SHRI KIRITKUMAR HIMATLAL DHOLAKIA,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-5(1)(5), AHMEDABAD

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ITA 2187/AHD/2017Status: DisposedITAT Ahmedabad31 July 2019AY 2011-123 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty is not exigible as the assessee offered an explanation which was partially accepted, and the remaining part was unproved, not outright false. Additionally, the charge for penalty was vague and not sustainable in law.

What were the facts?

The assessee had cash deposits of Rs. 9,60,000/- in their bank account. The ITAT in quantum proceedings sustained an addition of Rs. 4,60,000/-, accepting the source of Rs. 5 Lakhs as valid. The AO imposed a penalty under Section 271(1)(c).

What were the issues?

Whether penalty under Section 271(1)(c) is leviable when the assessee's explanation for cash deposits is partially accepted and the charge in the penalty notice is vague.

Which sections of the Income-tax Act were involved?

Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD

Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA

For Appellant: Shri K. C. Thaker, A.R, Shri Rajesh Meena, Sr.D.R

आदेश/O R D E R

PER PRADIP KUMAR KEDIA - AM:

1.

The captioned appeal has been filed at the instance of the assessee against the order of the Commissioner of Income Tax (Appeals)-5, Ahmedabad (‘CIT(A)’ in short), dated 14.07.2017 arising in the penalty order dated 09.03.2016 passed by the Assessing Officer (AO) under s. 271(1)(c) of the Income Tax Act, 1961 (the Act) concerning AY 2011-12.

[Kiritkumar H. Dholakia Vs. ITO] A.Y. 2011-12 - 2 -

2.

As per the grounds of appeal, the assessee has impugned the action of the CIT(A) in imposing penalty of Rs.2,90,000/- under s. 271(1)(c) of the Act.

3. When the matter was called for hearing, the learned AR for the assessee pointed out that in the course of assessment proceedings, the learned AO observed that certain cash deposits to the extent of Rs.9,60,000/- was found to be made in the bank account of the assessee. The ITAT in the quantum proceedings in order dated 10.11.2017 sustained the addition to the extent of Rs.4,60,000/- and accepted source of cash deposit to the extent of Rs.5 Lakhs to be valid. In the matter, the learned AR submitted that his case is two fold; (i) that the source of the cash being sale of cars have not been disputed and rather accepted. The co-ordinate bench of ITAT in quantum proceedings has merely assigned lump sum value of the cars to be at Rs.5 Lakhs and thus confirmed the balance addition. Therefore, such action in the quantum proceedings for reducing the value of cars should not lead to imposition of penalty towards the cash deposits. It was submitted that the explanation of the assessee has been partly accepted and no malafides can be attributed to the assessee in the explanation for the cash deposits remained unexplained & (ii) the action of the AO while issuing notice under s. 271(1)(c) of the Act as well as while imposing the penalty vide order dated 09.03.2016 is vague and without assigning definite charge against the assessee. The learned AR pointed out that the AO has neither strike off and made specific charge towards concealment or furnishing of inaccurate particulars of income either as issuing notice under s.274 of the Act nor has specified the charge so labeled even in the penalty order. In the circumstances, the action of the AO is not sustainable in law.

4. We have carefully considered the rival submissions towards the maintainability of penalty under s. 271(1)(c) of the Act. We observe that the assessee has inter alia explained the source of cash deposits to be out of sale of two cars Rs.4 Lakhs was stated to be generated out of sale of Swift Dzire and Rs.5 Lakhs was stated to be generated on sale of Toyota [Kiritkumar H. Dholakia Vs. ITO] A.Y. 2011-12 - 3 - Qualis. The ITAT has estimated lower values on sale of such cars and thus sustained the addition to the extent of Rs.4,60,000/-. Under the circumstances, while the explanation towards source of cash deposit has not been accepted to be fully justified, the case made out by the assessee towards source of cash deposit cannot be stated to be downright false in so far as penalty proceedings are concerned. The assessee has offered explanation which has been accepted partially in the quantum proceedings and the remaining part of the explanation is only unproved. Thus, penalty, in our view, in such circumstances, is not exigible. We also find merit in the second line of argument of the assessee alleging vagueness in the specification of charge against the assessee. The AO is required to bring out specific charge against the assessee while imposing penalty under s. 271(1)(c) of the Act. The AO has clearly failed to do so. The imposition of penalty in such circumstances is not sustainable in law.

5.

In the result, the appeal of the assessee is allowed.

This Order pronounced in Open Court on 31/07/2019

Sd/- Sd/- (RAJPAL YADAV) (PRADIP KUMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: Dated 31/07/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।

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