD REVEAL THAT THE ASSESSEE HAS CLAIMED EXPENDITURE TOWARDS DEVELOPMENT AND IMPROVEMENT OF RS.30,28,000/ - . OUT OF THAT, EXPENSES TO THE EXTEN T OF RS.3,81,000/ - WAS DISALLOWED. PROBABLY, THE ASSESSEE MIGHT NOT ABLE TO P RODUCE SUPPORTING EVIDENCE TO THIS EXPENDITURE. BUT IT CANNOT BE CONSTRUED THAT EXPLANATION OF THE ASSESSEE WAS FALSE. SHE DOES NOT DESERVE TO ITA NO. 302 /RJT/20 16 5 BE VISITED WITH PENALTY ON SUCH ESTIMATED DISALLOWANCE . HENCE, WE ALLOW THE APPEAL OF THE ASSESSEE AND CANCEL THE IMPUGNED PENALTY. 9 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 9 T H SEPTEMBER, 201 9 AT RAJKOT . S D / - S D / - (WASEEM AHMED ) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER