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Income Tax Appellate Tribunal, AHMEDABAD – BENCH ‘A’
Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA
आयकर अपील�य अ�धकरण, अहमदाबाद �यायपीठ - अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD – BENCH ‘A’
BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER आयकर अपील सं./ ITA No. 2485/Ahd/2018 �नधा�रण वष�/Assessment Year: 2008-09 Shri Baldevbhai M. Chaudhary ITO, ward-4 Chaudhary Vas Vs Mehsana. At & Post : Paliyad, Tal: Kalol Dist. Gandhinagar 382 735. PAN : AATPC 3015 A अपीलाथ�/ (Appellant) �� यथ�/ (Respondent) Assessee by : Smt.Aarti N. Shah, AR Revenue by : Shri S.K. Dev, Sr.DR सुनवाई क� तार�ख/Date of Hearing : 01/05/2019 घोषणा क� तार�ख /Date of Pronouncement : 07 /05/2019 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : Assessee is in appeal before the Tribunal against order of the ld.CIT(A), Gandhinagar dated 5.1.2018 passed for the Asstt.Year 2008-10.
Sole grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty of Rs.2.04.905/- imposed by the AO under section 271(1)(c) of the Income Tax Act.
Brief facts of the case are that assessee is an individual and salaried employee of the Department of Post. He has filed return of income showing total income at Rs.2,04,660/-. The case of the assessee was reopened and notice under section 143(2) was issued and served upon the assessee. In the assessment under section 143(3) one of the additions
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made was on account of unexplained cash credit of Rs.8,49,500/-. This addition was challenged upto the Tribunal, and the Tribunal ultimately confirmed the same. Against this confirmation, the ld.AO initiated penalty proceedings under section 271(1)(c) of the Act. In the penalty proceedings, it was explained by the assessee that the assessee has not concealed income nor furnished any inaccurate particulars of income; that the impugned addition of Rs.8,49,500/- represented borrowal from friends and relatives for financing his son’s USA visa. The assessee has furnished details of lenders with supporting evidences. Statement of the lenders have also recorded by the AO and they confirmed advancing of loan to the assessee; they also produced form no. 7/12 to show earning of income from agriculture produce. However, the ld.AO did not accept the contentions of the assessee and imposed penalty under section 271(1)(c) by rejecting confirmations filed by the depositors on the ground that depositors were not capable of advancing such sum. He imposed penalty of Rs.2,94,895/-. Appeal before the ld.CIT(A) did not bring any relief to the assessee, hence, assessee is now before the Tribunal.
Before us, the ld.counsel for the assessee reiterated submissions made before Revenue authorities, while ld.DR supported the orders of AO and the CIT(A).
We have considered rival submissions and gone through the record carefully. Section 271(1)(c) of the Income Tax Act, 1961 has direct bearing on the controversy. Therefore, it is pertinent to take note of the section.
"271. Failure to furnish returns, comply with notices, concealment of income, etc.
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(1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is satisfied that any person (a) and (b)** ** ** (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. He may direct that such person shall pay by way of penalty. (i)and (Income-tax Officer,)** ** ** (iii) in the cases referred to in Clause (c) or Clause (d), in addition to tax, if any, payable by him, a sum which shall not be less than, but which shall not exceed three times, the amount of tax sought to be evaded by reason of the concealment of particulars of his income or fringe benefit the furnishing of inaccurate particulars of such income or fringe benefits: Explanation 1- Where in respect of any facts material to the computation of the total income of any person under this Act, (A) Such person fails to offer an explanation or offers an explanation which is found by the Assessing Officer or the Commissioner (Appeals) or the CIT to be false, or (B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income or such person as a result thereof shall, for the purposes of Clause (c) of this sub-section, be deemed to represent the income in respect of which particulars have been concealed.”
A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied, that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, the penalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming
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provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into
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play in the above two situations then the related addition or disallowance in computing the total income of the assessee for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished.
In the light of the above, if we examine the facts of the present case, it would reveal that the assessee was a salaried employee working with postal department. According to him, these loans were taken for the purpose of obtaining VISA for his son. He has withdrawn the money from his bank account and repaid to the creditors in cash. His explanation was not accepted in the quantum proceedings, probably he failed to substantiate his explanation, but against the order of the ITAT, appeal of the assessee stands admitted before the Hon’ble High Court. It is settled position of law that when the evidences and explanation furnished by the assessee in support of cash credits are not acceptable by the department, then addition under section 68 can be made, but penalty under section 271(1)(c) of the Act is not automatic. Thus, from the material available on record, we are of the view that the explanation of the assessee was not found to be false, but it could not be accepted on account of substantiation of his claim with help of some solid evidences. Therefore, it is not a fit case for visiting the assessee with penalty. We allow the appeal of the assessee and delete the impugned penalty.
In the result, appeal of the assessee is allowed. Pronounced in the Open Court on 7th May, 2019.
Sd/- Sd/- (PRADIP KUMAR KEDIA) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated, 07/05/2019