Sri.S. Mohammed Haris, Calicut V. ITO, Calicut

ITA 629/COCH/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69111 (ITAT-COCHIN)
• Duration Of Justice: 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 30-09-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LATHA V KUMAR
• Assessee Lawyers: A V MURALEEDHARAN
• Keywords: Unexplained investment; Difference of opinion; Onus to prove
• Section: 68; 6

Judgement Text

ITA NO. 629/ COCH/ 2013 1 IN THE INCOME TAX APELALTER TIBUNAL COCHIN BENCH , COCHIN BEFORE S/SH RI N.R.S. GANESAN, JM & B. R. BASKARAN, AM ITA NO. 629 /COCH/ 2013 (ASST YEAR 2006 - 07 ) SHRI MOHAMED HARIS M/S WELMAN INTERNATIONAL HOTEL DIPLOMAT BUILDING RAILWAY STATION ROAD CALICUT VS THE INCOME TAX OFFICER WARD 1(1), KOZHIKODE ( APPELLANT) (RESPONDENT) PAN NO. AAQPH3487E ASSESSEE BY SHRI A V MURALEEDHARAN REVENUE BY SMT LATHA V KUMAR, JR DR DATE OF HEARING 9 TH DEC 2013 DATE OF PRONOUNCEMENT 20 TH , DEC 2013 OR D ER PER B.R. BASKARAN, AM: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 26.8.2013 PASSED BY THE LD CIT(A), KOZHIKODE AND IT RELATES TO THE AY 2006 - 07. THE PENALTY OF RS. 8,84,676/ - LEVIED B Y THE AO U/S 271(1)( C) OF THE ACT, HAVING BEEN CO NFIRMED BY THE LD CIT(A), THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 2 THE FACTS WHICH LEAD TO THE LEVY OF PENALTY ARE STATED IN BRIEF: THE ASSE SSEE FILED HIS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF RS. 2,43,821/ - DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO CALLED FOR CASH FLOW STATEMENT AND COPIES OF BANK ACCOUNT S FROM THE ASSESSEE . ON VERIFICATION OF THE BANK PASSBOOK S OF THE ASSESSEE, THE AO NOTICED THAT THE ASSESSEE HAD MADE HUGE CASH DEPOSITS IN HIS SAVING BANK ACCOUNT S MAINTAINED WITH HDFC, CALICUT AND BANK OF INDIA, CALICUT. WITH REGARD TO THE SOURCE S OF THESE ITA NO. 629/ COCH/ 2013 2 DEPOSITS, THE ASSESSEE SUBMITTED THAT HE AVAILED LOANS FROM FRIENDS AND RELATIVES FOR THE PURPOSE OF CONSTRUCTION OF A COMMERCIAL BUILDING A T CALICUT . THE ASSESSEE ALSO SEEMS TO HAVE FURNISHED CERTAIN CONFIRMATION LETTERS IN SUPPORT OF THE SAME. ACCORDING TO THE AO, SOME OF THE EXPLANATIONS WERE NOT ACCEPTABLE AS THE EVIDENCE PRODUCED BY THE ASSESSEE WAS NOT MATCHING THE DATES OF DEPOSITS IN THE BANK ACCOUNTS. ACCORDINGLY, THE AO DETERMINED A SUM OF R S. 13 LACS AS UNEXPLAINED INVESTMENT RELATING TO THE SHORT FALL IN CASH FLOW AND ASSESSED THE SAME UNDER THE HEAD INCOME FROM OTHER SOURCES. THE ASSESSEE HAS ALSO AGREED FOR THE ASSESSMENT OF THE SAID AMOUNT AND HENCE HE DID NOT FILE ANY APPEAL . SUBSEQUENTLY, THE AO AND LEVIED A PENALTY OF RS. 8,84,676/ - U/S 271(1)(C) OF THE ACT, WHICH WA S EQU IV AL E NT TO 200%OF TAX SOUGHT TO BE EVADED. THE ASSESSEE COULD NOT SUCCEED IN THE APPEAL FILED BEFO RE THE LD CIT(A) AND HENCE, HE HAS FILED THIS APPEAL BEFORE US. 3 THE LD AR SUBMITTED THAT THE ASSESSEE HAD AGREED FOR THE ADDITION OF RS. 13 LACS AFTER REACHING AN UNDERSTAND ING WITH THE AO THAT NO PENALTY WOULD BE LEVIED ON THE ADDITION CITED ABOVE . THE LD AR FURTHER SUBMITTED THAT THE ASSESSEE HAS FILED CONFIRMATION LETTERS BEFORE THE AO EXPLAINING THE LOANS TAKEN BY HIM. HOWEVER, THE AO HAS MADE THE IMPUGNED ADDITION BY REJECTING THE EXPLANATIONS OF THE ASSESSEE AND HENCE, IN EFFECT, THE ADDITION H AS BEEN MADE ONLY ON ACCOUNT OF DIFFERENCE OF OPINION WITH REGARD TO THE EXPLANATION S OFFERED BY THE ASSESSEE . FURTHER THE ASSESSEE HAS ALSO AGREED FOR THE ADDITION WITH THE BELIEF THAT THE AO SHALL NOT LEVY PENALTY ON THE SAME. ACCORDINGLY, THE LD A.R S UBMITTED THAT THE AO SHOULD NOT HAVE LEVIED PENALTY ON THE ABOVE SAID ADDITION. THE LD A.R FURTHER SUBMITTED THAT THERE IS NO PROVISION IN THE INCOME TAX RETURN TO DISCLOSE ALL THE DEPOSITS MADE BY THE ASSESSEE INTO HIS BANK ACCOUNT AND HENCE THERE IS NO C OMPULSION FOR THE ASSESSEE TO DISCLOSE ALL THE BANK DEPOSITS. ITA NO. 629/ COCH/ 2013 3 4. ON THE OTHER HAND, THE LD DR SUBMITTED THAT THE ASSESSEE COULD NOT EXPLAIN THE BANK DEPOSITS TO THE SATISFACTION OF THE AO AND HENCE, THE AO HAS LEVIED THE PENALTY. FURTHER, THE AO CAME TO KNOW ABOUT THE DEPOSIT S MADE BY THE ASSESSEE IN THE BANK ACCOUNTS ONLY THROUGH AIR INFORMATION AND WHEN QUESTIONED ABOUT THE SOURCE OF DEPOSITS, THE ASSESSEE HAS SURRENDERED THE AMOUNT FOR TAXATION DURING THE ASSESSMENT PROCEEDINGS. ACCORDINGLY THE LD D.R SUBMITTED THAT THE ASSESSEE WOULD NOT HAVE OFFERED THE IMPUGNED AMOUNT OF RS.13.00 LAKHS, IF THE AIR INFORMATION WAS NOT BROUGHT TO HIS NOTICE. THE LD DR FURTHER PLACED RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA P LTD V S CIT (358 ITR 593 ) (SC) TO SUBMIT THAT THE PENALTY U/S 271(1)( C) OF THE ACT IS EXIGIBLE EVEN IN THE CASE OF VOLUNTARY SURRENDER OF INCOME. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULLY PERUSED THE RECORD. WE NOTICE THAT THE ASSESSEE HAS NOT FURNISHED BEFORE US COPIES OF CONFIRMATION LETTERS SAID TO HAVE BEEN FILED BEFORE THE AO TO SUPPORT THE CLAIM OF RECEIPT OF LOANS FROM FRIENDS AND RELATIONS, WHICH WERE UTILIZED TO MAKE DEPOSITS INTO THE BANK ACCOUNTS. ACCORDINGLY A SPECIFIC QUERY WAS ASK ED TO LD A.R AS TO WHETHER THE ASSESSEE WOULD BE IN A POSITION TO FURNISH COPIES OF CONFIRMATION LETTERS, WHICH WERE CLAIMED TO HAVE BEEN FILED BEFORE THE AO. HOWEVER, THE LD A.R SUBMITTED THAT THE ASSESSEE AGREED TO THE ADDITION OF RS.13.00 LAKHS UPON RE ACHING AN UNDERSTANDING WITH THE AO THAT THE PENALTY U/S 271(1)(C) OF THE ACT WOULD NOT BE LEVIED. IN THE ABSENCE OF ANY ASSURANCE FROM THE LD A.R IN THIS REGARD, WE HAVE TO ONLY PRESUME THAT THE ASSESSEE IS NOT INTERESTED IN FURNISHING THE COPIES OF CONF IRMATION LETTERS BEFORE US. ITA NO. 629/ COCH/ 2013 4 6. WE ALSO NOTICE THAT THE ASSESSMENT ORDER IS ALSO SILENT ABOUT THE QUANTUM OF DEPOSITS FOUND IN THE BANK ACCOUNT, NAMES AND ADDRESSES OF LENDERS WHO HAVE LENT THE MONEY TO THE ASSESSEE, THE QUANTUM OF LOAN GIVEN BY EACH O F THEM, THE DETAILS OF CONFIRMATION LETTERS OBTAINED FROM THE LENDERS, THE CASH CREDITS ACCEPTED BY THE AO, THE CASH CREDITS NOT ACCEPTED BY THE AO ETC. 7. BE THAT AS IT MAY, THE FACT REMAINS THAT THE ASSESSEE HAS MADE DEPOSITS INTO HIS BANK ACCOUNTS AND HE COULD NOT PROPERLY EXPLAIN THE SOURCES FOR THE SAME. HENCE HE HAS AGREED FOR THE ADDITION OF RS.13.00 LAKHS. HOWEVER, AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF MAK DATA P LTD (SUPRA), THE VOLUNTARY SURRENDER WOULD NOT ABSOLVE THE ASSESS EE FROM LIABILITY TO PENALTY AND HE IS REQUIRED TO OFFER AN EXPLANATION FOR CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. FROM THE PENALTY ORDER, WE NOTICE THAT THE ASSESSEE HAS OFFERED FOLLOWING EXPLANATIONS: - I HAVE FILED THE RETURN O F INCOME FOR THE ASSESSMENT YEAR 2006 - 07 DISCLOSING ALL THE PARTICULARS OF INCOME ON 13.7.2007. MY INCOME CONSISTS OF INTEREST ON CAPITAL AND SALARY FROM THE FIRM 1) HOTEL DIPLOMAT, RAILWAY STATION ROAD, CALICUT; 2) M/S MAMA LOVE TEXTILES, K V COMPLEX, KAL LAI ROAD AND 3) SALWAR HUT, THAMARASSERY, IN WHICH I AM A PARTNER. THE ADDITION TO THE RETURNED INCOME WAS MADE ON ACCOUNT OF DIFFERENCE OF OPINION REGARDING THE EXPLANATION OFFERED FOR THE DEPOSITS MADE ON THE BANK ACCOUNTS. IT IS EXPLAINED THAT THE DE POSITS IN THE BANK ACCOUNT REPRESENTS THE AMOUNT PAID TO THE APPLICANT BY HIS FATHER AND BROTHERS FOR THE PURPOSE OF CONSTRUCTING A COMMERCIAL BUILDING KNOW AS WELMAN BUILDERS & DEVELOPERS WHICH HAS BEEN UTILIZED FOR THE SAID CONSTRUCTION. HOWEVER, TO AV OID FURTHER LITIGATION AND TO KEEP UP GOOD RELATION WITH THE DEPARTMENT I HAVE AGREED FOR THE ADDITION TO THE RETURNED INCOME AND ARRANGEMENT ARE BEING MADE FOR PAYMENT OF THE TAX ASSESSED. UNDER THE CIRCUMSTANCES IT MAY BE SEEN THAT I HAVE NOT CONCEALED ANY PARTICULARS OF MY INCOME AS EXPLAINED ABOVE. THE RETURN OF INCOME WAS FILED VOLUNTARILY DISPOSING ALL THE PARTICULARS OF INCOME BEFORE ISSUANCE OF ANY NOTICE FROM THE DEPQRTM3NT AND I HAVE COOPERATED WITH THE DEPARTMENT AT ALL STAGES OF ASSESSMENT AND I AM ALSO MAKING ARRANGEMENTS FOR PAYMENTS OF THE ASSESSED TAX. ITA NO. 629/ COCH/ 2013 5 8. AT THIS STAGE, WE FEEL IT APPROPRIATE TO EXTRACT BELOW THE EXPLANATION 1 TO SEC. 271 OF THE ACT. EXPLANATION 1 : WHERE IN RESPECT OF ANY FACTS MATERIAL TO THE COMPUTATION OF THE TOTA L 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) TO BE FALSE, OR (B) SUCH PERSON OFFERS AN EXPLANATION WHICH HE IS NOT ABLE TO SUBSTANTIATE AND FAILS TO PROVE 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 I NCOME OF SUCH PERSON AS A RESULT 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. THE HONBLE SUPREME COURT HAS EXPLAINED THE SCOPE OF EXPLANATION 1 TO SEC. 271 AS UNDER IN THE CASE OF MAK DATA P LTD (SUPRA) AS UNDER: - THE ASSESSING OFFICER, IN OUR VIEW, SHALL NOT BE CARRIED AWAY BY THE PLEA OF THE ASSESSEE LIKE VOLUNTARY DISCLOSURE, BUY PEACE, AVOID LITIGATION, AMICABLE SETTLEMENT, ETC., TO EX PLAIN AWAY ITS CONDUCT. THE QUESTION IS WHETHER THE ASSESSEE HAS OFFERED ANY EXPLANATION FOR CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING INACCURATE PARTICULARS OF INCOME. THE EXPLANATION TO SECTION 271(1) RAISES A PRESUMPTION OF CONCEALMENT, WHEN A DIFFERENCE IS NOTICED BY THE ASSESSING OFFICER, BETWEEN REPORTED AND ASSESSED INCOME. THE BURDEN IS THEN ON THE ASSESSEE TO SHOW OTHERWISE, BY COGENT AND RELIABLE EVIDENCE. WHEN THE INITIAL ONUS PLACED BY THE EXPLANATION, HAS BEEN DISCHARGED BY HIM, TH E ONUS SHIFTS ON THE REVENUE TO SHOW THAT THE AMOUNT IN QUESTION CONSTITUTED THE INCOME AND NOT OTHERWISE. 9. ON A CAREFUL READING OF EXPLANATION OFFERED BY THE ASSESSEE, WE NOTICE THAT THE ASSESSEE HAS ONLY STATED THAT THE IMPUGNED ADDITION HAS BEEN MADE ON ACCOUNT OF DIFFERENCE OF OPINION REGARDING EXPLANATION OFFERED BY H IM WITH THE REGARD TO THE LOANS. HOWEVER, THE ASSESSEE HAS FAILED TO FURNISH ANY MATERIAL TO PROVE THAT HIS EXPLANATION WAS BONAFIDE ONE. WE ALSO NOTICE THAT THE ASSESSEE DID NOT DISCLOSE THE DETAILS OF DEPOSITS IN HIS RETURN OF INCOME AND HE WAS CONSTRAINED TO DISCLOSE THEM ONLY ON ACCOUNT OF AIR INFORMATION OBTAINED BY THE AO. THOUGH THE LD A.R CONTENDS THAT THERE IS NO PROVISION IN THE RETURN OF INCOME TO DISCLOSE THE BANK DETAILS, NOTHING WOULD HAVE PREVENTED THE ASSESSEE TO FURNISH THE DETAILS OF BANK DEPOSITS BY FILING A CASH FLOW STATEMENT ALONG WITH THE RETURN OF INCOME. BEFORE US ALSO, THE ASSESSEE COULD NOT FURNISH THE COPIES OF CONFIRMATION LETTERS OBTAINED FROM THE LENDERS, WHICH WOULD HAVE THROWN LIGHT AS TO WHETHER THE ASSESSEE HAD DISCHARGED THE BURDEN OF PROOF PLACED UPON HIM ITA NO. 629/ COCH/ 2013 6 U/S 68 OF THE ACT AND THIS FACT UAL POSITION ALSO PROVES THAT THE ASSESSEE HAS FAILED TO FURNISH ALL THE FACTS RELATING TO AND MATERIAL TO THE COMPUTATION OF INCOME. UNDER THESE CIRCUMSTANCES, IN OUR VIEW, THE ASSESSEE HAS FAILED TO DISCHARGE THE BURDEN PLACED UPON HIM UNDER EXPLANATION 1 TO SEC. 271 OF THE ACT. 10. HOWEVER, WE NOTICE THAT THE AO HAS LEVIED PENALTY @ 200% OF THE TAX S OUGHT TO BE EVADED. ACCORDING TO THE ASSESSEE HE HAD AGREED TO THE ASSESSMENT OF RS.13.00 LAKHS ON REACHING AN UNDERSTANDING THAT THE AO SHALL NOT LEVY PENALTY. WE HAVE ALSO NOTICED THAT THE AO ALSO DID NOT ELABORATELY DISCUSS ABOUT THE ADDITION IN THE A SSESSMENT ORDER. UNDER THESE SET OF FACTS, IN OUR VIEW, IT WOULD BE JUSTIFIABLE IF THE PENALTY AMOUNT IS RESTRICTED TO 100% OF THE TAX SOUGHT TO BE EVADED. WE ORDER ACCORDINGLY AND THE ORDER OF LD CIT(A) STANDS MODIFIED TO THAT EXTENT. 11. IN THE RE SULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH , DAY OF DEC 2013. SD/ SD/ - (N.R.S. GANESAN) ( B.R. BASKARAN ) JUDICIAL MEMBER ACCOUNTANT MEMBER COCHIN: DATED 20 TH , DEC 2013 RAJ* ITA NO. 629/ COCH/ 2013 7 COPY TO: 1. APPELLANT SRI S MOHAMMED HARIS, M/S WELMAN INTERNATIONAL, HOTEL DIPLOMAT BLDG, RAILWAY STAN ROAD, CALICUT 2. RESPONDENT ITO, WARD 1(1), KOZHIKODE 3. CIT(A) 4. CIT , KOZHIKODE 5. DR 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR ITAT, COCHIN