Shri S.D. Jadeja, JAMNAGAR V. The Income Tax Officer, Ward-3(2), JAMNAGAR

ITA 345/RJT/2012

• Counselvise Citation: 34524914 RSA 2012
• Duration Of Justice: 1 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 03-01-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 29-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR J B JHAVERI DR
• Keywords: Unexplained cash credit; Corroborative evidences
• Section: 68; 144

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBULAL; RAJKOT BENCH, RAJKOT BEFORE SHRI T. K. SHARMA, JM AND SHRI B. R. JAIN, A M ITA NO. 345/RJT/2012 / ASSESSMENT YEAR : 2005-06 SHRI S.D. JADEJA, MUFF & QUINN VILLAS, SARUSECTION ROAD, JAMNAGAR PAN : AAYPJ 3666 M ( / APPELLANT) THE INCOME-TAX OFFICER WARD 3 (2), JAMNAGAR / RESPONDENT ! ' #$ / ASSESSEE BY SHRI VIMAL DESAI, CA % ! ' #$ / REVENUE BY DR. J. B. JHAVERI, DR # & ' ! ( / DATE OF HEARING 03.01.2014 ) ! ( / DATE OF PRONOUNCEMENT 09.01.2014 / ORDER .. , / T. K. SHARMA, J. M.: THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER DATED 24.04.2012 OF LD. CIT(A) , JAMNAGAR CONFIRMING THE PENALTY ON ADDITION OF RS.5,17,000/- U/S 271(1)(C) OF THE INCO ME-TAX ACT 1961 ON ACCOUNT OF UNEXPLAINED BANK DEPOSITS. 2. THE FACTS, IN BRIEF, ARE THAT THE ASSESSEE IS AN INDIVIDUAL AND EX-RULER OF JAMNAGAR. HE DERIVES INCOME FROM AGRICULTURAL ACTI VITIES AND IN THE ABSENCE OF ANY TAXABLE INCOME, THE ASSESSEE HAS NOT FILED THE RETU RN OF INCOME FOR THE ASSESSMENT YEAR UNDER APPEAL. THE ASSESSING OFFICER FRAMED AS SESSMENT U/S 144 OF THE INCOME- TAX ACT ON 26.12.2007 DETERMINING THE TOTAL INCOME OF THE ASSESSEE AT RS.2,96,08,189/-. THE ASSESSEE FILED AN APPEAL AGAINST THE SAID ASSES SMENT ORDER WHICH WAS PARTLY ALLOWED BY THE LD. CIT(A) AND ITAT. AFTER GIVING TH E APPEAL EFFECT, THE FOLLOWING THREE ADDITIONS WERE CONFIRMED. A. AMOUNTS CREDITED IN BANK ACCOUNT U/S 68 & 69A : RS.5,17,000/- B. AIR TRAVELLING EXPENSES : RS. 50,000/- C. HOUSEHOLD EXPENSES : RS.3,00,000/- SUBSEQUENTLY, THE ASSESSING OFFICER LEVIED PENALTY OF RS.2,62,660/- U/S 271(1)(C) OF THE INCOME-TAX ACT ON THE FINAL INCOME ASSESSED AT RS.8,67,000/-. ON APPEAL, IN THE IMPUGNED ORDER, LD. CIT(A) DELETED THE PENALTY ON A DDITION OF TRAVEL EXPENSES OF 345-RJT-2012 - SHRI S.D. JADEJA 2 RS.50,000/- AND HOUSEHOLD EXPENSES OF RS.3,00,000/- , BUT CONFIRMED THE PENALTY ON ADDITION OF RS.5,17,000/- ON ACCOUNT OF DEPOSIT IN BANK ACCOUNTS OF THE ASSESSEE. AGGRIEVED WITH THE ORDER OF LD. CIT(A), THE ASSESSE E IS IN APPEAL BEFORE THIS TRIBUNAL. 3. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI VIMAL DESAI, CA, APPEARED AND MADE THE FOLLOWING SUBMISSIONS:- I. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. ASKED THE ASSESSEE TO EXPLAIN DEPOSITS IN HIS VARIOUS BANK ACCOUNTS. T HE ASSESSEE EXPLAINED THE SOURCE OF ALL THE DEPOSITS IN HIS VARIOUS BANK ACCO UNTS. HOWEVER, IN RESPECT OF FEW DEPOSIT ENTRIES TOTALING RS.5,17,000/- THE A SSESSEE COULD NOT FURNISH THE EVIDENCE; THEREFORE, THE ASSESSING OFFICER BROU GHT TO TAX THE UNEXPLAINED DEPOSITS U/S 68 & 69A OF THE INCOME-TAX ACT, 1961. II. THE ASSESSEE EXPLAINED THAT THE AFORESAID DEPOS ITS ENTRIES REPRESENT INTERNAL TRANSFER OF FUNDS FROM HIS ONE BANK ACCOUNT TO ANOT HER. SOURCE OF SUCH DEPOSITS WAS EXPLAINED BY THE ASSESSEE BUT THE SAME COULD NOT BE SUBSTANTIATED WITH DOCUMENTARY EVIDENCE FOR THE REA SON THAT THE ASSESSEE WAS NOT IN POSSESSION OF SUPPORTING RECORDS THEREOF AND ALSO DUE TO OTHER REASONS BEYOND HIS CONTROL. III. THE LD. COUNSEL OF THE ASSESSEE POINTED OUT TH AT ON THE BASIS OF ABOVE CIRCUMSTANCES THE ASSESSING OFFICER AT THE BEST CAN MAKE ADDITION OF SUCH UNPROVED ENTRIES IN ABSENCE OF ANY SUPPORTING DOCUM ENTARY EVIDENCE FURNISHED BY THE ASSESSEE BUT ON SUCH ADDITION PEN ALTY U/S 271(1)(C) IS NOT LEVIABLE AS THE ASSESSEE EXPLAINED ALL THE DEPOSIT ENTRIES OUT OF WHICH SOME HAVE REMAINED UNPROVED AND SUCH UNPROVED ENTRIES HA VE ALSO NOT BEEN DISPROVED. IV. THE ASSESSEE HAS EXPLAINED ALMOST 95% OF TOTAL DEPOSITS OF RS.79,50,000/- IN HIS VARIOUS BANK ACCOUNTS WITH SUPPORTING EVIDEN CE; THEREFORE, IT WILL BE IMPROPER TO PRESUME THAT THE ASSESSEE HAS INTENDED TO CONCEAL HIS INCOME BY NOT EXPLAINING REMAINING 5% AMOUNTING TO RS.5,17 ,000/-. IN ANY CASE, IT IS NOT POSITIVELY PROVED DURING THE COURSE OF ASSESSME NT AS WELL AS THE APPELLANT PROCEEDINGS THAT THE ALLEGED UNEXPLAINED DEPOSITS REPRESENT ASSESSEES INCOME AND THEREFORE, THE SAME CANNOT BE SUBJECTED TO CONCEALMENT PENALTY U/S 271(1)(C). V. THAT THE FACTS NARRATED (SUPRA), NOWHERE SUGGEST THAT THERE IS ANY CONSCIOUS AND WILLFUL DEFAULT OR ATTEMPT ON THE PART OF THE A SSESSEE WITH ANY MALAFIDE INTENTION TO EVADE ANY REVENUE. AFTER NARRATING AFORESAID FACTS, THE LD. COUNSEL OF THE ASSESSEE TOOK US THROUGH THE ORDER OF THE TRIBUNAL IN QUANTUM APPEAL IN ITA NO.504/RJT/2008 DATED 03.07.2009, WHEREIN IN PARAGRAPH 15, THE TRIBUNAL CONFIRMED THE ADDITION OF RS.5,17,000/- IN RESPECT OF CREDIT ENTRIES IN THE BANK ACCOUNTS FOR NON-PROD UCTION OF SUPPORTING EVIDENCES. THE LD. COUNSEL OF THE ASSESSEE ALSO RELIED UPON THE DE CISION OF THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES V. CIT, REPO RTED IN [2001] 114 TAXMAN 203 (GUJ); 345-RJT-2012 - SHRI S.D. JADEJA 3 WHEREIN WHILE CANCELLING THE PENALTY U/S 271(1)(C) IN RESPECT OF CASH CREDIT U/S 68, THE HONBLE HIGH COURT HELD AS UNDER:- THE PROVISIONS OF SECTION 68 PERMITTING THE ASSESS ING OFFICER TO TREAT UNEXPLAINED CASH CREDIT AS INCOME ARE ENABLING PROV ISIONS FOR MAKING CERTAIN ADDITIONS, WHERE THERE IS FAILURE BY THE ASSESSEE T O GIVE AN EXPLANATION OR WHERE THE EXPLANATION IS NOT TO THE SATISFACTION OF THE A SSESSING OFFICER. HOWEVER, THE ADDITION MADE ON THIS COUNT WOULD NOT AUTOMATICALLY JUSTIFY IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) BY RECOURSE ONLY TO EXPLANA TION 1 BELOW SECTION 271(1)(C). IN ORDER TO JUSTIFY THE LEVY OF PENALTY, TWO FACTOR S MUST CO-EXIST, (I) THERE MUST BE SOME MATERIAL OR CIRCUMSTANCES LEADING TO THE REASO NABLE CONCLUSION THAT THE AMOUNT DOES REPRESENT THE ASSESSEE'S INCOME. IT IS NOT ENOUGH FOR THE PURPOSE OF PENALTY THAT THE AMOUNT HAS BEEN ASSESSED AS INC OME AND (II) THE CIRCUMSTANCES MUST SHOW THAT THERE WAS ANIMUS, I.E. , CONSCIOUS CONCEALMENT OR ACT OF FURNISHING OF INACCURATE PARTICULARS ON THE PART OF THE ASSESSEE. THE EXPLANATION HAS NO BEARING ON FACTOR NO. 1 BUT IT H AS A BEARING ONLY ON FACTOR NO. 2. THE EXPLANATION DOES NOT MAKE THE ASSESSMENT ORD ER CONCLUSIVE EVIDENCE THAT THE AMOUNT ASSESSED WAS IN FACT THE INCOME OF THE ASSESSEE. NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES ARE E QUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCE ALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN E XPLANATION WHICH IS UNPROVED BUT NOT DISPROVED, I.E., IT IS NOT ACCEPTED BUT CIR CUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE 'S CASE IS FALSE, THE EXPLANATION CANNOT HELP THE DEPARTMENT BECAUSE THER E WILL BE NO MATERIAL TO SHOW THAT THE AMOUNT IN QUESTION WAS THE INCOME OF THE ASSESSEE. ALTERNATIVELY TREATING THE EXPLANATION AS DEALING W ITH BOTH THE INGREDIENTS (I) AND (II) ABOVE, WHERE THE CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEE'S EXPLANATION IS FALSE, THE ASSESSEE MUST BE HELD TO HAVE PROVED THAT THERE WAS NO MENS REA OR GUILTY MI ND ON HIS PART. EVEN IN THIS VIEW OF THE MATTER, THE EXPLANATION ALONE CANNOT JU STIFY LEVY OF PENALTY. ABSENCE OF PROOF ACCEPTABLE TO THE DEPARTMENT CANNOT BE EQU ATED WITH FRAUD OR WILFUL DEFAULT. AS WE FIND NO MATERIAL DIFFERENCE BETWEEN THE ORIGINAL EXPLANATION 1 AND EXPLANATION 1 AS SUBSTITUTED, IN OUR OPINION, IT HA S TO BE SO CONSTRUED AS TO HARMONISE IT WITH THE BASIC PRINCIPLES OF JUSTICE A ND FAIRNESS AS IN THE CASE OF THE ORIGINAL EXPLANATION. TO SUM UP, LD. COUNSEL OF THE ASSESSEE PLEADED THA T THE AFORESAID RATIO OF THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES V. CIT (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE ASSESSEES CASE; THEREFORE, PENALTY CONFIRMED BY THE LD. CIT(A) ON ADDITION OF RS.5,17,000/- BE CANC ELLED. 4. ON THE OTHER HAND, DR. J. B. JHAVERI, DR, APPEAR ED ON BEHALF OF THE REVENUE VEHEMENTLY SUPPORTED THE ORDER OF LD. CIT(A). THE L D. DR POINTED OUT THAT BEFORE THE ASSESSING OFFICER THE ASSESSEE HAS NOT FURNISHED AN Y REPLY TO THE SHOW-CAUSE NOTICE OF THE PENALTY PROCEEDINGS U/S 271(1)(C); THEREFORE, T HE ASSESSING OFFICER IS LEGALLY AND FACTUALLY CORRECT IN LEVYING THE PENALTY U/S 271(1) (C). IN REPLY, THE LD. COUNSEL OF THE 345-RJT-2012 - SHRI S.D. JADEJA 4 ASSESSEE POINTED OUT THAT THE SAID SHOW-CAUSE NOTIC E FOR LEVYING PENALTY U/S 271(1)(C) WAS NOT RECEIVED BY THE ASSESSEE; THEREFORE, THE AS SESSEE FURNISHED ITS EXPLANATION BEFORE THE LD. CIT(A) ONLY. 5. HAVING HEARD BOTH THE SIDES, WE HAVE GONE THROUG H THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT THE ASSESSEE IS AN EX-RULER OF JAMNAGAR. HE HAS FURNISHED THE DETAILS OF ALL THE DEPOSITS IN VARIOU S BANK ACCOUNTS AND ALSO FURNISHED SUPPORTING EVIDENCES IN SUPPORT OF 95% OF HIS DEPOS ITS IN BANKS. ONLY IN RESPECT OF 5%, THE ASSESSEE COULD NOT PRODUCE SUPPORTING EVIDENCES . ON ACCOUNT OF NON-PRODUCTION OF SUPPORTING EVIDENCES, THE ADDITION CAN BE MADE U/S 68 & 69A OF THE INCOME-TAX ACT, 1961, BUT FOLLOWING THE RATIO OF JUDGMENT OF HONBL E GUJARAT HIGH COURT IN THE CASE OF NATIONAL TEXTILES V. CIT (SUPRA) , ON SUCH ADDITION PENALTY U/S 271(1)(C) IS NOT LEVIABLE. FOR THIS REASON, WE CANCEL THE PENALTY CONFIRMED BY THE LD. CIT(A) IN THE IMPUGNED ORDER IN RESPECT OF DEPOSIT OF RS.5,17,000/- IN BAN K ACCOUNTS OF THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THIS ORDER PRONOUNCED IN OPEN COURT ON THE DATE MEN TIONED HEREINABOVE. SD/- SD/- (B. R. JAIN) (T. K. SHARM A) $( #*% / ACCOUNTANT MEMBER #*% /JUDICIAL MEMBER *$+ ,*-/ ORDER DATE 09.01.2014 /RAJKOT *BT / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT- SHRI S.D. JADEJA, SARUSECTION ROAD, JA MNAGAR 2. /RESPONDENT- THE INCOME-TAX OFFICER, WARD 3 (2),J AMNAGAR 3. #-2- & 3 / CIT, JAMNAGAR 4. & 3 - / CIT(A), JAMNAGAR 5 . 678 , , / DR, ITAT, RAJKOT 6 . 89 :; / GUARD FILE. *$+ #$ / BY ORDER , TRUE COPY PRIVATE SECRETARY, , INCOME TAX APPELLATE TRIBUNAL, RAJKOT.