Neelamdevi Sureshkumar Modi, Surat V. Income Tax Officer, Ward-1(2)(3), Surat

ITA 791/SRT/2023

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 0379 (ITAT-SURAT)
• Duration Of Justice: 8 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-08-2024
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 17-07-2024
• Assessment Year: 2005-2006
• Appeal Filed On: 19-11-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Principle of natural justice; Onus to prove
• Section: 131; 68; 271(1)(c); 142(1); 250; 274; 251; 143(2); 73

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JIDICIAL MEMBER & SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA No.791/SRT/2023 Assessment Year: (2005-06) (Physical Court Hearing) Neelamdevi Sureshkumar Modi A-402 Ratna Shyam Residency, Althan Canal Road, Althan, Surat-395007 Vs. Income Tax Officer, Ward-1(2)(3) Surat, Aaykar Bhavan, Majura Gatel, Surat-395001 èथायीलेखासं./जीआइआरसं./PAN/GIR No.: AAYPM 1355 Q (अपीलाथŎ/Appellant) (ŮȑथŎ /Respondent) िनधाŊįरती की ओर से /Assessee by Ms. Chaitali Shah, CA िनधाŊįरती की ओर से /Revenue by Shri Vinod Kumar, Sr. DR सुनवाई की तारीख /Date of Hearing 18.07.2024 घोषणा की तारीख /Date of Pronouncement 07.08.2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: This appeal by the assessee emanates from the order passed under section 250 of the Income-tax Act, 1961 (in short, “the Act”) dated 22.09.2023 for assessment year 2005-06 by the National Faceless Appeal Centre (NFAC), Delhi / Commissioner of Income Tax(Appeals) (in short, “CIT(A)”), which in turn arises from the order of penalty levied u/s 271(1)(c) of the Act by Assessing Officer (in short, “AO”) on 31.07.2018. The grounds of appeal raised by the assessee are as under:- 2 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi “1. On facts and circumstances of the case as well as per law on the subject, the Ld CIT(A) has erred in confirming the action of Assessing Officer in levying penalty u/s 271(1)(c) when Assessing Officer has not specified in the notice u/s 274 r.w.s 271(1)(c) whether the penalty was leviable for concealment of income or for furnishing inaccurate particulars thereof. 2. On the facts and circumstances of the case as well as law on the subject, the Ld.CIT(A) has erred in confirming the action of Assessing Officer in levying penalty of RS.4,09,053/- u/s 271(1)(c) of the I.T. Act, 1961. 3. It is therefore prayed that penalty levied by the Assessing Officer and confirmed by CIT(A) may please be deleted. 4. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.” 2. Facts in brief are that the assessee filed her return of income of Rs.1,10,640/- on 27.10.2005 for AY 2005-06. The case was selected for scrutiny and notices u/s 143(2) and 142(1) of the Act were issued and served on the assessee. Subsequently, questionnaire was also issued to the assessee requiring her to submit various details. The AO found that assessee had taken unsecured loan of Rs.12,25,000/- from three persons during the year. The AO observed that the assessee in her statement on oath u/s 131 of the Act admitted that she had taken entries from above three parties for her business since she was not having enough capital at hand. The AO added this sums to the total income u/s 68 of the Act. He also added some small expenses and determined total income at Rs.13,59,770/-. He initiated penalty proceedings u/s 271(1)(c) of the Act separately “for furnishing 3 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi inaccurate particulars of income thereby concealing the income”. The assessee filed appeal before CIT(A) who partly allowed the appeal of assessee which was further contested before Tribunal by the assessee. The appeal as well as Miscellaneous Application (MA) have been dismissed by the Tribunal. In the meanwhile, the AO issued fresh show- cause notice for penalty u/s 271(1)(c) of the Act on 24.07.2018. In reply, assessee submitted that it had filed MA before Tribunal which is pending. The AO observed that assessee could not submit any concrete evidence regarding the unsecured loan and hence she has furnished inaccurate particulars of income. Further, since assessee has not filed appeal before the Hon’ble High Court against the addition, AO was satisfied that default committed by assessee is punishable u/s 271(1)(c) of the Act. Accordingly, he levied penalty on the concealed income of Rs.12,25,000/- at the minimum rate of 100% of the tax sought to be evaded, which comes to Rs.4,09,053/-. In the appellate proceedings before CIT(A), the assessee had challenged the penalty order both on validity of the penalty order where penalty has been imposed for concealment whereas it was initiated for furnishing inaccurate particulars of income and on merit of the penalty. The CIT(A) has dismissed both the grounds. Regarding the jurisdictional issue, he has relied on the decisions of Hon’ble Andhra Pradesh High Court in cases 4 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi of CIT vs. Chandulal (1985) 152 ITR 238 (AP) and Srinivasa Pitty & Sons vs. CIT 173 ITR 306 (AP) and dismissed the ground raised by assessee. Regarding merit of the penalty, he has held that it is a clear case of concealment of income as per Section 271(1)(c) of the Act. Thus, both the grounds and appeal were dismissed. Aggrieved by the order of CIT(A) assessee has filed present appeal before the Tribunal. 3. The Ld.AR of the assessee submitted that addition of unsecured loan was based on the statement recorded u/s 131 of the Act where assessee admitted that she had taken entries from three parties for her business. However, as per the assessee no such statement was recorded and AO has not supplied copy of such statement to the assessee. The Ld.AR of the assessee submitted that AO issued the show-cause notice u/s 274 r.w.s. 271(1)(c) on 31.12.2007 recording that assessee had concealed particulars of income or furnished inaccurate particulars of income. The relevant portion of the limb was not struck off. In assessment order, AO recorded that assessee “has furnished inaccurate particulars of income thereby concealing the income”. Therefore, in both assessment order and penalty notice, AO has not specified the particular limb on which penalty proceedings initiated. The Ld.AR of the assessee relied on the following decisions in support of above contention and urged that penalty proceedings are 5 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi not valid (i) Dilip N. Shroff vs. JCIT case No.2746 of 2007 dated 18.05.2007 (SC); (ii) CIT vs. SSA’S Emerald Meadows 73 taxmann.com 248 (SC); (iii) CIT vs. SSA’S Emerald Meadows – 73 taxmann.com 241 (Karn.); (iv) PCIT vs. Blackroak Securities Pvt. Ltd. 157 taxmann.com 564 (Del)); (v) PCIT vs. Jehangir H.C. Jehangir 155 taxmann.com 209 (Bom); (vi) CIT vs. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Karn.) and (vii) Shri Rajesh Pransukha (HUF) vs. ITO in ITA Nos. 2248-2249 & 2329/AHD/2014 dated 31.05.2019. 3.1 Regarding merits of the addition, the Ld.AR of the assessee submitted that no statement was recorded by the AO u/s 131 of the Act. The assessee vide letters date 15.10.2013, 10.05.2016, 03.11.2017 and 27.05.2021 requested the AO to supply copy of the statement recorded on oath. However, assessee has not been provided copy of the said statement till date. The AO has not made any comment on this aspect of the matter. Even otherwise, merely stating entries would not mean “accommodation entries”. It was also submitted that the husband of assessee stated that loans were repaid in subsequent year and therefore addition cannot be made u/s 68 of the Act in view of the decision of Hon’ble jurisdictional High Court in case of CIT vs. Ayachi Chandrashekhar Narsangji 42 taxmann.com 251 (Guj). The Ld.AR of the assessee also submitted that penalty proceedings and assessment 6 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi proceedings are separate and assessee is entitled to file further explanation and lead further evidence in course of penalty proceedings. For this, Ld.AR of the assessee relied on the decisions in the cases of T. Ashok Pai vs. CIT 292 ITR 11 (SC) and CIT vs. Parmanand M Patel 278 ITR 3 (Guj). 4. On the other hand, Ld. Sr-DR for the Revenue relied on the order of the lower authorities and submitted that since the impugned addition has been upheld by the CIT(A) and Tribunal, penalty imposed u/s 271(1)(c) of the Act by AO and confirmed by CIT(A) should be sustained. 5. We have heard the submissions of both the parties and perused the materials on record. We have also deliberated on the decisions relied upon by the Ld.AR of the assessee. It is seen from the assessment order that addition of unsecured loan of Rs.12,25,000/- received by the assessee was added u/s 68 of the Act based on the statement of the assessee u/s 131 of the Act that she had taken entries from the three parties because she was not having much capital at hand for her business. The Ld.AR of the assessee contended that no such statement was recorded and AO has not supplied copy of the 7 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi statement despite the request made on four occasions vide letters dated 15.10.2013, 10.05.2016, 03.11.2017 and 27.05.2021. We find that no comment has been made about such assertion of the assessee in the penalty order. It is well established that penalty proceedings and assessment proceedings are separate and distinct and assessee is entitled to file further explanation and lead further evidence in course of penalty proceedings. The Hon’ble Supreme Court in case of T. Ashok Pai (supra) has held that since burden of proof in penalty proceedings varies from that in the assessment proceedings, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceedings. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. The Hon’ble jurisdictional High Court in case of Parmanand M Patel (supra) has also held that assessment and penalty proceedings are distinct and separate. It is possible for an assessee to lead evidence which is independent of the evidence led in the other proceedings. In the present case, we find that despite repeated request the AO has not supplied copy of the alleged statement recorded on oath where assessee admitted to have taken the unsecured loans as entries for 8 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi business purpose. This is a relevant piece of evidence in absence of which penalty cannot be levied. The assessee has challenged that no such statement was given by her. No prejudice would be caused to the interests of revenue if such statement had, in fact, been recorded. The assessee should have been supplied a copy of the said statement as per the principles of natural justice, which has not been followed in the case. Therefore, levy of penalty without supplying copy of the impugned statement and without eliciting reply of the assessee thereon is not in accordance with law. Be that as it may, the assessee has also stated that the impugned loans were subsequently repaid by the assessee. Such claim has not been rebutted by the Department. The Hon’ble jurisdictional High Court in the case Ayachi Chandrashekhar Narsanghji (supra) has held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. Hence, on merit also assessee is not liable for penalty u/s 271(1)(c) of the Act. In view of the above facts and respectfully following the decisions cited supra, we delete the penalty imposed by AO. This ground of assessee is allowed. 9 ITA No.791/SRT/2023 AY.05-06 Neelamdevi S Modi 6. Since we have decided the issue in favour of assessee on merit, the other ground on jurisdiction becomes academic in nature and does not require any adjudication. 7. In the result, appeal filed by the assessee is allowed. Order is pronounced on 07/08/2024 in the open court. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER स ू रत/Surat Ǒदनांक/ Date: 07/08/2024 DKP Outsourcing Sr.P.S Copy of the Order forwarded to 1. The Assessee 2. The Respondent 3. The CIT(A) 4. CIT 5. DR/AR, ITAT, Surat 6. Guard File By Order // True Copy // Assistant Registrar/Sr. PS/PS ITAT, Surat