VISHNU KUMAR BHARGAVA vs. THE INCOME TAX OFFICER

Judgment 22/10/2018 (PER HON’BLE MOHAMMAD RAFIQ. J.) This appeal has been preferred by assessee against the judgement of the Income Tax Appellate Tribunal dated 19.3.2018, which has upheld the levy of penalty under Section 271(1)(c) of the Income Tax Act. The facts of the case are that the proceeding for assessment was carried out by the respondent-assessing authority against the appellant under Section 142(1) of the Act. The case of the appellant has been that he received notice u/s.142(1) on 3.8.2007 even though the time prescribed for initiation of assessment proceedings came to an end on 31.7.2007. Thereafter, another notice dated 21.5.2008 was received through registered post fixing the date of hearing for 28.8.2008. On that date, the authorised representative of the appellant appeared before the assessing authority. He was handed over the query sheet. The (2 of 6) [ITA-246/2018] appellant filed a letter pointing out specifically that the notice u/s.142(1) was received by him on 3.8.2007, which notice was beyond the time prescribed for initiation of the proceedings. Hence the proceedings were void ab initio and the same ought to be dropped. Even when the assessing authority summoned the appellant u/s.131 to record his statement, he reiterated the same objection about the proceedings having lapsed. The Assessing Officer, however, proceeded to carry out assessment proceedings by invoking Section 144 of the Act and framed ex-parte order dated 30.12.2008. The appellant filed appeal before the CIT(A). The appellant by his letter dated 9.8.2010 took a stand that he failed to collect confirmations from the lenders but upon framing of the order, he had collected the same, which may be taken on record by way of additional evidence in terms of Rule 46A. CIT(A) however issued a direction to present the relevant evidence before the AO, who was directed to, in turn, prepare a remand report after granting the appellant a fair opportunity and submit such remand report after granting the appellant a fair opportunity and submit such remand report to the CIT(A). The appellant-assessee then took the matter to the Income Tax Appellate Tribunal by way of second appeal. The Tribunal has dismissed the appeal vide order dated 13.2.2015. Based on the assessment order dated 20.11.2011, the Income Tax Officer vide notice dated 30.12.2008, initiated proceedings for levy of penalty u/s.271(1)(c). In the course of proceedings for levy of penalty, the Assessing Officer recorded that the assessee has deposited various cash amounts in his own bank account totalling to Rs.15,25,000, but he failed to furnish the explanation of the sources for such cash amount. This unexplained amount has been (3 of 6) [ITA-246/2018] treated as assessee’s undisclosed income. The stand of the appellant-assessee, however, was that as per the documents sought to be placed on record by way of application under Rule 46A of the Rules, the cash deposits represent advances received on sale of land and therefore did not fall within the ambit of income prior to the execution and registration of respective sale deeds, which sale deeds have not been executed and/or registered during the financial year under consideration. As such, the assessee did not indulge in either furnishing any inaccurate particulars or of concealment of any income, as no income had accrued during the year. Thus, it was merely a case of failure to explain the entries. The appellant-assessee unsuccessfully challenged the order of Assessing Officer before the CIT(A) and Income Tax Appellate Tribunal, who have both dismissed the appeal respectively dated 1.3.2013 and 19.3.2018. It may be at the outset noted that the appellant in the present appeal has questioned the correctness of the penalty of Rs.4,99,321 levied by the Assessing Officer and confirmed by CIT(A) and Income Tax Appellate Tribunal under Section 271(1)(c) of the Act. The appellant before the Tribunal has relied on number of judgements of various High Courts and the Supreme Courts in support of his contention that disallowance of any claim cannot become the basis for levy of penalty u/s.271(1)(c) of the Act. The Tribunal however held that the aforementioned judgements have been rendered in the specific facts of each case and have no similarity to the facts of the assessee. In the case of assessee, the addition was made on account of deposits in the bank account and the assessee failed to explain the source of such deposits and therefore when the assessee has failed to explain the source, the (4 of 6) [ITA-246/2018] said addition was confirmed even upto the stage of the Tribunal. In the penalty proceedings, the only defence available to the assessee would be that though the explanation of the assessee was not accepted by the Assessing Officer, however, the same is bonafide. The Tribunal however noted that the assessee has not furnished any explanation either before the Assessing Officer in the penalty proceedings or before the CIT(A) in the appellate proceedings. The Tribunal further noted that the assessee has not uttered even a single sentence about the source of the deposit made in the bank account and therefore when no explanation at all was furnished by the assessee then the question of the same being bonafide does not arise. We may at the outset take note of the fact that the order of the Tribunal dated 13.2.2015, against the order of CIT(A) 31.3.2011 and original assessment order of Assessing Officer dated 30.12.2008 was challenged before this Court by assessee in D.B. Income Tax Appeal No.103/2015. The coordinate bench of this Court dismissed the appeal vide order dated 25.4.2016 by holding that the finding arrived at by the Tribunal is just and proper based on the material on record and no substantial question of law can be said to emerge out of the impugned order. Argument of the learned counsel for the appellant is that penalty u/s.271(1)(c) could not levied in case of mere rejection of explanation offered by the assessee. The Tribunal has seriously erred in having not considered the view taken by the Karnataka High Court in CIT vs. Filterex Technologies Pvt. Ltd.-(2016) 380 ITR 222 (Kar.), wherein it was held that penalty proceedings are quite different from assessment proceedings.

(5 of 6) [ITA-246/2018] Learned counsel sought to raise the similar arguments, which he had advanced in the earlier appeal no.103/2015. He argued that the view taken by this Court in earlier judgement of assessee was not a correct view, being contrary to the law laid down by the Delhi High Court in Principal Commissioner of Income Tax vs. Paramount Biotech Industries Ltd., ITA Nos.887/2017 and 888/2017 dated 24.10.2017. Learned counsel also relied on the judgement of coordinate bench of this Court in Commissioner of Income Tax vs. Krishi Tyre Retreading & Rubber Industries, ITA No.542/2008 decided on 19.9.2013. Learned counsel again argued that this Court has not correctly appreciated the fact that the notice dated 24.7.2007 was served on the appellant on 3.8.2007 and according to Section 142(1), the notice was required to be served on or before 31.7.2007 and since it was served on 31.7.2007, the proceedings became time barred and thus the action of the Assessing Officer was incompetent. Coordinate bench of this Court in the earlier judgement dated 25.4.2016 has rejected the aforesaid argument by relying on judgements of various High Courts and the Supreme Court. We cannot while examining the correctness of the judgement passed against the same assessee, albeit in respect of levy of penalty under Section 271(1)(c), go into the correctness of the aforesaid judgement of the coordinate bench of this Court. The Tribunal in our considered view has rightly held that the assessee failed to furnish any explanation about the source of deposit made in the bank account and when no explanation whatsoever has been furnished by the assessee, the question of explanation being bonafide did not arise. No question of law much less any (6 of 6) [ITA-246/2018] substantial question of law, arises in this appeal. The impugned order in our considered view does not suffer from any infirmity. The appeal, which lacks merit, is hereby dismissed. (GOVERDHAN BARDHAR),J (MOHAMMAD RAFIQ),J RS/13