RAMJI HARAKCHAND SHAH,MUMBAI V. ACIT 30(3), MUMBAI

ITA 5362/MUM/2024

AI Insights

The case revolves around a penalty imposed on Ramji Harakchand Shah by the Assessing Officer (AO) under section 271(1)(c) for the Assessment Year 2013-14, following an addition of Rs. 71,75,000 under section 2(22)(e) of the Income Tax Act. The AO had treated the outstanding debit balance from M/s. Shah Housecon Pvt. Ltd. as deemed dividend, leading to the penalty for alleged concealment and furnishing of inaccurate particulars of income. The Commissioner of Income Tax (Appeals) upheld the penalty, which was contested in the Tribunal. The Tribunal concluded that the assessee had provided all necessary disclosures and explanations, and the mere application of a deeming provision did not constitute grounds for the penalty.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 473400 (ITAT-MUMBAI)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Laws Referred To: Section 271(1)(c), Section 2(22)(e)
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R.R. MAKWANA
• Assessee Lawyers: SIMRAN DHAVAN
• Keywords: Reasonable cause
• Section: 2(22)(e)

Judgement Text

" IN THE INCOME TAX APPELLATE TRIBUNAL, ‘D’ BENCH MUMBAI BEFORE: SHRI AMIT SHUKLA, JUDICIAL MEMBER & SHRI GIRISH AGRAWAL, ACCOUNTANT MEMBER ITA No. 5362/MUM/2024 (Assessment Year : 2013-14) Ramji Harakchand Shah A-Wing, 1st Floor, Shah Arcade, Rani Sati Marg, Malad (East), 400097. Vs. ACIT 30(3) Pratyakshakar Bhavan, Bandra Kurla Complex, Bandra(East), Mumbai-400051. PAN/GIR No. AAFPS8246R (Appellant) .. (Respondent) Assessee by Ms. Simran Dhavan Revenue by Shri. R.R. Makwana, Sr. DR Date of Hearing 29/01/2025 Date of Pronouncement 28/02/2025 आदेश / O R D E R PER AMIT SHUKLA (J.M): The aforesaid appeal has been filed by the assessee against order dated 14/08/2024 passed by CIT(A)-53, Mumbai in relation to the penalty proceedings u/s.271(1)(c) for the A.Y.2013-14. ITA No.5362/MUM/2024 M/s. Ramji Harakchand Shah 2 2. Assessee is aggrieved by levy of penalty of Rs.25,29,075/- levied by the ld. AO on account of addition of Rs.71,75,000/- made u/s.2(22)(e). 3. The brief facts are that during the course of quantum proceedings ld. AO noted that assessee had shown unsecured loans of Rs.71,75,000/- from M/s. Shah Housecon Pvt. Ltd. He further noted that assessee is one of the Director of the said company having more than 10% shareholding in this company. On perusal of the ledgers, he found that during the year assessee has paid Rs.57,50,000/- to the company and received an amount of Rs.1,26,75,000/- from the said company leaving closing balance of Rs.71,75,000/-. He also found that M/s. Shah Housecon Pvt. Ltd. had shown surplus of Rs.4.14 Crores for year ending as on 31/03/2013 and Rs.4.18 Crores for the year ending 31/03/2012. Accordingy, he invoked the deeming provision of Section 2(22)(e) and made addition of Rs.81,75,000/- u/s. 2(22)(e) in the following manner:- Name of the Company Date of debit balance Peak of debit balance in (Rs.) M/s. Shah Housecon Pvt. Ltd 05.05.2012 10,00,000 (peak balance theory applied) 02.03.2013 71,75,000 Total 81,75,000 4. On this disllowance penalty u/s.271(1)(c) has been levied by the ld. AO both for concealment and furnishing of inaccurate particulars of income. The ld. CIT(A) too has confirmed the said ITA No.5362/MUM/2024 M/s. Ramji Harakchand Shah 3 penalty. The finding of the ld. CIT(A) is completely off tangent wherein, he is discussing the concept of mens rea and reasonable cause u/s.273B which has no relevance in the case of penalty levied u/s.271(1)(c). 5. From the perusal of the records, it is seen that simply because there was an outstanding debit balance wherein assessee has paid amount of Rs.57,50,000/- and received Rs.1,26,75,000/-, the difference has been treated as deemed dividend. Not only that he has worked out some peak debit balance in the ledger of company and has added further amount of Rs.10,00,000/-. From the records it is seen that assessee has filed loan confirmation from the company and the purpose for which the loan was given. Once assessee has furnished all the particulars of income then simply because deeming provision has been invoked it cannot be held that assessee has furnished any inaccurate particulars of income. Here in this case one very important fact is that in the assessment order ld. AO has initiated penalty on both the charges, i.e., filing of inaccurate particulars of income and concealment of income. In the show- cause notice, no specific charge has been specified and even in the penalty order it is not clear on which specific charge penalty has been levied and on one stroke he has stated that penalty has been levied on both the charges. The law is well setled that ld. AO has to specify the charge under which limb he has initiated the penalty proceedings u/s.271(1)(c) and then after receiving the explanation he has to levy penalty on that particular charge only. The assessee has raised this issue before the ld. CIT(A) and ITA No.5362/MUM/2024 M/s. Ramji Harakchand Shah 4 also before us which has been rejected or clarifying that penalty is leviable on particular charge only. Thus, without specifying the charge neither the penalty can be levied nor can it be sustained. In any case it cannot be a case of concealment of income because there is no income which has been concealed, because assessee has duly disclosed the loan received from the company and explined the reasons fot outsatnding debit balance; nor can it be the case of furnishing of inaccurate particulars of income, because all the particulars were furnidhed. Simply because loan has been received and there was a debit balance at the year end and deeming friction has been applied, the penalty u/s.271(1)(c) cannot be levied. Accordingly, same is deleted. 6. In the result, appeal of the assessee is allowed. Order pronounced on 28.02.2025. Sd/- (GIRISH AGRAWAL) Sd/- (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER Mumbai; Dated 28/02/2025 KARUNA, sr.ps Copy of the Order forwarded to : 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// ITA No.5362/MUM/2024 M/s. Ramji Harakchand Shah 5 BY ORDER, (Asstt. Registrar) ITAT, Mumbai "