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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), Gandhinagar, Ahmedabad [‘CIT(A)’ in short] dated 10/07/2017 passed for Assessment Year (AY) 2010-11.
ITA No.1920/Ahd/2017 Smt. Jashodaben H Patel vs. ITO Asst.Year – 2010-11 - 2 - 2. Though the assessee has taken three grounds of appeal, but her grievance revolves around a single issue; namely, Ld.CIT(A) has erred in confirming the penalty of Rs.89,305/- imposed by the 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 18/03/2011 declaring total income at Rs.1,49,580/-. The case of the assessee was selected for scrutiny assessment and notice u/s.143(2) of the Act was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the Assessing Officer that assessee was maintaining two bank accounts with Mehsana Urban Co-op. Bank, Sidhpur and Karur Vysya Bank, Unjha.
A perusal of those bank accounts, it revealed to the Assessing Officer that assessee has made deposits in cash on various dates. The Assessing Officer has confronted the assessee to show the source of such deposits. According to the Assessing Officer, assessee failed to show the source of deposits in these banks. Hence, he made an addition of Rs.9,91,585/- with the aid of section 69 of the Act. Similarly, the Assessing Officer confronted the assessee to submit working of capital gain. The assessee has disclosed capital gain of Rs.90,797/- which was not furnished in the original return of income. Hence, the Assessing Officer has made addition of Rs.90,797/-. The income of the assessee in
ITA No.1920/Ahd/2017 Smt. Jashodaben H Patel vs. ITO Asst.Year – 2010-11 - 3 - this way was determined at Rs.12,31,962/- as against Rs.1,49,580/- returned by her. The Assessing Officer has initiated penalty proceedings against the assessee u/s.271(1)(c) of the Act r.w.s. 274 of the Act. In response to the show-cause notice, assessee has contended that this addition of unexplained investment in bank deposit has been reduced by the Ld.CIT(A) to Rs.3,78,635/- as against 9,91,585/- made by the Assessing Officer. Therefore, the Ld.first appellate authority in the quantum appeal has accepted the stand of assessee and restricted the addition on an estimate basis.
As far as addition on account of capital gain is concerned, the assessee contended that it was a bona fide error and, therefore, no penalty be imposed upon her. The Ld.AO was not satisfied with the explanation of the assessee and imposed a penalty of Rs.89,305/- which is equivalent to the tax sought to be evaded by 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 which read as under:
ITA No.1920/Ahd/2017 Smt. Jashodaben H Patel vs. ITO Asst.Year – 2010-11 - 4 - "271. Failure to furnish returns, comply with notices, concealment of income, etc.
(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.”
ITA No.1920/Ahd/2017 Smt. Jashodaben H Patel vs. ITO Asst.Year – 2010-11 - 5 - 7. 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 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
ITA No.1920/Ahd/2017 Smt. Jashodaben H Patel vs. ITO Asst.Year – 2010-11 - 6 - 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 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 above, let us consider the facts of the present case. It emerges from the record that in order to explain the source of deposits in the two bank accounts, the assessee has submitted a fund flow statement. It was contended that her mother-in-law was having agricultural land which was acquired by GIDC in survey No.337/1 at
ITA No.1920/Ahd/2017 Smt. Jashodaben H Patel vs. ITO Asst.Year – 2010-11 - 7 - Village Gagalasan, District Sidhpur. She received compensation approximately Rs.3.56 lakhs. It was given to the assessee and it was deposited in her bank account. Similarly, the mother-in-law was having agricultural income and a claim at Rs.7,37,424/- was made. The Ld. first appellate authority has observed that out of the agricultural income earned by the mother-in-law, the other brothers of assessee’s husband would have also taken some shares. Hence, to the extent of Rs.2,50,000/-, the explanation of assessee was accepted. In other words, the ld. first appellate authority has also observed that at the most out of agricultural income earned by the mother-in-law, the assessee’s share could be Rs.2,50,000/-. Under these circumstances, the addition made at Rs.9,91,585/- was scaled down to Rs.3,78,635/-. To our mind, assessee has given an explanation for the deposits in the bank accounts. However, that Explanation did not meet the approval of Assessing Officer and addition on an estimate basis has been confirmed by the CIT(A). The explanation made by the assessee was not found to be false. Thus, assessee does not deserve to be visited with penalty as far as quantum addition of Rs.3,78,635/- is concerned.
As far as addition of Rs.90,797/- on account of capital gain is concerned, there is no explanation at the end of assessee either in the quantum proceedings or in the penalty proceedings. Hence, assessee deserves to be visited with the penalty on this addition.
ITA No.1920/Ahd/2017 Smt. Jashodaben H Patel vs. ITO Asst.Year – 2010-11 - 8 -
In the result, appeal of the assessee is partly allowed.
Order pronounced in the Court on 13th March-2019 at Ahmedabad.
Sd/- Sd/- ( PRADIP KUMAR KEDIA) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 13/ 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)-Gandhinagar, 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 1. Date of dictation ..11.3.19 (dictation-pad 11- pages attached at the end of this File) 2. Date on which the typed draft is placed before the Dictating Member ..12.3.19 3. Other Member... 4. Date on which the approved draft comes to the Sr.P.S./P.S…………….. 5. Date on which the fair order is placed before the Dictating Member for pronouncement…… 6. Date on which the fair order comes back to the Sr.P.S./P.S…….13.3.19 7. Date on which the file goes to the Bench Clerk…………………13.3.19 8. Date on which the file goes to the Head Clerk…………………………………... 9. The date on which the file goes to the Assistant Registrar for signature on the order…………………….. 10. Date of Despatch of the Order………………