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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI SANDEEP GOSAIN, Honble & SHRI O.P.MEENA, Honble
सुनवाईकीतारीख/ Date of hearing: 12.02.2020 उ�घोषणाक�तार�ख/Pronouncement on: 12.02.2020 आदेश /O R D E R
PER SANDEEP GOSAIN, JM:
This appeal by the Assessee is directed against the order of Ld.Commissioner of Income Tax(Appeals)-I, Surat dated 25.04.2017 for the assessment year 2008-09.
2. Grounds raised
by the Assessee read as under: “1. On the facts and circumstances of the case as well as law on the subject, the Learned Commissioner of Income Tax (Appeals) has erred in partly confirming the action of assessing officer in imposing penalty u/s 271(1)(c) of the I.T. Act, 1961 by sustaining penalty to the extent of Rs. 1,59,444/- as against Rs. 2,33,175/- imposed by assessing officer.
2. It is therefore prayed that above penalty imposed by assessing officer and confirmed by Commissioner of Income-tax (Appeals) may please e deleted.
3. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”
Shri Jerambhai Parsottambhai Thesia Vs. DCIT, Circle-2(3), Surat/ A.Y. 2008-09 Page 2 of 8
The solitary ground raised by the assessee challenging the order passed by ld.CIT(A) in confirming the action of the ld.Assessing Officer(AO) in imposing penalty u/s.271(1)(c) by sustaining penalty to the extent of 1,59,444/- as against Rs.2,33,175/- imposed by the ld.AO.
The ld.Authorised Representative(AR) appearing on behalf of the assessee reiterated the same arguments as was raised before the ld.CIT(A) and the same were contained in para no.6 of the order of the ld.CIT(A) which is reproduced below:
“6. During the course of appellate proceedings the Ld. AR has filed written submission on this issue. Relevant portion of the same has been reproduced hereunder:- "In the course of appellant proceedings before CIT(A), it is submitted that no penalty u/s 271 (l}(c) of the Act should have been imposed by assessing officer. If is relevant to mention that mother of assessee wanted to make division of family assets which consists of share of her savings and her late husband, from their hard earned money and property of their own and other ancestral properties and distribute them equally among herself and her three sons. However, financial position of assessee was very much sound at the time of partition, so he waived his share from family asset. As assessee had waived his share from family asset, mother of assessee, Kunvarben Thesai and brother of assessee, Bhanubhai Thesia insisted him to accept small amount of money as a gift under love and affection and also under a feeling that assessee waived his share from family asset during division of - asset in earlier years. In support of the gifts received, assessee had submitted gift deed, form 7/12 and form 8-A as a proof of agriculture and proof of identity of donor during the course of assessment proceedings. Both brother and mother of assessee had given gift to assessee out of their past savings and agriculture income. Thus, it stands established that gifts made to assessee were genuine and donors had the creditworthiness of giving above mentioned gifts. Assessee had also expressed his willingness to produce the donors in case if the same was necessary however, assessing officer did not give any specific directions for the same. Here it should be noted that this is not the case of concealment of income or furnishing of inaccurate particulars of income. As gift received by assessee is very genuine for the reason that assessee showed gratitude by waiving his share from family assets at the time of partition of family assets and on account of this act, gift has been made by assessee's relative as appreciation of assessee's act. Also assessing officer has failed to bring even an iota of evidence on record which indicates that other unaccounted source of earning of income by Shri Jerambhai Parsottambhai Thesia Vs. DCIT, Circle-2(3), Surat/ A.Y. 2008-09 Page 3 of 8 assessee was found either during assessment proceedings or penalty proceedings. It is very pertinent to mention here that addition was confirmed merely on the ground of test of human probability. Nov/ the provisions of section 68 of the Income-tax Act, 1961, permits the Assessing Officer to treat unexplained cash credits as income are enabling provisions for making certain additions where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer. However the addition made on this count would not automatically justify imposition of penalty under section 271(l)(c) of the Income-tax Act 1961, by recourse only to Explanation 1 below section 271 (1) (c).
In order to justify the levy of penalty, two factors must co- exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. If is not enough for the purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to section 271(l)(c) has no bearing on factor No. 1 but has a bearing only on factor No.
2. The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but no disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, then assessing officer cannot take help of Explanation because there will be no material to show that the amount in question was the income of the assessee. Reliance is placed on ITAT Ahmedabad Bench decision in case of ITO V. Prakash K. Pate! -37 CCH 288 (Ahd) wherein it was observed that when additions have been confirmed due to failure of assessee to prove creditworthiness of donors which is material only for quantum proceedings, same cannot be made applicable in penalty proceedings & the penalty imposed u/s 271(l)(c) was deleted. Reliance is placed on the decision of Gujarat High Court in the case of National Textiles Vs C.I J. (249 ITR 125) wherein it was held that the provisions of section 68 permitting the Assessing Officer to treat unexplained cash credit as income are enabling provisions for making certain additions, where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer However, the addition made on this count would not automatically justify imposition of penalty under section 271(l)(c) by recourse only to Explanation 1 below section 271 (l)(c).
It is further submitted here that if explanation of assessee remains unproved but not disproved by assessing officer, no penalty u/s 271(1)(c) could be imposed. In support of this contention, reliance is placed on jurisdictional Gujarat High Court decision in case of National Textiles v. CIT (24? ITR 125) and CIT v. Jalaram Oil Mills (253 ITR 192) (Guj). It may therefore, kindly be appreciated that explanation furnished by assessee is very much bona fide and the same is not proved to be false by assessing officer. Now merely because addition is made to the income of Shri Jerambhai Parsottambhai Thesia Vs. DCIT, Circle-2(3), Surat/ A.Y. 2008-09 Page 4 of 8 assessee & the same is confirmed in appeal, it does not at all lead to the conclusion that there is concealment of income because the conditions laid down for imposing penalty u/s 271(l)(c) of the I.T. Act does not stand satisfied. It is therefore prayed that penalty imposed by assessing officer may kindly be deleted. Reliance is also placed on Punjab & Haryana High Court decision in case of CIT V. Balbir Singh - 304 ITR 125 (P&H) wherein it was held that when amount had been received through banking channel and identity of donor was also established, no penalty u/s 271(l)(c) of the Act can be imposed. It is a settled law that penalty proceedings and assessment proceedings are separate & penalty cannot be imposed only on the ground that addition is made to the income of assessee. Reliance is placed on decision of Honourable Supreme Court in case of CIT v. Reliance Petroproducts - [322 ITR 158 (SC)] wherein if has been observed that the argument of the revenue that "submitting an incorrect claim for expenditure would amount to giving inaccurate particulars of such income" is not correct. By no stretch of imagination can the making of an incorrect claim in law tantamount to furnishing inaccurate particulars. A mere making of the claim, which is not sustainable in law, by itself, will not amount to furnishing inaccurate particulars regarding the income of the assessee. If has been further observed that if the contention of the Revenue is accepted then in case of every Return where the claim made is not accepted by the AO for any reason, the assessee will invite penalty u/s 271 (J)(c) & that is clearly not the intendment of the Legislature. The ratio of above decision of Honourable Supreme Court is directly applicable to the facts of instant case & hence, penalty imposed by assessing officer is required to be deleted. Without prejudice to the above, it is further submitted that tax on above addition of Rs. 6,86,000/- comes to Rs. 1,59,444/-. As in the instant case, assessee has filed" return of loss of Rs. 75,88,462/- & the addition on account of cash credit of Rs. 1,41,50,000/- was deleted in appeal by learned CIT(A), the tax payable on income of Rs. 6,86,000/- comes to Rs. 1,59,444/- as assessee is an individual & exemption limit for A.Y 2008-09 was Rs. 1,10,000/- & on balance income tax is payable on the basis of applicable slab rates. Hence, penalty cannot be imposed more than the amount of tax sought to be evaded & thus, penalty imposed by assessing officer is excessive to the extent of Rs. 73,731/-."
On the other hand, the ld.Departmental Representative (DR)
relied upon the orders of Revenue Authorities.
We have heard both the Counsels and perused the material placed on records, judgments cited by the parties as well as orders passed by the Revenue Authorities. From the records, we noticed that the assessee had received gift of Rs.6,86,000/- and furnished confirmation of the donors. The assessee had received a sum of Shri Jerambhai Parsottambhai Thesia Vs. DCIT, Circle-2(3), Surat/ A.Y. 2008-09 Page 5 of 8 Rs.2,94,000/- from his mother Smt.Kunwarben Thesia and Rs.3,92,000/- from brother Shri Bhanubhai Thesia out of natural love and effection and in this respect assessee had submitted gift deeds, accordingly Form No. 7/12 and 8A as a proof of agricultural income and identity of donors. However, the ld.AO rejected the assessee’s contention and made addition of the said amount of Rs.6,86,000/- to the total income of the assessee and also imposed penalty u/s.271(1)(c) of the Act. Since in the present case, the gifts were received by the assessee from his mother and brother, therefore, the genuineness of the same stands clearly established. The explanation of the assessee is bonafide and the source of making these gifts by the donor have already been produced by the assessee by way of placing on record gift deeds, Form No 7/12 and form 8-A proof of agriculture for source of rights and also proved identity of the donors. The ld.AO failed to bring on record any evidence which indicates the demand drafts by way of gifts by the donors were issued out of the funds deposited by the assessee. Even no other unaccounted sources of earning of income by assessee was found either during the assessment proceedings or penalty proceedings. We are of the view that in order to justify the levy of penalty two factors must co-exist i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. It is not enough for the Shri Jerambhai Parsottambhai Thesia Vs. DCIT, Circle-2(3), Surat/ A.Y. 2008-09 Page 6 of 8 purpose of penalty that the amount has been assessed as income, and (ii) the circumstances must show that there was conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation 1 to section 271(1)(c) has no bearing on factor No. 1 but has a bearing only on factor No.
The Explanation does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee! No penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income with the hypothesis that it does. If the assessee gives an explanation which is unproved but no disproved, i.e., it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee's case is false, then assessing officer cannot take help of Explanation because there will be no material to show that the amount in question was the income of the assesse.
We have also gone through the decision of the Co-ordinate Bench in the case of ITO Vs. Prakash K. Patel – 37 CCH 28 (Ahd) wherein it was held as “when additions have been confirmed due to failure of assessee to prove creditworthiness of donors which is material only for quantum proceedings, same cannot be made applicable in penalty proceedings & the penalty imposed u/s 271(1)(c) was deleted” and also in Hon'ble Gujarat High Court in the case of Shri Jerambhai Parsottambhai Thesia Vs. DCIT, Circle-2(3), Surat/ A.Y. 2008-09 Page 7 of 8 National Textiles Vs. CIT (249 ITR 125) wherein it was held that “the provisions of section 68 permitting the Assessing Officer to treat unexplained cash credit as income are enabling provisions for making certain additions, where there is failure by the assessee to give an explanation or where the explanation is not to the satisfaction of the Assessing Officer However, the addition made on this count would not automatically justify imposition of penalty under section 271(1)(c) by recourse only to Explanation 1 below section 271(1)(c).”
We are of the considered view that if the explanation of the assessee remains unproved but not disproved by the ld.AO, then no penalty u/s.271(1)(c) could be imposed and in this respect we draw strength from the decision of the jurisdictional Gujarat High Court in the case of National Textile Vs. CIT (249 ITR 128)and CIT Vs. Jalaram Oil Mills (253 ITR 192) (Guj). From the explanation furnished by the assessee, we can infer that said explanation is bonafide and the same is not proved to be false by the ld.AO. Therefore, now merely because addition is made to the income of the assessee and the same is confirmed in appeal, it does not at all lead to the conclusion that there is concealment of income because of the conditions laid down for imposing penalty u/s.271(1)(c) of the Act. Therefore, considering the totality of the facts and circumstances, as well as the principle laid down by the judgments / decisions as mentioned above, we direct the ld.AO to delete the penalty.
Shri Jerambhai Parsottambhai Thesia Vs. DCIT, Circle-2(3), Surat/ A.Y. 2008-09 Page 8 of 8
In the light of above decisions, we are of the considered opinion that present penalty does not survive hence it is directed to be deleted, thus we direct the AO to allow the same to the assessee, accordingly, the solitary ground raised by the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 12-02-2020.