GURDEEP SINGH BIRDI, MUMBAI V. ACIT 24(1), MUMBAI

ITA 4486/MUM/2014

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3684 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 27-06-2014
• Court: TRIBUNAL
• Department Lawyers: SHRIKANT MAMDEO
• Keywords: Unexplained cash credit; Unexplained investment; Initiation of penalty proceedings; Bonafide mistake
• Section: 143(3); 131; 68; 69

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER ITA NO. 4486 /MUM./2014 ( ASSESSMENT YEAR : 20 0 7 08 ) SHRI GURDEEP SINGH BIRDI 1503/4, FARM MANOR ADARSH DUGHDALAYA LAN E MARVE ROAD, MALAD (W) MUMBAI 400 064 PAN AAAPB8784E . APPELLANT V/S INCOME TAX OFFICER WARD 24(1)(4) PRATYAKSHA KAR BHAVAN C 10, BANDRA KURLA COMPLEX BANDRA (E), MUMBAI 400 051 . RESPONDENT ASSESSEE BY : SHRI TARUN GHIA REVE NUE BY : SHRI SHRIKANT MAMDEO DATE OF HEARING 04.01.2016 DATE OF ORDER 04.01.2016 O R D E R PER SAKTIJIT DEY , J.M. INSTANT APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 9 TH APRIL 2014, PASSED BY THE LEARNED COMMISSIONER (APPEALS) 34, MUMBAI, FOR THE ASSESSMENT YEAR 2007 08. 2. BRIEFLY STATED THE FACTS ARE, THE ASSESSEE AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF EXECUTION OF CIVIL CONTRACT WORK . FOR THE ASSESSMENT SHRI GURDEEP SINGH BIRDI 2 YEAR UNDER CONSIDERATION, ASSESSEE FILED HIS RETURN OF INCOM E ON 28 TH FEBRUARY 2008, DECLARING TOTAL INCOME OF ` 21,53,830. WHILE COMPLETING THE ASSESSMENT UNDER SECTION 143(3) OF THE ACT, VIDE ORDER DATED 12 TH NOVEMBER 2009, THE ASSESSING OFFICER MADE THE FOLLOWING ADDITIONS: UNEXPLAINED INVESTMENT ` 93,87,596 UNEXPLAINED CASH CREDIT ON ACCOUNT OF UNSECURED LOAN ` 33,60,000 UNEXPLAINED CASH CREDIT DUE TO EXCESS BANK BALANCE ` 7,33,303 3. THE ADDITIONS MADE BY THE ASSESSING OFFICER WERE CHALLENGED IN THE APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS). THE LEARN ED COMMISSIONER (APPEALS), WHILE DISPOSING OFF THE ASSESSEES APPEAL, DELETED THE ADDITION OF ` 93,87,596, MADE UNDER SECTION 69 OF THE INCOME TAX ACT, 1961 (FOR SHORT 'THE ACT' ) ON ACCOUNT OF UNEXPLAINED INVESTMENT. HOWEVER, HE SUSTAINED THE ADDITIONS OF ` 33,60,000 AND ` 7,33,303, MADE UNDER SECTION 68 OF THE ACT ON ACCOUNT OF UNEXPLAINED CASH CREDIT. ADMITTEDLY, AGAINST THE AFORESAID ADDITIONS SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS), ASSESSEE HAS NOT PREFERRED ANY APPEAL BEFORE THE TRIBUNAL. THUS , THE ADDITIONS OF ` 33,60,000 AND ` 7,33,303, HAVE BECOME FINAL. SHRI GURDEEP SINGH BIRDI 3 4. ON THE BASIS OF THE AFORESAID TWO ADDITIONS SUSTAINED BY THE LEARNED COMMISSIONER (APPEALS), THE ASSESSING OFFICER INITIATED PROCEEDINGS FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE ACT BY ISSUING SHOW CAUSE NOTICE TO THE ASSESSEE ALLEGING CONCEALMENT OF INCOME. IN RESPONSE TO THE SHOW CAUSE NOTICE, THOUGH THE ASSESSEE OBJECTED TO THE INITIATION OF PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) BY STATING THAT AS HE HAS PRODUCED ALL RELEVANT PARTICULARS TRULY AND CORRECTLY AND THERE IS NO ATTEMPT ON HIS PART TO EITHER CONCEAL THE PARTICULARS OF INCOME OR FURNISH INACCURATE PARTICULARS, THERE IS NO CASE FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) , H OWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE AND PROCEEDED TO PASS AN ORDER ON 26 TH MARCH 2012, IMPOSING PENALTY OF ` 12,27,991, UNDER SECTION 271(1)(C) BEING THE MINIMUM AMOUNT OF PENALTY THAT COULD HAVE BEEN IMPOSED UNDER THE SAID PROVISION. 5. AGGRIEVED OF THE IMPOSITION OF PENALTY, ASSESSEE PREFERRED APPEAL BEFORE THE LEARNED COMMISSIONER (APPEALS), WHO ALSO CONFIRMED THE IMPOSITION OF PENALTY. 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT AS FAR AS THE ADDITION OF ` 30,60,000, ON ACCOU NT OF UNSECURED LOAN IS CONCERNED, THE ASSESSEE HAS NOT ONLY ESTABLISHED THE IDENTITY OF THE CREDITORS BUT PROVED THE GENUINENESS OF THE TRANSACTION AS THE LOANS WERE RECEIVED SHRI GURDEEP SINGH BIRDI 4 THROUGH PROPER BANKING CHANNEL. HE SUBMITTED, BY FURNISHING CONFIRMATION LETTERS , THE ASSESSEE HAS ALSO DISCHARGED HIS ONUS OF PROVING THE CREDITWORTHINESS OF THE CREDITORS. THEREFORE, MERELY BECAUSE THE ADDITIONS MADE WERE NOT CONTESTED IN FURTHER APPEAL BEFORE THE TRIBUNAL, IT WILL NOT LEAD TO THE CONCLUSION THAT THE ASSESSEE HAS CO NCEALED PARTICULARS OF INCOME. HE SUBMITTED, AS THE IDENTITY OF THE CREDITORS ARE ESTABLISHED AND TRANSACTIONS ARE THROUGH PROPER BANKING CHANNEL ONLY BECAUSE CREDITWORTHINESS OF THE CREDITORS COULD NOT BE PROVED TO THE SATISFACTION OF THE ASSESSING OFFICE R FOR WHICH ADDITIONS WERE MADE AS UNEXPLAINED CASH CREDIT, PENALTY CANNOT BE IMPOSED UNDER SECTION 271(1)(C) AS THE ASSESSING OFFICER HAS FAILED TO ESTABLISH CONCEALMENT OF INCOME BY THE ASSESSEE. AS FAR AS THE SECOND ADDITION OF ` 7,33,303 IS CONCERNED, LEARNED COUNSEL SUBMITTED THAT ASSESSEES ANNUAL TURNOVER BEING LESS THAN ` 40 LAKH, IT WAS NOT MANDATORY FOR HIM TO MAINTAIN REGULAR BOOKS OF ACCOUNT IN VIEW OF THE PROVISIONS OF SECTION 44AD. THEREFORE, THE BANK BALANCE MENTIONED IN THE BALANCE SHEET IS UNDER BONAFIDE MISTAKE AS THE ASSESSEE WAS UNABLE TO RECONCILE THE DIFFERENCE BETWEEN THE BANK BALANCE AS PER THE BANK STATEMENT AND AS PER BALANCE SHEET. HE, THEREFORE, SUBMITTED THAT PENALTY UNDER SECTION 271(1)(C) IS NOT IMPOSABLE. 7. THE LEARNED DEPARTME NTAL REPRESENTATIVE, ON THE OTHER HAND, SUPPORTING THE VIEW OF THE LEARNED COMMISSIONER (APPEALS) AND THE SHRI GURDEEP SINGH BIRDI 5 ASSESSING OFFICER SUBMITTED , AS THE ASSESSEE HAS FAILED TO DISCHARGE HIS ONUS OF PROVING THE CASH CREDIT AND HAS ACCEPTED THE ADDITIONS, I T PROVES THE FACT THAT CASH CREDIT ARE NOT GENUINE. THEREFORE, THE ASSESSEE HAVING CONCEALED HIS INCOME REPRESENT ING THE CASH CREDITS IS LIABLE FOR PENALTY UNDER SECTION 271(1)(C). AS FAR AS DIFFERENCE IN BANK BALANCE AS PER BANK STATEMENT AND AS PER BALANCE SHEET, TH E LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE HAD DELIBERATELY CONCEALED THE CORRECT PARTICULARS BY SHOWING THE BAN K BALANCE AT A LESSER FIGURE THA N THE ACTUAL BANK BALANCE AS PER BANK STATEMENT, THEREFORE, CONCEALMENT OF INCOME IS PROV ED BEYOND DOUBT. HE, THEREFORE, SUBMITTED THAT IMPOSITION OF PENALTY IN THE PARTICULAR FACTS AND CIRCUMSTANCES IS CORRECT. 8. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD IN THE LIGHT OF THE CASE LAWS RELIED UPON BY THE LEARNED COUNSEL. AS FAR AS THE FACTUAL ASPECT IS CONCERNED, THERE IS NO DISPUTE THAT THE ASSESSEE HAS NOT CONTESTED THE ADDITIONS OF ` 33,60,000 AND ` 7,33,303 MADE UNDER SECTION 68 OF THE ACT AS UNEXPLAINED CASH CREDIT AND HAS ACCEPTED THE DEC ISION OF THE LEARNED COMMISSIONER (APPEALS). KEEPING IN VIEW THE AFORESAID FACTUAL ASPECT, IT IS TO BE SEEN WHETHER PENALTY UNDER SECTION 271(1)(C) CAN BE IMPOSED ON THE BASIS OF THE AFORESAID TWO ADDITIONS FOR CONCEALMENT OF INCOME BY THE ASSESSEE. AS FAR AS THE ADDITION OF ` 33,60,000 ON SHRI GURDEEP SINGH BIRDI 6 ACCOUNT OF UNSECURED LOANS FROM FIVE DIFFERENT PARTIES ARE CONCERNED, IT IS SEEN FROM THE FACTS ON RECORD THAT DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HAS DISCLOSED THE IDENTITY OF THE CREDITORS WITH THEIR POSTAL ADDRESS, HOWEVER, SUMMONS ISSUED UNDER SECTION 131 OF THE ACT TO THE CONCERNED CREDITORS RETURNED UN SERVED BY THE POSTAL AUTHORITY AS THE PARTIES WERE NOT TRACEABLE. WHEN THESE FACTS WERE CONFRONTED TO THE ASSESSEE BY THE ASSESSING OFFICER WITH A REQUEST TO PRODUCE THE CREDITORS ALONG WITH CONFIRMATION LETTERS, THE ASSESSEE ONLY FURNISHED THE CONFIRMATION LETTERS WITHOUT PRODUCING THE CREDITORS. HOWEVER, FACT REMAINS, THE LOANS WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE FROM THE CONCERNED CREDITORS. AS IT APPEARS, THE ASSESSING OFFICER TREATED THE CREDIT AS UNEXPLAINED ONLY BECAUSE THE CONCERNED CREDIT ORS WERE NOT PRODUCED BEFORE HIM. THE LEARNED COMMISSIONER (APPEALS), THOUGH, ACCEPTED THAT ASSESSEE HAS ESTABLISHED THE IDENTITY OF THE CREDITORS BUT HE CONF IRMED THE ADDITION OF ` 33,60,000 ONLY FOR THE REASON THAT ASSESSEE COULD NOT PROVE THE CREDITWORTHINESS OF THE CREDIT ORS TO THE SATISFACTION OF THE ASSESSING OFFICER. HOWEVER, ON A PERUSAL OF THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) IN THE Q UANTUM PROCEEDINGS, IT IS FOUND THAT LEARNED COMMISSIONER (APPEALS) , THOUGH , HAS CONFIRMED THE ADDITION BUT AT THE SAME TIME HAS OBSERVED THAT THE ASSESSEE HAS BEEN ABLE TO ESTABLISH THE IDENTITY OF THE LOAN CREDITORS. HE HAS ALSO OBSERVED THAT THE ASSESSI NG OFFICER HAS NOT BROUGHT ANY ADVERSE MATERIAL ON RECORD TO SUGGEST THAT SHRI GURDEEP SINGH BIRDI 7 ACCOUNT PAYEE CHEQUES ARE FROM FICTITIOUS PERSONS OR THE AMOUNT REPRESENTS ASSESSEES OWN I N COM E. IT IS WELL KNOWN PRINCIPLE OF LAW THAT FOR PROVING A CASH CREDIT, ASSESSEE HAS TO ES TABLISH THE IDENTITY OF THE CREDITOR, HIS CREDITWORTHINESS AND GENUINENESS OF THE TRANSACTION. IN THE PRESENT CASE, THERE IS NO DISPUTE THAT IDENTITY OF THE CREDITORS HA S BEEN ESTABLISHED BY THE ASSESSEE AS RECORDED BY THE LEARNED COMMISSIONER (APPEALS). T HE GENUINENESS OF THE TRANSACTION IS ALSO PROVED TO CERTAIN EXTENT AS THE LOAN S WERE RECEIVED THROUGH ACCOUNT PAYEE CHEQUE S AND PROPER BANKING CHANNEL. THE LEARNED COMMISSIONER (APPEALS) HAS ALSO OBSERVED THAT THE ASSESSING OFFICER HAS FAILED TO ESTABLISH THAT THE ACCOUNT PAYEE CHEQUE S ARE FROM FICTITIOUS PERSONS OR REPRESENTS ASSESSEES OWN MONEY. IN THESE CIRCUMSTANCES, THE ONLY INGREDIENT REMAINS TO BE PROVED BY THE ASSESSEE IS THE CREDITWORTHINESS OF THE CREDITORS. IN THIS CONTEXT, IT NEEDS TO BE OBSERV ED THAT BEFORE THE ASSESSING OFFICER ITSELF ASSESSEE HAS SUBMITTED CONFIRMATION LETTERS FROM ALL THE LOAN CREDITORS. AS IT APPEARS, BEFORE REJECTING THE LOANS ON ACCOUNT OF LACK OF CREDITWORTHINESS OF THE CREDITORS, NO ENQUIRY HAS BEEN MADE BY THE ASSESSIN G OFFICER TO FIND OUT WHETHER THE CREDITORS ACTUALLY HAD RESOURCES TO ADVANCE THE LOAN AMOUNT TO THE ASSESSEE. THEREFORE, ONLY BECAUSE THE ASSESSEE DID NOT CHALLENGE THE ADDITIONS OF LOAN AMOUNTING TO ` 33,60,000 IN FURTHER APPEAL BEFORE THE TRIBUNAL THAT WILL NOT LEAD TO THE CONCLUSION THAT ASSESSEE HAS CONCEALED PARTICULARS SHRI GURDEEP SINGH BIRDI 8 OF HIS INCOME. THE ACCEPTANCE OF DECISION OF THE LEARNED COMMISSIONER (APPEALS) BY NOT PREFERRING FURTHER APPEAL MAY BE FOR VARIOUS REASONS, ONE OF THEM BEING INABILITY OF THE ASSESSEE TO PRODUCE THE CONCERNED CREDITORS BEFORE THE ASSESSING OFFICER TO CONCLUSIVELY PROVE THEIR CREDITWORTHINESS. HOWEVER, THAT CANNOT BE THE SOLE CRITERIA TO CONCLUDE THAT ASSESSEE HAS CONCEALED PARTICULARS OF INCOME AS FAR AS THE LOAN AMOUNT OF ` 33,60,000. T HEREFORE, IN OUR VIEW, IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) ON THE ADDITION OF ` 33,60,000, IS NOT JUSTIFIED. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 9. INSOFAR AS THE ADDITION OF ` 7,33,303, BEING DIFFERENCE IN BANK BALAN CE AS PER BANK STATEMENT AND AS PER BALANCE SHEET IS CONCERNED, FROM THE FACTS RECORDED, IT IS PROVED THAT ASSESSEE HAS FAILED TO PROPERLY EXPLAIN THE DIFFERENCE. WHEN THE BANK STATEMENT SHOWS THE BANK BALANCE AT ` 1,02,55,084, AS ON 31 ST MARCH 2007, THERE IS NO JUSTIFIABLE REASON WHY THE ASSESSEE SHOULD SHOW THE BANK BALANCE OF ` 95,21,781 IN THE BALANCE SHEET, AS ASSESSEE MUST BE VERY MUCH AWARE OF THE BANK BALANCE IN HIS OWN BANK ACCOUNT. I T IS ALSO EVIDENT THAT DURING THE QUANTUM PROCEEDINGS AS WELL AS IN COURSE OF PENALTY PROCEEDINGS BEFORE THE DEPARTMENTAL AUTHORITIES, ASSESSEE HAS FAILED TO EITHER RECONCILE THE DIFFERENCE OR JUSTIFY THE REASONS FOR NOT DOING SO PROPERLY. THEREFORE, IN OUR VIEW, CONCEALMENT OF INCOME TO THE EXTENT OF ` 7,33,303 BEING THE DIFFERENCE BETWEEN THE BANK BALANCE AS PER SHRI GURDEEP SINGH BIRDI 9 THE BANK STATEMENT AND BALANCE AS PER BALANCE SHEET IS PROVED. HENCE, ASSESSEE IS LIABLE TO BE VISITED WITH PENALTY UNDER SECTION 271(1)(C) ON THE ADDITION OF ` 7,33,303, MADE BY THE ASSESSING OFFICER AND SUST AINED BY THE LEARNED COMMISSIONER (APPEALS). ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO RESTRICT THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) TO THE ADDITION OF ` 7,33,303 ONLY. 10. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCE D IN THE OPEN COURT ON 4 TH JANUARY 2016 SD/ - N.K. BILLAIYA ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED : 4 TH JANUARY 2016 COPY OF THE ORDER FORWARDED TO : (1) THE ASSESSEE; (2) THE REVENUE; (3) THE CIT(A); (4) THE CIT, MUMBAI CITY CON CERNED; (5) THE DR, ITAT, MUMBAI; (6) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY (DY./ASSTT. REGISTRAR) ITAT, MUMBAI