K.Krishnaraj, Pollachi V. ITO Ward I, Pollachi

ITA 723/CHNY/2019

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 1547 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: K MEENAKSHISUNDRAM ITP
• Keywords: Unexplained investment; Gift; Business income
• Section: 271(1)(c); 69

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , B BENCH, CHENNAI . , , BEFORE SHRI DUVVURU RL REDDY, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ I.T.A.NO.723/CHNY/2019 ( [ [ / ASSESSMENT YEAR: 2009-10) SHRI K. KRISHNARAJ, DOOR NO.120 (OLD NO.82), MAIN ROAD, KINATHUKADAVU, POLLACHI 642 109. VS THE INCOME TAX OFFICER, WARD-1, POLLACHI. PAN: AYAPK6947J ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI K. MEENAKSHISUNDRAM, ITP / RESPONDENT BY : SHRI GURU BASHYAM, JCIT /DATE OF HEARING : 24.06.2019 /DATE OF PRONOUNCEMENT : 03.09.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER : THE ASSESSEE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-3, COIMBATORE IN APPEAL NO.67/17-18 DATED 12.12.2018 FOR THE ASSESSMENT YEAR 2009-10. 2. SHRI K. KRISHNARAJ, THE ASSESSEE, IS ENGAGED IN THE BUSINESS OF TRADING IN COCONUT. SINCE, HE DID NOT MAINTAIN BOOKS OF ACCOUNT, HE 2 ITA NO.723/CHNY/2019 ESTIMATED HIS INCOME AT THE RATE OF 5% OF THE TURN-OVER. HE MAINTAINED A SAVINGS BANK ACCOUNT WITH CITY UNION BANK, POLLACHI. ON EXAMINATION OF THE BANK ACCOUNT, THE AO FOUND THAT THE ASSESSEE MADE A DEPOSIT OF RS.20 LAKHS ON 12.03.2009. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, FOR THE ASSESSMENT YEAR 2009- 10, THE ASSESSEE COULD NOT EXPLAIN THE SOURCE FOR THE DEPOSITS. THEREFORE, THE AO TREATED THE DEPOSIT AS UNEXPLAINED INVESTMENT U/S.69 OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). ON FURTHER APPEAL, THIS ITAT IN ITANO.1943/MDS/2015, ORDER DATED 16.09.2016, AFTER CONSIDERING BOTH THE PARTIES PLEA, HELD THAT, IT CAN BE SAFELY PRESUMED THAT THE ASSESSEE WOULD HAVE GENUINE INTERNAL OWN SOURCE OF RS.10 LAKHS FOR MAKING THE DEPOSIT IN THE BANK ACCOUNT AND HENCE DIRECTED THE AO TO DELETE THE ADDITION OF RS.10 LAKHS OUT OF THE ADDITION MADE FOR RS.20 LAKHS. THEREAFTER, THE AO LEVIED PENALTY U/S.271(1)(C) OF THE ACT. ON APPEAL, THE LD.CIT(A) UPHELD THE LEVY OF PENALTY AND THUS DISMISSED THE ASSESSEES APPEAL. AGGRIEVED AGAINST THAT ORDER, THE ASSESSEE IS ON APPEAL BEFORE THIS TRIBUNAL. 3 ITA NO.723/CHNY/2019 3. THE LD.AR SUBMITTED THAT THE ASSESSEE EXPLAINED THE SOURCE FOR THE DEPOSIT VIZ., FROM HIS MOTHER SMT. K. DHANABAGYAM AND HIS FATHERS HUF SHRI K. KANNAIYAN, HUF, BOTH OF THEM WERE ASSESSED TO TAX AND THEY HAVE FILED RETURN WITH THE SAME AO. HOWEVER, THE DEPARTMENT HAS NOT DONE ANY INDEPENDENT INVESTIGATION BUT DISBELIEVED AND REJECTED THE ASSESSEES EXPLANATION AND LEVIED PENALTY ON THE ASSESSEE. THE AO HAS NOT SPECIFICALLY INVOKED NONE OF THE EXPLANATIONS TO SECTION 271(1)(C) OF THE ACT. THEREFORE, THE PENALTY LEVIED IS NOT SUSTAINABLE AND HENCE PLEADED THAT THE PENALTY LEVIED MAY BE DELETED. THE LD.AR RELIED ON THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF S.V. KALYANAM VS. ITO (2010) 327 ITR 477 (MAD), WHEREIN THE COURT HAS HELD THAT SECTION 69 IS A DEEMING PROVISION AND IT CANNOT BE EXTENDED TO PENALTY PROCEEDINGS AND SUBMITTED THE FACTS THIS CASE ON ALL THE FOURS WITH THE CASE LAW RENDERED BY THE HONBLE MADRAS HIGH COURT. HE FURTHER SUBMITTED THAT LEVY OF PENALTY IS NOT COMPULSORY IN ALL CASES, WHERE AN ADDITION MAY BE CONFIRMED. IN THIS REGARD, HE RELIED ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF HINDUSTAN STEEL LTD., VS. STATE OF ORISSA, 83 ITR 26 AND SUBMITTED THAT PENALTY IS NOT A SOURCE OF REVENUE, IT IS NOT AUTOMATIC, PENALTY SHOULD NOT BE 4 ITA NO.723/CHNY/2019 LEVIED SIMPLY BECAUSE IT IS LEGAL TO DO SO. PER CONTRA, THE LD.DR SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 3. WE HEARD THE RIVAL SUBMISSIONS AND GONE THROUGH THE RELEVANT MATERIAL. DURING THE PENALTY PROCEEDINGS, THE FOLLOWING EXPLANATIONS WERE BEFORE THE AO. THE ASSESSEE RECEIVED GIFT FROM HIS MOTHER SMT. K. DHANABAGYAM, HIS FATHERS HUF, K.KANNAIYAN, HUF, BOTH ARE ASSESSED TO INCOME TAX WITH THE SAME ASSESSING OFFICER WHO ASSESSED THE ASSESSEE AND BEFORE HIM THEY HAVE FILED THEIR RETURN OF INCOME FOR THE ASSESSMENT YEAR 2008-09 ON 03.04.2009 DISCLOSING INCOME OF RS.1,45,000/- AND RS.1,08,800 & AGRICULTURAL INCOME OF RS.4,00,000/- RESPECTIVELY. THE ASSESSEE CLAIMED THAT HE HAS RECEIVED GIFT OF RS.3,00,000/- FROM EACH OF THEM AND THE BALANCE WAS FROM HIS OWN FUNDS. IN THE CASE OF SMT. K. DHANABAGYAM, AS ON 31.03.2008/ 01.04.2009, SHE HAD RECEIVABLES TO THE TUNE OF RS.17,25,000/-, OUT OF WHICH SHE HAD GIVEN A GIFT OF RS.3,00,000/- TO HER SON IN MARCH 2009. SIMILARLY, IN THE CASE OF SHRI K. KANNAIYAN, HUF, OUT OF RECEIVABLES AS ON 31.03.2008, TO THE TUNE OF RS.19,50,000/- AND OUT OF REALIZATION THE FAMILY HAS PAID A SUM OF RS.3,00,000/- TO THE ASSESSEE. IN THE CASE OF ASSESSEE HIMSELF, AS 5 ITA NO.723/CHNY/2019 ON 31.03.2008, HE HAD RECEIVABLES OF RS.12,00,000/- AND ADVANCES OF RS.11,00,000/-. THIS SUM ALONG WITH THE CURRENT YEAR EARNINGS OF RS.5,06,577/- (BUSINESS INCOME OF RS.1,75,725 + AGRI. INCOME OF RS.3,30,850) WAS UTILIZED FOR THE DEPOSIT OF RS.14,00,000/- TO THE BANK. HOWEVER, THE AO HAS NOT ACCEPTED THE EXPLANATION AND MADE ADDITION IN THE ASSESSMENT. ON APPEAL, IN THE ASSESSEES CASE, THE ITAT HELD THAT THE ASSESSEE COULD HAVE GENUINE INTERNAL OWN SOURCE OF RS.10 LAKHS. THEREAFTER THE ASSESSEE FURNISHED THE SAME EXPLANATION BEFORE THE AO DURING THE COURSE OF PENALTY PROCEEDINGS, HOWEVER, THE AO HAS NOT MADE ANY ATTEMPT TO FIND WHETHER THE EXPLANATION OFFERED BY THE ASSESSEE IS FALSE, WHICH IS SINE QUA NON FOR LEVYING PENALTY U/S.271(1)(C). THE JURISDICTIONAL HIGH COURT HAS HELD IN S.V. KALYANAM VS. ITO, SUPRA, THAT THE DEPARTMENT CANNOT PRESUME THAT THERE IS A CONCEALMENT. THERE MUST BE AN INDEPENDENT FINDING. FURTHER, THE ASSESSEE HAS EXPLAINED THE SOURCE. MERE REJECTION OF EXPLANATION WOULD NOT BE A GROUND FOR LEVYING PENALTY. IN THIS CASE, THERE IS NO INDEPENDENT FINDINGS RECORDED BY THE LOWER AUTHORITIES WARRANTING LEVY OF PENALTY U/S.271(1)(C). THEREFORE, FOLLOWING THE DECISION OF THE JURISDICTIONAL 6 ITA NO.723/CHNY/2019 HIGH COURT IN THE CASE OF S.V. KALYANAM, SUPRA, THE PENALTY LEVIED IS NOT JUSTIFIABLE AND HENCE DELETED. 4. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON THE 3 RD SEPTEMBER, 2019 AT CHENNAI. SD/- SD/- /CHENNAI, /DATED 3 RD SEPTEMBER, 2019 RSR /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. ( ) /CIT(A) 4. /CIT 5. /DR 6. [ /GF ( ) (DUVVURU R.L REDDY) /JUDICIAL MEMBER ( ) (S. JAYARAMAN) /ACCOUNTANT MEMBER