SHRI PRAVINBHAI GHUSABHAI SINGALA,SURAT vs. INCOME TAX OFFICER WARD-3(1)(1), SURAT

Page 1 of 7 Pravinbhai Ghusabhai Singala Vs. ITO, Ward-3(1)(1), Surat/ITA No.739/SRT/2018/A.Y.2013-14 आयकर अपीलीय अिधकरण,सुरत �यायपीठ, सुरत IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT �ीमती िदवा िसंह, �ाियक सद� तथा �ी ओ.पी.मीना, लेखा सद� के सम� BEFORE SMT. DIVA SINGH, JUDICIAL MEMBER AND SHRI O.P.MEENA, ACCOUNTANT MEMBER

आ.अ.सं./I.T.A. No.739/SRT/2018 िनधा�रण वष�/Assessment Year : 2013-14 Shri Pravinbhai Ghusabhai Shingala, Vs. DCIT, A-85, Anand Dhara Row House, Circle-3(3), Surat. Mota Varachha Gam road, Near Darbar Faliya, Surat. [PAN: ADZPS 8679 M] अपीलाथ� Appellant ��यथ�/Respondent िनधा�रती क� ओर से /Assessee by Shri Rasesh Shah – CA राज�व क� ओर से /Revenue by Shri P.S.Choudhary – Sr.DR

सुनवाई की तारीख/ Date of hearing: 10.01.2019 11.01.2019 उ�ोषणा क� तारीख/Pronouncement on: आदेश /O R D E R PER O.P.MEENA, AM: 1. This appeal filed by the Assessee is directed against order of learned Commissioner of Income Tax(Appeals)-3, Surat(in short “the CIT (A)”) dated 27.09.2018 pertaining to Assessment Year 2013-14 which in turn has arisen from the orders passed by the DCIT, Circle-3(3), Surat(in short “the AO”) dated 23.09.2016 under section 271(1)(c)of Income Tax Act,1961 (in short ‘the Act’). 2. The grounds raised by the assessee read as under : “1. On the facts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in confirming the action of assessing officer in levying penalty of Rs.2,62,650/- u/s.271(1)(c) of the I.T.Act, 1961.

Page 2 of 7 Pravinbhai Ghusabhai Singala Vs. ITO, Ward-3(1)(1), Surat/ITA No.739/SRT/2018/A.Y.2013-14 2. Even otherwise, the assessing officer has erred in levying penalty by attracting both the limbs i.e. for concealment of income or for furnishing inaccurate particulars thereof. 3. Even otherwise, the assessing officer has erred in initiating penalty in the assessment order on the ground of furnishing inaccurate particulars of income and levying the penalty ultimately on both the grounds i.e. for concealment of income or for furnishing inaccurate particulars thereof. 4. It is therefore prayed that the above penalty levied by the assessing officer and confirmed by the CIT(A) may please be deleted. 5. Appellant craves leave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal.”

Page 3 of 7 Pravinbhai Ghusabhai Singala Vs. ITO, Ward-3(1)(1), Surat/ITA No.739/SRT/2018/A.Y.2013-14 5. The assessee carried the matter before the CIT(A) wherein it was contended it is not a case of furnishing inaccurate particulars of income or concealment of particulars of income. It was further stated that the assessee has agreed to the addition and did not file further appeal to buy peace, therefore, the CIT(A) was of the view that the assessee was not sure about the genuineness of the unsecured loan. Therefore, the penalty levied was held to be justified. 6. Being aggrieved, the assessee has filed appeal before this Tribunal. The ld.Counsel for the assessee relying on the decision of Hon'ble Jurisdictional High Court in the case of CIT vs Jalaram Oil Mills [2001] 69 CCS 520 Guj (SC) submitted that the assessee has merely considered that the entry in question may be treated as its income by virtue of provision of section 68, the Tribunal recorded a finding of fact that there is no instance to show that the assessee had been earning business income outside books in the past or in the year under consideration the penalty could not be sustained. In the case of assessee also since 3 parties could not be produced before the AO, therefore to avoid the litigation and buy peace the assessee has agreed for addition which does not tantamount to furnishing of inaccurate particulars of income by virtue of the provision of section 68 conceded by the assessee. The ld.Counsel further placed reliance in the case of National Textile vs CIT, wherein it was held that in order to justify levy of penalty for addition of cash credits, there must be some material or circumstances leading to reasonable conclusion that the amount

Page 4 of 7 Pravinbhai Ghusabhai Singala Vs. ITO, Ward-3(1)(1), Surat/ITA No.739/SRT/2018/A.Y.2013-14 represent assessee’s income and the circumstances must show that there was conscious concealment or act of furnishing in accurate particulars, Explanation-1 does not make the assessment order conclusive evidence that the amount assessed was in fact the income of the assessee. The ld.Counsel further submitted that the AO has initiated penalty for furnishing inaccurate particulars of income whereas the AO levied the penalty for furnishing inaccurate particulars of income and concealment the true particulars of income. Therefore, no specific charge was levied while initiating penalty u/s.271(1)(c) of the Act levying the penalty. Therefore, relying on the decision in the case of Nayn C Shah vs ITO [2016] 386 ITR 304 (Guj) it was submitted that while issuing a notice u/s.271(1)(c) of the Act the AO is required to specify as to what the AO wants on the part of the assessee, as to whether the case is one of furnishing inaccurate particulars or whether it is a case of concealment of income, or both. Hence, view expressed by the CIT(A) to effect that breach in question was technical and venial in nature, requires to upheld and the impugned order passed by Tribunal upholding the levy of penalty on the ground of suppression of particulars, deserves to set-aside. The ld.Counsel further filed copy of notice issued u/s.274 r.w.s. 271 of the Act wherein the relevant extract has not been struck down whether the assessee has been concealed the particulars of income or furnished inaccurate particulars of said income. 7. Per contra, the ld.Sr.DR relied on the orders of authorities below.

Page 5 of 7 Pravinbhai Ghusabhai Singala Vs. ITO, Ward-3(1)(1), Surat/ITA No.739/SRT/2018/A.Y.2013-14 8. We have heard the rival submissions and perused the material on record. The perusal of the assessment order as well as the penalty order shows that the penalty has been levied as the assessee has agreed for addition of Rs.8.50 lakhs on account of unexplained cash credit u/s.68 of the Act whereas the assessee has furnished the details of the all parties from whom unsecured loans were received along with confirmation, bank statement and copy of acknowledgment of return and Balance Sheet. Therefore, just because 3 parties could not appear before the AO, does not mean that loan taken was concealed income of the assessee. The assessee has agreed for the addition to buy peace, it is trite law that the assessment proceedings and penalty proceedings are distinct in law and the assessment proceedings have only pervasive value. The settled legal position is that the Explanation-2 section 271(1)(c) raised rebuttal presumption and burden which is cast on assessee is akin to a civil burden which may be discharged on a preponderance of probabilities. Certain entries were found credited in the books of the assessee maintained in the assessment year and Explanation offered by the assessee was not found satisfactory in the opinion of the AO and the same were taxed under the provision of section 68 for the purposes of arising total income. However, whether the same could be treated as concealed income of the year under consideration. The Hon'ble Jurisdictional High Court in the case of CIT vs Jalaram Oil Mills [2001] 69 CCS 520 Guj (SC) have held that on the basis of the assessee agreeying to have credit entries in its books of

Page 6 of 7 Pravinbhai Ghusabhai Singala Vs. ITO, Ward-3(1)(1), Surat/ITA No.739/SRT/2018/A.Y.2013-14 entries treated as its income by virtue of provision of section 68. The said sum shall be deemed to be income of the year under consideration. However, dehors the said provision, it is not possible to state with certainity that the said sum would be concealed income of the assessee for the year under consideration. The past history of the assessee shows that the assessee has not been earning income outside books of accounts. Therefore, penalty imposed in such circumstances is not justified. The ld.Counsel has laced reliance in the case of National Textile Vs. CIT [2001] 249 ITR 125 (Guj) wherein it was held that provisions of section permitting the AO to treat unexplained cash credit as income are enabling provision for making certain additions where there is failure by the assessee to give an explanation or whether the explanation is not to the satisfaction of the AO. However, the addition made on this account would not justify imposition of penalty u/s.271(1)(c) by recourse only to Explanation-1 to section 271(1)(c). Thus, in the light of these facts and ratio laid down by the Hon'ble Jurisdictional High Court in the aforesaid too cases, it is reasonable to conclude that the amount of cash credit added by the AO does not represent the assessee’s conceal income due to the very fact that the necessary evidence have been duly furnished before the AO in the assessment proceedings in respect of non-producing of the parties. The same does not amount to furnishing inaccurate particulars of income. Therefore, the case of the assessee is not covered by Explanation-1 to

Page 7 of 7 Pravinbhai Ghusabhai Singala Vs. ITO, Ward-3(1)(1), Surat/ITA No.739/SRT/2018/A.Y.2013-14 section 271(1)(c) of the Act. However, the AO has failed to specify the specific charge in the show cause notice issued u/s.271(1)(c) r.w.s 274. 9. In the light of these facts, we are of the considered opinion that the AO was not justified in levying the penalty merely because the assessee has agreed for addition, accordingly the penalty so levied at Rs.2,62,650/- is therefore deleted. Accordingly all ground of appeal raised by the assessee are allowed. 10. In the result, appeal of the assessee is allowed. 11. The order pronounced in the open court on 11-01-2019. Sd/- Sd/- (�ीमती िदवा िसंह /DIVA SINGH) (ओ.पी.मीना/O.P.MEENA) (�याियकसद�यतथा/JUDICIAL MEMBER) (लेखासद�यकेसम� /ACCOUNTANT MEMBER) सुरत/ Surat, �दनांक Dated: 11th January, 2019/S.Gangadhara Rao, Sr.PS Copy of order sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat