Shri Chirag Harmanbhai Patel(HUF), Anand V. The Dy.CIT.,Cent.Circle-1, Baroda

ITSSA 298/AHD/2012

• Counselvise Citation: [2013] 121 COUNSELVISE.COM (IT) 9110 (ITAT-AHMEDABAD)
• Duration Of Justice: 10 month(s) 7 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 26-04-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 15-01-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T SANKAR
• Assessee Lawyers: MUKUND BAXI
• Keywords: Unexplained cash credit; Income from undisclosed sources

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD (BEFORE SHRI MUKUL KUMAR SHRAWAT, JM AND SHRI A. K. GARODIA, AM) IT(SS) A NO.298/AHD/2012 (AY: 2008-2009) AND ITA NO.1323/AHD/2012 (AY:2009-2010) CHIRAG HARMANBHAI PATEL (HUF), 3, JAPAN PARK SOCIETY, NEAR CHAITANY HARIVIHAR, BEHIND DENA PARIVAR, TOWN HALL ROAD, ANAND-388001 PAN: AACHC6712K VS THE DCIT., CIRCLE-1, BARODA (APPELLANT) (RESPONDENT) APPELLANT BY SHRI MUKUND BAXI, A.R. RESPONDENT BY SHRI T. SANKAR, SR. D.R. DATE OF HEARING: 03.4.2013 DATE OF PRONOUNCEMENT: 26-04 -2013 ORDER PER A. K. GARODIA : BOTH THE APPEALS ARE FILED BY THE ASSESSEE AND THE SAME ARE DIRECTED AGAINST THE COMBINED ORDER OF LEARNED CIT( A)-IV, BARODA, DATED 30 TH MARCH, 2012, FOR THE ASSESSMENT YEAR 2008-09 AND 2 009-10. 2. IN BOTH THE APPEALS, ISSUE INVOLVED IS REGARDING IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE I.T. ACT. HE NCE, BOTH THE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WA Y OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. THE GROUNDS RAISED BY THE ASSESSEE FOR THE ASSES SMENT YEAR 2008- 09 ARE AS UNDER: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHMEDABAD HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. A.O. IN THE LEVY O F PENALTY U/S. 27(1)(C) IN VIOLATION OF LAW INASMUCH AS THAT THE PENALTY LEVIED IS WITHOUT SPECIFYING THE C HARGE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS. THE PENALTY COULD NOT HAVE BEEN LEVIED IN SUCH CIRCUMSTANCES AS HELD BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. VS. CIT 282 ITR 642 AND THUS DESERVES TO BE QUASHED. 2. WITHOUT PREJUDICE TO THE ABOVE THE LD. COMMISSIO NER OF INCOME TAX (APPEALS)-IV, AHMEDABAD HAS FURTHER ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. A.O. IN THE LEVY OF PENALTY U/S.27(1)(C) ON THE FAILURE TO: (A) SUBSTANTIATE THE CREDITS IN TERMS OF SEC.68 OF THE I.T. ACT AMOUNTING TO RS. 6,35,000/- IS CONCEALMENT OF PARTICULARS OF INCOME AND (B) SATISFACTORILY EXPLAIN THE SOURCE OF INVESTMENT OF RS.2,16,838/- IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY SO CONFIRMED ON SUCH ADDITIONS IS PRAYED TO BE CANCELLED'. 3. YOUR APPELLANT CRAVES LIBERTY TO ADD, ALTER, AME ND OR SUBSTITUTE OR WITHDRAW ANY OF THE GROUNDS OF APPEAL HEREINABOVE CONTAINED. 4. SIMILARLY, THE GROUNDS RAISED BY THE ASSESSEE FO R THE ASSESSMENT YEAR 2009-10 ARE ALSO REPRODUCED BELOW: 1. THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, AHMEDABAD HAS ERRED IN LAW AND IN FACTS IN CONFIRMI NG THE ACTION OF THE LD. A.O. IN THE LEVY OF PENALTY U /S. 27(1)(C) IN VIOLATION OF LAW INASMUCH AS THAT THE P ENALTY LEVIED IS WITHOUT SPECIFYING THE CHARGE OF CONCEALM ENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS. THE PENALTY COULD NOT HAVE BEEN LEVIED IN SUCH CIRCUMSTANCES AS HELD BY THE HONBLE GUJARAT HIGH C OURT IN THE CASE OF NEW SORATHIA ENGINEERING CO. VS. CIT 282 ITR 642 AND THUS DESERVES TO BE QUASHED. 2. WITHOUT PREJUDICE TO THE ABOVE THE LD. COMMISSI ONER OF INCOME TAX (APPEALS)-IV, AHMEDABAD HAS FURTHER ERRED IN LAW AND IN FACTS IN CONFIRMING THE ACTION OF THE LD. A.O. IN THE LEVY OF PENALTY U/S.27(1)(C) ON THE FAILURE TO: (A) SUBSTANTIATE THE CREDITS IN TERMS OF SEC.68 OF THE I.T. ACT AMOUNTING TO RS.7,01,000/- IS CONCEALMENT OF PARTICULARS OF INCOME AND (B) SATISFACTORILY EXPLAIN THE SOURCE OF INVESTMENT OF RS.2,24,222/- IS FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE PENALTY OF RS.2,00,000/- SO CONFIRMED ON SUCH ADDITIONS IS PRAYED TO BE CANCELLED'. 3. YOUR APPELLANT CRAVES LIBERTY TO ADD, ALTER, AME ND OR SUBSTITUTE OR WITHDRAW ANY OF THE GROUNDS OF APP EAL HEREINABOVE CONTAINED. 5. IT WAS SUBMITTED BY LEARNED A.R. FOR THE ASSESSE E THAT IN PARAGRAPH NO.9 AND 10 OF THE PENALTY ORDER OF BOTH THE APPEAL S, IT IS OBSERVED BY THE A.O. THAT THE ASSESSEE DID NOT ONLY CONCEAL THE PAR TICULARS OF ITS INCOME BUT ALSO FURNISHED INACCURATE PARTICULARS OF SUCH I NCOME, AND THEREFORE, THE OBJECTION OF THE A.O. DID NOT SPECIFY AS TO WHE THER ASSESSEE HAS CONCEALED THE INCOME OR HAS FURNISHED INACCURATE PA RTICULARS OF INCOME, AND THEREFORE, THE PENALTY ORDER IN BOTH THE YEARS IS BAD IN LAW AS PER THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NEW SORATHIA ENGINEER CO. VS. CIT REPORTED IN (2006) 282 ITR 0642 , AND THEREFORE, THE SAME MAY BE QUASHED IN BOTH THE YEAR S. 6. IN REPLY, LEARNED D.R. FOR THE REVENUE SUPPORTED THE ORDER OF AUTHORITY BELOW. IT WAS SUBMITTED BY LEARNED D.R. T HAT AS PER THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN K.M. SHAH & COMPANY VS. CIT REPORTED IN (1999) 238 ITR 415 , IT WAS HELD BY HONBLE GUJARAT HIGH COURT THAT THERE CANNOT BE A STRAITJACKET FORMULA F OR DETECTION OF THESE DEFAULTS OF CONCEALMENT OR OF FURNISHING INACCURATE PARTICULARS OF INCOME AND THEREFORE, CONCEALMENT OF PARTICULARS OF INCOME AND FURNISHING INACCURATE PARTICULARS OF INCOME MAY AT TIMES OVERL AP. HE FURTHER SUBMITTED THAT AS PER THE JUDGMENT OF HONBLE GUJAR AT HIGH COURT WHEN OBJECTION IS ABOUT BOTH THE DEFAULTS, THE PENALTY I S JUSTIFIED AND ONLY WHEN THE A.O. IS NOT SPECIFIC AS TO WHETHER THE ASSESSEE IS GUILTY OF BOTH DEFAULTS OR ANY ONE PARTICULAR DEFAULT THEN ONLY IT CAN BE SAID THAT THE PENALTY ORDER IS DEFECTIVE. 7. LEARNED A.R. FOR THE ASSESSEE HAS PLACED RELIANC E ON A TRIBUNAL DECISION IN WHICH THE PENALTY PROCEEDINGS WERE QUAS HED BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NEW SORATHIA ENGINEER CO. VS. CIT (SUPRA) & CIT VS. MAN U ENGINEERING WORKS REPORTED IN (1980) 122 ITR 306 . HE SUBMITTED THE COPY OF FIVE DECISIONS PASSED BY THE TRIBUNAL IN THE PAPER BOOK. 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS REGARDI NG THE TECHNICAL ASPECT AND WE FIND THAT IN THE PRESENT CASE, THE AL LEGATION OF THE A.O. IN THE PENALTY ORDER IS SPECIFIC THAT ASSESSEE IS GUIL TY OF CONCEALING THE PARTICULARS OF HIS INCOME AND ALSO FURNISHING INACC URATE PARTICULARS OF HIS INCOME. HENCE, AS PER THE A.O., THE ASSESSEE HAD CO MMITTED BOTH THE DEFAULTS AND SUCH ALLEGATION OF A.O. IS SPECIFIC AN D IT CANNOT BE SAID THAT THE ALLEGATION OF THE A.O. IS NOT SPECIFIC. HENCE, IN OUR CONSIDERED VIEW, WE FIND THAT IN THE FACTS OF THE PRESENT CASE, THIS ISSUE IS COVERED IN FAVOUR OF THE REVENUE AND AGAINST THE ASSESSEE BY THE JUDG MENT RENDERED IN K.M. SHAH (SUPRA) AND OTHER TWO JUDGMENTS OF HONBL E GUJARAT HIGH COURT IN CASE OF NEW SORATHIA ENGINEERING CO. (SUPRA) AND MANU ENGINEERING (SUPRA) ARE NOT APPLICABLE IN THE PRESENT CASE. FOR THE SAME REASON, THE TRIBUNALS DECISIONS CITED BY THE LEARNED COUNSEL FOR THE ASSE SSEE AND COPY FURNISHED IN THE PAPER BOOK ARE ALSO NOT APPLI CABLE IN THE PRESENT CASE BECAUSE THE TRIBUNALS DECISION HAS FOLLOWED T HE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NEW SORA THIA ENGINEER CO. (SUPRA). 9. NOW WE SHOULD DECIDE ABOUT THE MERIT OF THE PENA LTY IN THE PRESENT CASE. WE FIND THAT THE PENALTY HAS BEEN LEVIED IN R ESPECT OF UNEXPLAINED CASH CREDIT FROM VARIOUS PERSONS. LEARNED A.R. FOR THE ASSESSEE HAS PLACED RELIANCE UPON THE TRIBUNALS DECISION IN THE CASE OF I.T.O. VS. CHHAIL BEHARI REPORTED IN (2010)129 TTJ(AGRA) 389. AS AGAI NST THIS, LEARNED DR FOR THE REVENUE HAS PLACED RELIANCE UPON THE FOLLOW ING JUDGMENTS: (A) SNITA TRANSPORT (P) LTD., TAX APPEAL NO.474 OF 2012 DATED 11.12.2012 (COPY FILED), (B) CIT VS. BECHARBHAI P. PARMAR REPO RTED IN 341 ITR 499 AND (C) CHARANDAS HARIDAS VS. CIT REPORTED IN [1960] 39 ITR 202 (SC) (D) CIT VS. CHANDRA VILAS HOTEL REPORTED IN 291 ITR 202 . 10. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS REGARD ING MERIT OF THE PENALTY ORDER AND WE FIND THAT IT WAS HELD BY THE T RIBUNAL IN THE CASE OF ITO VS. CHHAIL BIHARI (SUPRA) THAT THE DIFFERENCE BETWE EN THE TWO LIMBS OF SECTION 271(1)(C) IS NOT ERASED BY THE RETROSPECTIV E AMENDMENT. THESE TWO LIMBS ARE STATED TO BE CONCEALMENT OF INCOME AN D FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE TRIBUNAL IN T HIS CASE HAS SIMPLY FOLLOWED THE JUDGMENT OF HONBLE GUJARAT HIGH COURT RENDERED IN THE CASE OF NEW SORATHIA ENGINEERING CO. (SUPRA). WE HAVE AL READY DISCUSSED THAT THE JUDGMENT OF HONBLE HIGH COURT IN NEW SORATHIA ENGINEERING CO. (SUPRA) IS NOT APPLICABLE IN THIS PRESENT CASE AND THEREFORE, THE TRIBUNAL DECISION IS ALSO NOT APPLICABLE IN THE PRESENT CASE . 11. WHEN WE EXAMINE THE ASSESSMENT ORDER, WE FIND T HAT IT IS NOTED BY THE A.O. IN PARAGRAPH 4 OF THE ASSESSMENT ORDER THA T THE ASSESSEE HAS SHOWN UNACCOUNTED INCOME OF RS.2,24,222/- IN THE PR OFIT & LOSS ACCOUNT. WE FURTHER NOTED THAT THE ASSESSEE HAD EXPLAINED TH AT HE HAS RECONCILED THE AUTO SWEEP ACCOUNT IN KOTAK MAHINDRA BANK LTD A LONG WITH THE BANK STATEMENT AND ACCORDINGLY, EXCESS CREDIT APPEARING IN THE AUTO SWEEP ACCOUNT WITH THE KOTAK MAHINDRA BANK LTD., WHICH RE PRESENTED THE INTEREST INCOME CREDITED BY THE BANK IN THE PAST AS WELL AS FOR THE YEAR UNDER CONSIDERATION AND THEREFORE, THE SAME IS CRED ITED UNDER THE HEAD UNACCOUNTED INCOME BECAUSE THE ASSESSEE WAS NOT KNOWING AS TO WHICH PORTION OF THIS INCOME IS RELATED TO WHICH YE AR. IN ADDITION TO THIS, THERE IS ONE MORE ADDITION IN RESPECT OF UNSECURED LOAN RECEIVED BY THE ASSESSEE FROM THREE PERSONS IN ASSESSMENT YEAR 2009 -10 OF RS.7.01 LAC. IT IS NOTED BY THE A.O. IN THE ASSESSMENT ORDER THA T THE ASSESSEE WAS ASKED TO ESTABLISH THE IDENTITY AND CREDITWORTHINES S OF THE THREE PERSONS AND GENUINENESS OF THE TRANSACTIONS AND DESPITE SEV ERAL OPPORTUNITIES, THE ASSESSEE HAS NOT FURNISHED ANY MATERIAL TO SUBSTANT IATE HIS CLAIM REGARDING THE RECEIPT OF UNSECURED LOAN. SIMILARLY, IN ASSESSMENT YEAR 2008-09, IT IS NOTED BY THE A.O. THAT THE ASSESSEE HAD RECEIVED UNSECURED LOAN FROM FOUR PERSONS OF RS.6.35 LACS AND DESPITE SEVERAL OPPORTUNITIES, THE ASSESSEE HAD NOT FURNISHED ANY MATERIAL TO SUBS TANTIATE HIS CLAIM OF THE AMOUNT BEING RECEIVED AS LOAN IN SPITE OF THIS THAT THE ASSESSEE WAS ASKED TO ESTABLISH THE IDENTITY OF THE LOAN CREDITO RS AND THEIR CREDITWORTHINESS AND ALSO GENUINENESS OF THESE TRAN SACTIONS. IN THIS YEAR, THE A.O. HAS MADE ONE MORE ADDITION OF RS.2,16,838/ - ON ACCOUNT OF NEGATIVE CASH BALANCE. ONE MORE ADDITION WAS MADE O F RS.4,58,030/- IN RESPECT OF SUNDRY CREDITORS BY INVOKING SECTION 41( 1) OF THE I.T. ACT, 1961. 12. IN COURSE OF PENALTY PROCEEDINGS, THE ASSESSEE HAS RAISED OBJECTION ON TECHNICAL ASPECTS AS TO WHETHER THE PE NALTY PROCEEDINGS IS FOR THE CONCEALMENT OF INCOME OR FOR FURNISHING OF INAC CURATE PARTICULARS OF INCOME BUT NO SUBMISSION WAS MADE ON THE MERIT OF T HE PENALTY. WHEN WE EXAMINE THE FACT OF THE PRESENT CASE, WE FIND THAT REGARDING UNSECURED LOAN IN BOTH YEARS, THE ASSESSEE HAS NOT EVEN MADE AN ATTEMPT TO FULFILL THE REQUIREMENT OF LAW BY ESTABLISHING THE IDENTITY AND CREDITWORTHINESS OF THE LOAN CREDITORS AND GENUINENESS OF THE TRANSACTI ON. THERE IS ONE MORE ADDITION, I.E., REGARDING UNACCOUNTED INCOME CREDIT ED BY THE ASSESSEE AND NOT DECLARED THE SAME FOR TAX PURPOSE AND SIMILARLY THE ASSESSEE HAD NEGATIVE CASH BALANCE IN ASSESSMENT YEAR 2008-09 SH OWN UNDER THAT HEAD IN BALANCE SHEET WITHOUT INCLUDING THE SAME IN THE INCOME OF THE ASSESSEE. THERE IS NO EXPLANATION OF THE ASSESSEE AS TO HOW THE PENALTY IS NOT LEVIABLE AND THERE IS A CLEAR CUT CASE OF CO NCEALMENT OF INCOME AS WELL AS FURNISHING OF INACCURATE PARTICULARS OF INC OME. AS PER EXPLANATION 1 TO SECTION 271(1), IF THE EXPLANATION IS GIVEN, WHI CH IS NOT FOUND TO BE FALSE AND SOME OTHER CONDITIONS ARE FULFILLED BY THE ASSE SSEE, IT CAN BE SAID THAT 271(1)(C) IS NOT APPLICABLE. IN THE PRESENT CASE EV EN NO EXPLANATION IS GIVEN BY THE ASSESSEE. HENCE, SECTION 271(1)(C) IS CLEARLY APPLICABLE. 13. HOWEVER, FOR THE ADDITION OF RS.458030 MADE BY THE A.O. IN A.Y. 2008-2009 BY INVOKING THE PROVISION OF SECTION 41(1 ) OF THE I.T. ACT, WE FEEL THAT IN RESPECT OF THIS ADDITION, THE PENALTY IS NOT JUSTIFIED BECAUSE SUCH LIABILITY IS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE AND HENCE, IT CANNOT BE SAID THAT THE LIABILITY HAS CONCLUSIVE LY CEASED TO EXIST AND HENCE ALTHOUGH THE ADDITION IS NOT IN DISPUTE BUT I N THESE FACTS, IT DOES NOT AMOUNT TO CONCEALMENT AND HENCE, FOR THIS ADDITION, PENALTY IS NOT JUSTIFIED. WE, THEREFORE, DELETE THE PENALTY IN A.Y . 2008-09 IN RESPECT OF THIS ADDITION OF RS.4,58,030/- MADE BY THE A.O. BY INVOKING THE PROVISION OF SECTION 41(1) OF THE IT ACT BUT THE BALANCE PENA LTY IN BOTH YEARS IS UPHELD. 14. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR T HE A.Y. 2008-09 IS PARTLY ALLOWED WHEREAS APPEAL OF THE ASSESSEE FOR T HE A.Y.2009-10 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENTIONED ON CAPTION PAGE. SD/- SD/- (MUKUL KUMAR SHRAWAT) JUDICIAL MEMBER (A.K. GARODIA) ACCOUNTANT MEMBER TRUE COPY PRABHAT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, AHMEDABAD