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Income Tax Appellate Tribunal, “SMC” BENCH, AHMEDABAD
Before: SHRI RAJPAL YADAV & SHRI PRADIP KUMAR KEDIA
आदेश / O R D E R
PER SHRI RAJPAL YADAV, JUDICIAL MEMBER : The Assessee is in appeal before us against the order of Ld.Commissioner of Income Tax(Appeals)-1, Ahmedabad [‘CIT(A)’ in short] dated 29/09/2017 passed for Assessment Year (AY) 2008-09.
Solitary grievance of the assessee is that the Ld.CIT(A) has erred in confirming the penalty of Rs.2,71,920/- which was imposed by the
ITA No.2495 /Ahd/2017 Smt.Bhavnaben Hiteshbhai Shah vs. DCIT Asst.Year – 2008-09 - 2 - Assessing Officer u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act").
The brief facts of the case are that assessee has filed her return of income on 30/07/2008 declaring total income of Rs.7,08,050/-.
On scrutiny of the accounts, it revealed to the Assessing Officer that APCL had advanced Rs.8 lakhs to the appellant which was treated as deemed dividend u/s.2(22)(e) of the Act in the hands of the assessee. The addition of this amount stands confirmed upto the ITAT in ITA No.2668/Ahd/2014. The Ld.AO has initiated penalty proceedings u/s.271(1)(c) of the Act and ultimately imposed a penalty of Rs.2,71,920/-.
Appeal to the Ld.CIT(A) did not bring any relief to the assessee.
We have duly considered rival contentions 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 this section as under:
"271. Failure to furnish returns, comply with notices, concealment of income, etc.
ITA No.2495 /Ahd/2017 Smt.Bhavnaben Hiteshbhai Shah vs. DCIT Asst.Year – 2008-09 - 3 -
(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
ITA No.2495 /Ahd/2017 Smt.Bhavnaben Hiteshbhai Shah vs. DCIT Asst.Year – 2008-09 - 4 - 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 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
ITA No.2495 /Ahd/2017 Smt.Bhavnaben Hiteshbhai Shah vs. DCIT Asst.Year – 2008-09 - 5 - 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 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.
8.1 In the light of the above, let us examine the facts of the case. A perusal of the record would indicate that assessee was owner of the premises occupied by APCL. An advance of Rs.8 lakhs was given to the assessee for carrying out renovation work. A resolution by the Board of Directors of APCL for granting advance of Rs.8 lakhs was passed. She failed to carry out the renovation work and returned the money. The question was whether it was a business advance or a loan simplicitor. In
ITA No.2495 /Ahd/2017 Smt.Bhavnaben Hiteshbhai Shah vs. DCIT Asst.Year – 2008-09 - 6 - the opinion of assessee, it is a business advance which was returned on her failure to carry out necessary renovation work. This view point of the assessee did not meet approval of Assessing Officer who treated this advance as a loan and considered it as a deemed dividend.
8.2. Considering the above facts, we are of the view that assessee has given explanation which is a bonafide one and, therefore, does not deserve to be visited with penalty. We allow the appeal of the assessee and delete the penalty.
In the result, appeal of the assessee is allowed. Order pronounced in the Court on 15th March-2019 at Ahmedabad. Sd/- Sd/- ( PRADIP KUMAR KEDIA) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 15/ 03 /2019 ट�.सी.नायर, व.�न.स./T.C. NAIR, Sr. PS आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)-1, Ahmedabad �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 5. 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER, स�या�पत ��त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील�य अ�धकरण, अहमदाबाद / ITAT, Ahmedabad