SURESHBHAI MANIBHAI PATEL,SURAT V. INCOME TAX OFFICER, WARD 1, BARDOLI

ITA 731/SRT/2024

AI Insights

The case involves two appeals by Sureshbhai Manibhai Patel against the orders of the Income Tax Officer (ITO) and the Commissioner of Income Tax (Appeals) regarding the assessment year 2010-11. The appeals were related to the reopening of the assessment under section 147, issuance of notice under section 148, and additions made to the income on account of unexplained cash deposits and undisclosed contract income. The Tribunal upheld the additions in the first appeal but quashed the penalty in the second appeal, citing that the additions were made on an estimated basis.

• Counselvise Citation: [2024] 140 COUNSELVISE.COM (IT) 26813 (ITAT-SURAT)
• Duration Of Justice: 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-11-2024
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 04-11-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 28-06-2024
• Other Referred Cases: CIT vs. Samson Perinchery, Ruchit Dineshbhai Doshi vs. ITA No.216/SRT/2023, Asian Granito India Ltd. vs. DCIT, CIT vs. Subhas Trading Co., CIT vs. K. R. Chinni Krishna Chetty
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MUKESH JAIN
• Assessee Lawyers: P. M. JAGASHETH
• Keywords: Unexplained cash credit; Revision of order
• Section: 147; 148; 142(1); 250; 263; 271(1)(c); 274

Judgement Text

" IN THE INCOME-TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND SHRI BIJAYANANDA PRUSETH, ACCOUNTANT MEMBER आयकर अपील सं./ITA Nos.731 & 732/SRT/2024 Assessment Year: (2010-11) (Physical Hearing) Sureshbhai Manibhai Patel, At & Po – Vanskui, Vanskui Ta Mahuva, Dist – Surat, Surat - 394210 Vs. The ITO, Ward – 1, Bardoli èथायीलेखासं./जीआइआरसं./PAN/GIR No: ANBPP7561M (Appellant) (Respondent) Appellant by Shri P. M. Jagasheth, CA Respondent by Shri Mukesh Jain, Sr. DR Date of Hearing 04/11/2024 Date of Pronouncement 18/11/2024 आदेश / O R D E R PER BIJAYANANDA PRUSETH, AM: These two appeals by the assessee emanate from the common order passed under section 250 of the Income-tax Act, 1961 (in short, ‘the Act’) dated 30.04.2024 by the Learned Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi [in short, ‘CIT(A)’] for the assessment years (AY) 2010-11. 2. The grounds of appeal raised by the assessee in ITA No.731/Srt/2024, are as under: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in reopening the Assessment u/s.147 of the Act and issuing notice u/s.148 of the Act. 2. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in 2 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel confirming the action of the Assessing Officer in making addition of Rs. 10,59,000/- on account of cash deposited in bank account created as alleged unexplained cash credit. 3. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.13,614/- on account of alleged undisclosed contract income. 4. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of the Income Tax (Appeals) has erred in confirming the action of the Assessing Officer in making addition of Rs.4,016/- on account of alleged undisclosed contract income. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” 3. The grounds of appeal raised by the assessee in ITA No.732/SRT/2024, are as under: “1. On the facts and in the circumstances of the case as well as the law on the subject, the learned Commissioner of Income Tax (appeals) has erred in levying Penalty of Rs.2,33,799/- u/s 271(1)(c) of the Income Tax Act, 1961. 2. It is therefore prayed that the above penalty may please be deleted as learned members of the tribunal may deem it proper. 3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of the hearing of the appeal.” ITA No. 731/SRT/2024 for AY.2010-11: 4. Brief facts of the case are that assessee has not filed his return of income for AY.2010-11. The Assessing Officer (in short, ‘AO’) noticed that the assessee had made total cash deposits of Rs.10,59,000/- in his bank account maintained with ICICI Bank. The assessee earned income from contract receipt at Rs.1,70,180/- u/s 194 C of the Act from Shree Mahuva Pradesh Sahakari Khand Udyog Mandli Limited. The case of the assessee was reopened u/s 147 of the Act and notice u/s 148 of the Act issued on 28.03.2017. No return was filed in 3 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel response to the notice issued u/s 148 of the Act. Thereafter, a notice u/s 142(1) was issued to the assessee on 28.06.2017, which also remained unanswered. Thereafter, a show cause notice was issued on 10.07.2017, requesting the assessee as to why the deposit in the bank account and income earned from contract receipt should not be added to total income. However, during the assessment proceedings, the assessee neither attended nor furnished any details. After observing that assessee had not complied with the statutory notices and show cause notice issued to him, the AO completed the assessment u/s 144 of the Act by making addition of Rs.10,59,000/- on account of unexplained cash deposits, Rs.13,614/- as income from contract receipt @ 8% of the total contract receipt of Rs.1,70,180/- and Rs.4,016/- towards bank interest. Total income was determined at Rs.10,76,630/-. The AO also initiated penalty proceedings u/s 271(1)(c) of the Act for concealment of income. 5. Aggrieved by the order of AO, the assessee filed this appeal before the CIT(A). The CIT(A) issued notices of hearing dated 18.05.2023 and 24.04.2024, but assessee did not complied to the said notices. The CIT(A) observed that assessee filed multiple adjournment letters without valid reasons. He had, therefore, disposed of the appeal based on the material on records. He has reproduced assessment order and observed that another order u/s 147 r.w.s. 263 was passed by the PCIT, Surat-2, wherein the PCIT held that order passed by the AO was erroneous and prejudicial to the interests of revenue because he had considered only Rs.10,76,630/- whereas the total amount credited in the bank account with ICICI Bank was Rs.36,39,830/-. The AO had not inquired or 4 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel verified the total deposit nor added to the total income, the differential amount of Rs.23,98,004/-. The PCIT directed AO to inquire into and verify the source of deposit of the above amount and complete the assessment thereafter. Aggrieved by order of PCIT u/s 263 of the Act, assessee filed appeal before the ITAT who has allowed appeal of assessee in ITA No.103/SRT/2021, dated 16.10.2023. the ITAT observed that the bank account maintained with ICICI Bank was examined by the AO and after examination, the addition of Rs.10,59,000/- was made. The amount of addition comes to 30% of the total credit; therefore, a reasonable addition was made by AO. The AO has taken a plausible view and taxed the total receipt @ 30%. The order passed by AO was, therefore, not erroneous. Following the observation of the ITAT, the CIT(A) did not find any infirmity in the order of AO. Accordingly, the CIT(A) confirmed the addition of Rs.10,76,630/- on account of unexplained cash deposit/credit made by the AO. 6. Aggrieved by the order of Ld. CIT(A), the assessee filed appeal before the Tribunal. 7. Ground No.1 is regarding confirmation of the action of AO is reopening the assessment u/s 147 of the Act and issuing notice u/s 148 of the Act. The assessee had not filed any return of income for the yar under consideration. As per the information with the Income-tax Department, AO found that assessee had made cash deposit of Rs.10,59,000/- in the bank account maintained with ICICI Bank. The assessee also earned income from contract receipt of Rs.1,70,180/-. Hence, the case was reopened u/s 147 of the Act. During the 5 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel appellate proceedings, the Ld. AR of assessee submitted that assessee is an agriculturist and his income was exempt, because of which he did not file return of income. No further submission or details have been given to explain as to what was the extent of agricultural holding, details of agricultural expenses and sale of agricultural produce etc. during the proceedings before the AO or CIT(A) or the ITAT. It may be stated that the assessee had deposited huge sum of Rs.36,39,830/- in his bank account with ICICI Bank. Therefore, it is difficult to accept that the income of the assessee was below taxable income. In view of the above fact and since the appellant has not seriously pursued the matter by filing explanation and details, the ground is dismissed. 7.1 In the result, the ground no.1 is raised by the assessee is dismissed. 8. Ground No.2 pertains to addition of Rs.10,59,000/- as unexplained cash deposit. Facts have been discussed earlier in this order and hence not repeated here. 8.1 The Learned Authorized (Ld. AR) of the assessee submitted that assessee did not file return of income because he is an agriculturist and the agricultural income earned by him is exempt from tax. He further stated that the CIT(A) passed the order on the date of hearing of the last notice. He further submitted that there was total cash withdrawal of Rs.23,90,000/- against which assessee has deposited Rs.10,59,000/- in the bank account. He requested to delete the addition or in the alternative, restrict the addition to 40% of the agricultural income of Rs.10.59 lakhs. 6 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel 8.2 On the other hand, Learned Senior Departmental Representative (Ld. Sr. DR) of the revenue supported the order of lower authorities and the order of ITAT (supra). He submitted that the ITAT has clearly held the order of AO is not erroneous. It held that AO has taxed 30% of the deposits in the bank account maintained with ICICI Bank, which is sufficient to safeguard the interests of revenue. This has been accepted by the CIT(A) and hence he has confirmed the addition. He requested to upheld the decision of CIT(A). 8.3 We have heard both the parties and perused the materials available on record. We have also carefully through the orders of the CIT(A) and the ITAT. There is no dispute regarding the fact that in the savings bank account no.020601500612, maintained by the assessee, with the ICICI Bank, there was total credit to the tune of Rs.36,39,830/-. The AO had added only cash deposit of Rs.10,59,000/-. The Ld. AR has submitted that only 40% of cash deposit should be added; but he has not given any details of the credit entries of Rs.36,39,830/- in the bank account of assessee. However, after considering all the facts, the ITAT in its order has held that a reasonable addition was made by the AO; therefore, the order of AO is not erroneous. It also held that the AO had applied his mind judicially to tax 30% of the total credit in the bank account in the hands of the assessee. In view of these findings by the ITAT, the CIT(A) has upheld the addition. We do not find any reason to differ with the view of the CIT(A) which is in accordance with the finding of the Tribunal. Accordingly, the ground no.2 is dismissed. 8.4 In the result, ground no.2 raised by the assessee is dismissed. 7 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel 9. Ground No.3 and 4 pertains to addition of Rs.13,614/- and Rs.4,016/- being profit on contract receipt of Rs.1,70,180/- and bank interest respectively. The CIT(A) has confirmed addition of Rs.10,76,360/-. No separate argument has been made by the Ld. AR or Ld. Sr. DR. Hence, we do not find any reasons to interfere in the findings of the CIT(A). The grounds are accordingly dismissed. 9.1 In the result, ground nos. 3 & 4 are also dismissed. 9.2 In the result, appeal of the assessee in ITA No.731/SRT/2024, is dismissed. ITA No. 732/SRT/2024 for AY.2010-11: 10. The only issue in this appeal is penalty of Rs.2,33,799/- levied u/s 271(1)(c) of the Act on addition of Rs.10,76,630/- made by the AO in his order u/s 144 r.w.s. 147 of the Act. The AO issued notice u/s 274 r.w.s. 271(1)(c) of the Act fixing hearing on 28.08.2017 and 02.10.2018. But, none attended. Hence, the AO was satisfied at para 7 of the penalty order that assessee has concealed his income and hence liable for penalty u/s 271(1)(c) of the Act. Thereafter, the AO at para 8 of the order, levied penalty u/s 271(1)(c) @ 100% of tax sought to be evaded amounts to Rs.2,33,799/- for furnishing inaccurate particulars of income and thereby concealment of income. The CIT(A) upheld the penalty order of AO because AO’s order u/s 144 r.w.s. 147 was not erroneous, as per observation of ITAT in the appeal against order u/s 263 by the PCIT. He observed that proper explanation regarding cash deposit of Rs.10,76,000/- was not given by assessee. Hence, penalty of Rs.2,33,799/- on account of furnishing of inaccurate particulars of income was confirmed. 8 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel 10.1 Before us, the Ld. AR of the assessee submitted that the AO has initiated penalty for concealment of income whereas he has levied the penalty for furnishing inaccurate particulars of income. He submitted that the CIT(A) has confirmed the penalty on account of furnishing inaccurate particulars of income. Since the ground on which penalty was initiated and the basis on which it has been levied are different, the penalty is liable to be quashed. For this, he relied on the decision of the Bombay High Court in the case of CIT vs. Samson Perinchery, in Tax Appeal No.1154 of 2014 and Ruchit Dineshbhai Doshi, ITA No.216/SRT/2023, dated 25.07.2023. The Ld. AR further submitted that penalty cannot be levied where the addition is on estimate basis. For this, he relied on the decision of ITAT, Ahmedabad in the case of Asian Granito India Ltd. vs. DCIT, in ITA No.619 & 620/AHD/2023, dated 09.10.2024. 11. On the other hand, Ld. Sr. DR for the revenue relied on the orders of the lower authorities. 12. We have heard both sides and perused the record. We have also deliberated the decisions relied upon by Ld. AR. It is well-established that penalty proceedings and assessment proceedings are separate and distinct proceedings and findings in the assessment proceeding are not conclusive for imposition of penalty u/s 271(1)(c) of the Act. Before penalty can be imposed, the entirety of the circumstances must reasonably point to the conclusion that the disputed amount represented income, and the assessee has concealed the particulars of income or has furnished inaccurate particulars of such income. A definite finding about concealment is necessary without which there can be no 9 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel question of imposing any penalty, as held by Hon’ble Madras High Court in case of CIT vs. K. R. Chinni Krishna Chetty, 246 ITR 121 (Mad). 12.1 Before deciding the merit of the penalty, let us discuss the jurisdiction issue raised by the Ld. AR. He submitted that penalty was initiated for concealment of income but was imposed for furnishing inaccurate particulars of income. We have perused the assessment order as well the penalty order. It is seen from para 6 of the assessment order that the AO was satisfied that assessee has concealed particulars of income. At para 8, he has initiated penalty proceedings u/s 271(1)(c) of the Act for concealment of income. In the penalty order, at para 7, it is stated that he was satisfied that the assessee has concealed his income and hence liable for penalty u/s 271(1)(c) of the Act. At para 8, he has levied penalty of Rs.2,33,799/- for furnishing inaccurate particulars of income and thereby concealment of income. It is clear from conjoint reading of both orders that the AO was satisfied about concealment of income of the assessee. He has, therefore, levied penalty for concealment of income by way of furnishing inaccurate particulars of income. The expressions “has concealed the particulars of income” and “has furnished inaccurate particulars of income” have not been defined either in section 271(1)(c) or elsewhere in the Act. However, one thing is certain that these two circumstances lead to the same effect i.e., keeping off a certain portion of income from the knowledge of the Income-tax Authorities. The former is direct and later may be indirect in execution. The end result, however, is keeping off or hiding a portion of the income from the knowledge of the Department. In 10 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel the present case, the AO was satisfied that assessee has concealed his income which is clear from para 6 & 8 of both assessment and penalty order. What he means at para 8 of the penalty order is that assessee has concealed income by furnishing inaccurate particulars of income. Therefore, in our considered view, the AO has not initiated penalty under a different limb and imposed penalty under a separate limb. Therefore, we do not find any merit in the submission of Ld. AR. 12.2 However, we find merit in the other contention of the Ld. AR that the addition was on estimate basis and therefore, penalty u/s 271(1)(c) of the Act cannot be levied on such addition. It is clear from the order of CIT(A), who has followed the order of ITAT in appellant's own case for the subject assessment year. The ITAT had noted that AO took a reasonable and plausible view to tax @ 30% of the total credit entries in the bank account of the assessee. This finding of the ITAT has been referred to and relied upon by the CIT(A) to sustain the addition made by the AO. The AO has levied penalty on the above addition. The same has been confirmed by the CIT(A) again by holding that the order of AO is not erroneous. He further stated that the appellant had no proper explanation regarding cash deposit to the tune of Rs.10,76,630/-. After considering the entire matrix of the facts, we find that CIT(A) has confirmed the penalty on the basis of estimated addition @ 30% of the total credit entries in the bank account. Penalty u/s 271(1)(c) of the Act based on estimated addition is not sustainable, as held by the Hon’ble jurisdictional High Court in case of CIT vs. Subhas Trading Co., 221 ITR 110 (Guj.). The ITAT, Ahmedabad Bench has also 11 ITA No.731 & 732/SRT/2024/AY.2010-11 Sureshbhai Manibhai Patel deleted penalty levied u/s 271(1)(c) of the Act where addition was on estimated basis. In view of the above facts and the precedents cited supra, the order of CIT(A) is quashed, and AO is directed to delete the penalty of Rs.10,76,630/-. 12.3 In the result, appeal of the assessee in ITA No.732/SRT/2024 is allowed. Order is pronounced in the open court on 18/11/2024. Sd/- Sd/- (PAWAN SINGH) (BIJAYANANDA PRUSETH) JUDICIAL MEMBER ACCOUNTANT MEMBER Surat Ǒदनांक/ Date: 18/11/2024 SAMANTA 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 "