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Income Tax Appellate Tribunal, JAIPUR BENCHES,”B” JAIPUR
Before: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 1387/JP/2019
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”B” JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA. No. 1387/JP/2019 fu/kZkj.k o"kZ@Assessment Year : 2011-12 cuke Chhatrapati Shivaji Shikshan Sansthan The DCIT, Vs. 01 Kanpura samod, Circle-7, Chomu, Jaipur Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AABAC 1117 E vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : Shri C.L. Yadav (Adv.) jktLo dh vksj ls@ Revenue by : Miss Chanchal Meena (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 18/02/2020 mn?kks"k.kk dh rkjh[k@Date of Pronouncement : 20/02/2020 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M. This is an appeal filed by the assessee against the order of ld. CIT(A)-III, Jaipur dated 30.10.2019 for the assessment years 2011-12 wherein the limited ground of appeal relates to sustenance of penalty amounting to Rs. 30,150/- U/s 271(1)(c) of the IT Act. The relevant findings of the ld. CIT(A) which are under consideration reads as under:-
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“I pursued the record I find that the addition of Rs.6,54,000/- made u/s 68, salary payable of Rs.18,690/- and disallowance out of expenses of Rs.15,76,981/- was deleted while deciding the quantum appeal. Therefore the question of penalty u/s 271(I)(c) does not survive on above addition. The remaining addition of Rs.1,10,882/- out of various. expenses. The A/R of the appellant submitted that the disallowance is on estimate basis addition. Thus the penalty u/s 271(1)(c) is not leviable on estimate basis. There is force in the submission of the A/R that the penalty u/s 271(I)(c) is not leviable on estimate addition as decided by various court. Hence the penalty imposed on estimate addition of Rs.1,10,882/- is cancel. The A/R further argued that the society is registered under the Rajasthan Societies Registration Act, 1958. The objects of the society are to provide education and it exists solely for education purpose. In the return of income available on records, the society has claimed exemption under section 10(23C) (iiiad) of the I.T. Act, 1961. Hence, the income of the society is found to be exempted under section 10(23C)(iiiad) of the I.T. Act, 1961 but this argument is not tenable because this issue was not before the CIT(A) at the time of quantum appeal. The appellant filed wrong claim of Rs.4,69,664/- with intention to evade the tax and shown Nil income. The appellant also not disclose the Rs.13,000/- in his books of account with intention to-evade the tax on this amount. Therefore this is a fit case for imposition of penalty u/s 271(1)(c) of the Income Tax Act, 1961 on concealed income of Rs.4,82,664/-. The Assessing Officer rightly imposed the penalty of Rs.4,82,664/- @ 100% sought to evade the tax. Accordingly I confirm the penalty imposed u/s 271(1)(c) of the Income Tax Act, 1961 on concealed income of Rs.4,82,664/- of Rs.30,150/- and balance amount of penalty of Rs.9,67,460/- is cancel. This ground is partly allowed.”
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We therefore find that the penalty has been sustained by the ld. CIT(A) on surplus of the receipts over expenditure account amounting to Rs. 4,69,664/- which has been brought to tax by the Assessing officer denying the claim of exemption u/s 10(23C)(iiiad) and secondly on Rs. 13,000/- which has been sustained by the ld. CIT(A) U/s 68 of the Act in the quantum proceedings.
Firstly, regarding the surplus of receipts over the expenditure account, the Assessing Officer has stated in the assessment order that the assessee did not furnish any documentary evidence in support of its claim of exemption U/s 10(23C)(iiiad) of the Act, thereafter, a show cause notice was issued to the assessee as to why the gross receipt should not be taxed as business receipt however, there has been no compliance on part of the assessee. The Assessing officer accordingly held that the claim of exemption U/s 10(23C) of the Act remains unproved and the gross receipts of Rs. 38,45,391/- was treated as business receipt and the surplus of receipts over expenditure as per return of income amounting to Rs. 4,69,664/- was brought to tax besides disallowance of 50% of expenses so claimed by the assessee. Apparently, the assessee has agitated the said matter of surplus being brought to tax before the ld CIT(A) by way of an additional ground of appeal, however, the same was not allowed. As far as quantum proceedings are concerned, the matter has since attained finality.
Now, coming to the penalty proceedings, the Assessing officer referring to the findings in the assessment order and in absence of any explanation submitted by the assessee, has levied the penalty u/s
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271(1)(c) of the Act stating that the assessee has concealed the particulars of its income and which has been sustained by the ld CIT(A) and against the said findings, the assessee is in appeal before us.
During the course of hearing, the ld AR submitted that the Assessing officer has failed to record any direction to initiate penalty proceedings in terms of section 271(IB) vide passing the assessment order under section 143(3) r/w 144 dated 24.02.2014 and hence, the entire proceedings are required to be quashed. In support, reliance was placed on the Hon’ble Supreme Court decision in case of D.M. Manasi reported in 86 ITR 557 wherein it was held that satisfaction of the concerned tax authority to the effect that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income is the condition precedent for levy of penalty and such satisfaction must be arrived at in the course of any proceedings under this Act. Further, reliance was placed on the decision of Hon’ble Punjab & Haryana High Court in case of CIT vs Mohinder Lal 168 ITR 101 and Hon’ble Karnataka High Court decision in case of CIT vs MWP Ltd (ITA no. 332/2007).
The ld DR is heard who has relied on the order of the lower authorities.
Heard both the parties and pursued the material available on record. In order to appreciate the aforesaid contention so raised by the ld AR, we refer to the assessment order passed by the Assessing officer
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under section 143(3) r/w 144 dated 24.02.2014 and the contents thereof are reproduced in verbatim as under:-
“Return of income in this case was filed on 30/09/2011 declaring Ni income. The case was selected for compulsory scrutiny and notice u/s 143(2) of the Income-tax Act, 1961 was issued on 20/09 2012 by ACTT-7, Jaipur which was duly served upon the assessee on 23/09/2012. On the change of incumbent of the office, notice u/s 142(1) of the Income Tax Act 1961 was issued on 08.07.2013 the hearings was fixed for 19.07.2013 to complete the assessment proceedings pending, but the assessee have not availed the same.
During the assessment proceeding assessee did not make any compliance of any notices and The assessee did not furnished any documentary evidence in support of its claim regarding exemption u/s 10(23C)/12A of the I.T. Act, 1961. Therefore, vide this officer letter No. 1336 dated 31.12.2013 the assessee was offered final opportunity and was also asked to show caused that why gross receipts of Rs.38,45,391/- should not be taxed under income tax Act, treating the same as a business receipts as the assessee has not submitted any documentary evidence in support of the claim that charitable activities were conducted during the year .No compliance were made on fixed date and thereafter till date.
In view of these facts, I have no option except to complete the assessment proceedings ex-parte u/s 144(1) or best judgment assessment. In absence of any documentary evidence the claim of exemption u/s 10(23C) and 12A of the 1.T. Act, 1961 remains unproved, hence, the receipts of Rs.38,45,391/- is being treated as business receipts and
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50% expenses is disallowed, out of total expenses claimed of Rs. 33,75,727 ,and added to the income of the society.
ADDITION U/S 68
During the year the society has shown Rs. 6,67,000/- as unsecured loan in balance sheet , the society has not submitted any documentary evidence or confirmations of loan ,so same is added to the total receipt of the assess treating them as unexplained cash deposit during the year. Penalty proceeding u/s 271 (c) is also initiated for concealment of income and furnishing of inaccurate of particular.
SALARY PAYABLE Society has shown Rs.18,69,000 as salary payable in balance sheet during the year, 10% of this amount is disallowed and added back to the total income of the society. With the above remarks the total income of the assessee is computed as under- Returned income as per return of income Rs. 4,69,664/- Add: (i) Addition on account of disallowance of expense Rs. 16,87,863/- (ii) Addition U/s 68 Rs. 6,67,000/- (iii) Disallowance of salary payable Rs. 18,690/- Total Income Rs. 28,43,217/- Round off- Rs. 28,43,217/- Assessed U/s 143(2)/144 of I.T. Act 1961 at total income of Rs. 28,43,217/- issue demand notice, challan and other necessary
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forms. Charges tax and interest U/s ----------- of the Income Act, 1961 as per calculation sheet (ITNS150) appended with the order and which also forms part of it.”
As it apparent from the assessment order, there is no direction for initiation of penalty proceedings by the Assessing officer, therefore, the deeming fiction created by virtue of provision of section 271(IB) in terms of deemed satisfaction of the Assessing officer for initiation of penalty proceedings doesn’t apply in the instant case. Further, on perusal of relevant part of the assessment order, wherein the claim of exemption of the assessee u/s 10(23C)(iiiad) has been denied and surplus of receipts over expenditure has been brought to tax, again, there is no satisfaction which has been recorded by the Assessing officer. It is a settled legal proposition as supported by various authorities as so quoted by the ld AR that satisfaction of the concerned Assessing officer to the effect that the assessee has either concealed the particulars of income or furnished inaccurate particulars of income is the condition precedent for levy of penalty and such satisfaction must be arrived at in the course of the proceedings under this Act. Therefore, in absence of any such satisfaction so recorded by the Assessing officer which can be discernable from the assessment order and even in absence of any direction to initiate the penalty proceedings, wherein deemed satisfaction can be said to be recorded by the Assessing officer, the very initiation of penalty proceedings is vitiated and cannot be sustained in the eyes of law and consequent levy of penalty is hereby set-aside.
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Regarding levy of penalty on Rs. 13,000/- on amount of unsecured loan which has been sustained U/s 68 of the Act, the ld AR submitted that in the show cause notice dated 24.02.2014, the Assessing officer has not specified the specific charges in terms of concealing particulars of income or furnishing inaccurate particulars of income and thereafter, the penalty has been levied on concealment of particulars of income. It was further submitted that the assessee has explained before the CIT(A) that the amount of Rs.13,000/- received by it was unsecured loan from Shri Chhitarmal. Confirmation was also provided. Details in the form of ID proof was, however, not available. Thus, by explaining all the reasons, the assessee has discharged burden cast upon it. Thereafter, it is the duty of the Assessing Officer to disprove that the explanation given by the assessee is neither correct nor bonafide. Therefore, the ld. CIT(A) is not correct in upholding the penalty order passed by the Assessing Officer without considering the explanation given by the assessee. In support, reliance was placed on the Hon'ble Gujarat High Court in the case of National Textiles v. CIT 249 ITR 125.
The ld DR is heard who has relied on the orders of the lower authorities.
Heard both the parties and pursued the material available on record. In support of the unsecured loan of Rs. 13,000/-, the assessee has submitted the necessary confirmation from the lender, therefore, non-acceptance of the confirmation so filed of the assessee may be basis for making the addition U/s 68 of the Act. However, given the fact
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that the same has been filed by the assessee during the course of appellate proceedings, the Assessing officer who has relied on the findings in the assessment order has levied the penalty. Therefore, it is case where the explanation has been furnished by the assessee and necessary confirmation has also been filed, non-acceptance thereof may be basis for making the addition, however, the same cannot be the basis for levy of penalty U/s 271(1)(c) of the Act. In the result, the levy of penalty on such addition is hereby deleted.
In the result, the appeal of the assessee is allowed.
Order pronounced in the open Court on 20/02/2020. Sd/- Sd/- ¼fot; iky jko½ ¼foØe flag ;kno½ (Vijay Pal Rao) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 20/02/2020. *Santosh आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- Chhatrapati Shivaji Shikshan Sansthan, Jaipur. 2. izR;FkhZ@ The Respondent- DCIT, Circle-7, Jaipur. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File { ITA No. 1387/JP/2019} vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत.