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Income Tax Appellate Tribunal, AHMEDABAD - BENCH ‘D’
Before: SHRI RAJPAL YADAV & SHRI WASEEM AHMED
आदेश/O R D E R
PER RAJPAL YADAV, JUDICIAL MEMBER:
Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-7, Ahmedabad dated 28.1.2015 passed for the Asstt.Year 2009-10.
Sole grievance of the assessee is that the ld.CIT(A) has erred in confirming penalty of Rs.93,630/- which was imposed by the AO under section 271(1)(c) of the Act.
ITA No.1041/Ahd/2015 2 3. Brief facts of the case are that the assessee has filed its return of income on 29.9.2009 declaring total income at Rs.12,11,950/-. It emerges out from the record that on 10.9.2009 a survey under section 133A was carried out at the business premises of the assessee. According to the AO, the assessee has disclosed an amount of Rs.11.50 lakhs voluntarily towards unaccounted receipts for accounting year 2008-09 in addition to its regular income. The ld.AO further observed that in the return filed on 29.9.2009 for A.Y.2009-10 it had offered Rs.8.50 lakhs instead of admitted unaccounted receipt of Rs.11.50 lakhs. Thus, in the opinion of the AO a sum of Rs.3 lakhs required to be added to the total income. He accordingly passed assessment order under section 143(3) of the Act on 21.11.2011 whereby addition of Rs.3.00 lakhs was made. The ld.AO has initiated penalty proceedings under section 271(1)(c) of the Act on the addition made to the income of the assessee. In response to the show cause notice of the AO, it was contended by the assessee that it has made a note along with return of income wherein it submitted that Rs.3,99,850/- was earned in earlier year, and it was duly recognized as normal profit in the return filed for earlier year. Therefore, balance of Rs.8.50 lakhs was offered in this assessment year. The ld.AO was not satisfied with the explanation of the assessee. He observed that the assessee has furnished inaccurate particualrs to the extent of Rs.3.00 lakhs, and accordingly levied penalty of Rs.93,630/- which is equivalent to the tax sought to be evaded of Rs.3 lakhs. The finding recorded by the AO in para-5 is worth to note. It reads as under:
“5. In view of the above discussion, it is clear that the assessee has furnished inaccurate particulars of income to the extent of Rs.3,00,000/-. Therefore, it is a fit case for imposing penalty u/s. 271(1) (c) of the IT. Act 1961. Accordingly, I impose the minimum penalty leviable @ 100% of tax sought to be evaded u/s 271 (1) (c) of the Act of Rs.93,630/- as against penalty of Rs.2,80,890/- being 300% of the tax sought to be evaded. I therefore, levy a penalty of Rs.93,630/- @ 100% u/s
ITA No.1041/Ahd/2015 3 271 (1) (c) of the Income Tax Act 1961. Issue Notice of Demand and Challan.”
On appeal, the ld.CIT(A) concurred with the AO, but changed basis for visiting the assessee penalty. The ld.AO has levied penalty for the reasons that the assessee has furnished inaccurate particulars, but the ld.CIT(A) has confirmed the penalty with help of Explanation-1 to Section 271(1)(c). The relevant finding of the ld.CIT(A) is also worth to note. It reads as under: “3.2 I have considered the penalty order assessment order and the submissions made by the appellant. The appellant, during the course of survey, based on the document found, has disclosed unaccounted/undisclosed receipt of Rs.11,50,000/- not entered in the books of accounts for accounting year 2008-09. However, in the return of income filed, it has included only Rs.8,50,000/-. The appellant, before me, has contended that Rs.11,50,000/-was unaccounted receipt and considering the expenditure, undisclosed income was of Rs.8,50,000/-, therefore, only Rs.8,50,000/- was added as disclosed under survey. The appellant neither before the AO nor before me has submitted the details of expenditure to arrive at the figure of Rs.8,50,000/-. In view of the above and Explanation 1 to Section 271(1)(c), penalty of Rs.3,00,000/- levied by the Assessing Officer u/s. 271(1)(c) is confirmed.”
With the assistance of the ld.representatives, we have gone through the record carefully. The ld.counsel for the assessee has raised multi-fold contentions before us. In the first fold of contentions, he submitted that the addition has been made on the basis of alleged voluntary disclosure. This disclosure is based on a statement recorded during the course of search, and such statement was given without any oath, because officer in the survey team is not authorized to administer oath as provided in sub-section (3) of section 133(A). It was a just information for setting machinery in motion. Hence, there is no evidence with the Revenue to say that the assessee has unaccounted receipts. For buttressing his contentions, he made reference to the decision of Hon’ble Supreme Court in the case of S.Khader Kahn Son, 25 taxmann.com 413 (SC).
ITA No.1041/Ahd/2015 4 In the next fold of contentions, he submitted that the assessee has duly provided a note at the end of the return filed by it wherein it has submitted that out of Rs.11.50 lakhs, Rs.3.99 lakhs was part of normal profit which has been offered earlier. The assessee has disclosed everything including its account. Revenue has failed to rebut this disclosure and failed to disclose which incorrect fact was furnished by the assessee.
In the next fold of contentions, he submitted that penalty has been imposed by the AO on the ground that the assessee has furnished inaccurate particulars; whereas this basis has been changed by the ld.CIT(A) who confirmed the penalty with the help of Explanation 1 to section 271(1)(c). This explanation provides that if an addition is being made to the total income of the assessee, then it would be deemed that such addition represents concealed income. So penalty has been confirmed for concealment and no show cause notice was given for this purpose. The ld.CIT(A) cannot change basis of visiting the assessee with penalty unless such penalty proceedings was initiated by the ld.CIT(A). For buttressing his contentions, he relied upon the order of the ITAT passed in the case of Shri Kantibhai Naranbhai Prajapati in ITA No.2880/Ahd/2014 which has been taken note by the Tribunal in the case of Shri Jayendra N. Shah Vs. ACIT, in ITA No.1381/Ahd/2016. The Tribunal has reproduced finding of the ITAT in the case of Kantibhai Naranbhai Prajpati (supra). Such finding reads as under:
“6. We have heard the rival contentions and perused the materials available on record. At the outset, we find that in the identical facts and circumstances the Hon'ble ITAT in the case of Kantibhai Naranbhai Prajapati (supra) has deleted the penalty imposed by the lower authorities. The relevant extract of the order is reproduced below:
"8. We straight away find that the AO vide penalty order doted 25/11/2013 under s.271(l)(c) of the Act imposed penalty on additions made alleging 'concealment of
ITA No.1041/Ahd/2015 5 particulars of income'. However, the CIT(A), on the other hand, has confirmed the penalty on the ground of 'furnishing inaccurate particulars of income'. Apparently, the basis and foundation for imposition of penalty has been altered by the C1T(A). It is thus ostensible that findings recorded by the CIT(A) show that penalty has been confirmed on a different premise and the original satisfaction for imposition of penalty has been altered or modified by the appellate authority. In such circumstances, where the original basis of imposition of penalty has been altered in a significant way by the first appellate authority, the very basis for sustaining the penalty is rendered non- existent. Needless to say, the imposition of penalty is solely dependent upon the 'satisfaction' of the AO [unless initiated by CIT(A)] and non-else. The ground for action by AO was allegation of 'concealment'. This ground has been substituted by CIT(A) to 'furnishing inaccurate particulars of income' while confirming the penalty quantified by the AO. Thus, in the absence of continuity in the findings of the AO and the CIT(A), the order of the penalty passed by the AO is liable to be struck down on this ground alone. For such a view, we usefully refer to the decision of the Hon'ble Gujarat High Court in the case of New Sorathia Engineering Company vs. CIT(2006) 282 ITR 642 (Guj.) and CIT vs. Manu Engineering Works (1980) 122 ITR 306 (Guj.). Similar view has been taken by the Coordinate Bench of the Tribunal in Gian Chand Batia vs. DCIT 61 ITD 24(AIL). Therefore, where concurrent I.T.authorities are not sure about nature of default, the penal action under s.271(l)(c) of the Act is not sustainable in law."
The facts of the case in hand are identical to the facts of the case as discussed above. Therefore, the ratio laid down by this Tribunal in the case of Kantibhai Naranbhai Prajapati (supra) is squarely applicable to the facts of the instant case. Therefore, respectfully following the same we reverse the orders of authorities below. Thus, the ground of appeal of the assessee is allowed.”
On the other hand, the ld.DR relied upon the order of the ld.CIT(A).
On due consideration of the above facts and circumstances, we are of the view that the assessee does not deserve to be visited with penalty because there is no evidence brought on record by the Revenue
ITA No.1041/Ahd/2015 6 demonstrating the fact that the assessee has furnished inaccurate particulars. Only circumstances referred by the AO is the statement given during the course of survey for harbouring belief that income of Rs.3.00 lakhs deserves to be assessed in the hands of the assessee, over and above, income disclosed by it. This evidence is an information only, which does not carry evidentiary value, hence, on the basis of this statement, it cannot be concluded that the assessee has furnished inaccurate particulars of income. Apart from above, the assessee has completely disclosed the details along with copies of accounts. It has made a noting in the return of income showing as to how Rs.3.00 lakh is not to be included in its income. It is a separate matter that such addition has been made, which might have not been changed, but for the purpose of penalty, the stand taken by the assessee deserves to be looked into and deserves to be decided afresh. Apart from two circumstances, we are of the view that the ld.CIT(A) has confirmed penalty for deemed concealment, whereas, this was not used by the AO as reason for visiting the assessee with penalty. We extracted a part of the penalty order as well as finding of the ld.CIT(A). If both the orders of the Revenue authorities are being examined in the light of the discussion made by the Tribunal in the case Shri Kantibhai Naranbhai Prajpati (supra), then penalty is not sustainable. Therefore, 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 9th January, 2019 at Ahmedabad.
Sd/- Sd/- (WASEEM AHMED) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 09/01/2019