SHRI VISHNU KUMAR BHARGAVA,JAIPUR vs. INCOME TAX OFFICER, WARD-7-3, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh fot; iky jko] U;kf;d lnL; ,oa Jh Hkkxpan] ys[kk lnL; ds le{k BEFORE: SHRI VIJAY PAL RAO, JM & SHRI BHAGCHAND, AM vk;dj vihy la-@ITA No. 694/JP/2017 fu/kZkj.k o"kZ@Assessment Year : 2006-07 cuke Vishnu Kumar Bhargava The ITO, Vs. D-16, Meera Marg, Ward-7(3) Bani Park, Jaipur. Jaipur. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABPPB 2688 B vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@ Assessee by : None (Written submissions) jktLo dh vksj ls@ Revenue by : Shri J.C. Kulhari (JCIT) lquokbZ dh rkjh[k@ Date of Hearing : 14/03/2018 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 19/03/2018

vkns'k@ ORDER

PER: VIJAY PAL RAO, J.M.

This appeal by the assessee is directed against the order dated

22.06.2017 of CIT(A), Jaipur arising from penalty order passed U/s

271(1)(c) of the Act for the assessment year 2006-07. The assessee has

raised the following grounds:-

“ 1. The learned C.I.T. (A) has erred in fact as well as in law in confirming the penalty of Rs. 4,99,321/- levied by the A.O. u/s 271(1)(c) of the I.T. Act, 1961 on the basis of an exparte assessment order u/s 144 of the ITA.

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

was called for hearing despite the fact that on the last date of hearing

the assessee sought adjournment vide request on record dated

07.02.2018 and accordingly, the matter was adjourned to 14.03.2018

i.e. today. Since, none has appeared on behalf of the assessee up to

1.40 P.M. therefore, we propose to hear and disposed off this appeal

ex-parte.

considered the written submissions of the assessee and heard the ld.

DR as well as perused the order of the authorities below. The assessee

filed his return of income on 26.07.2006 which was assessed u/s 144 of

the Act on 20.12.2011 at a total income of Rs. 83,03,000/-. The AO

made addition of Rs. 15,25,000/- as well as Rs. 65,80,000/- on account

of unexplained cash deposit in the bank account u/s 69 of the Act. The

AO initiated proceedings u/s 271(1)(c) of the Act in respect of addition

of Rs. 15,25,000/-. The assessee though challenged the addition made 2

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO by the AO before the ld. CIT(A) and further, before this Tribunal

however, the addition of Rs. 15,25,000/- was confirmed by this

Tribunal. Subsequently, the AO has levied the penalty of Rs. 4,99,321/-

being 100% of the tax to be evaded vide order dated 01.03.2013. The

assessee again challenged the levied of penalty before the ld. CIT(A)

but could not succeed.

however, the assessee has filed written submissions, we note that the

assessee has referred as many as 20 decisions of various Hon’ble High

Courts as well as Hon’ble Supreme Court as under:- • CIT vs. Filterex Technologies P. Ltd 380 ITR 222 (Karn). • CIT vs. PH State Forest Corporation Ltd. 340 ITR 204 (H.P.) • CIT vs. S.L.N. Traders (no.2) 341 ITR 235 (Karn) • CIT vs. Sangeeta Leasing 343 ITR 428 (Delhi) • CIT vs. Sadhu Singh & Sons 344 ITR 316 (P &H) • CIT vs. Lakhani Footwear Ltd. 347 ITR 478 (P &H) • Mehsons Export Vs. ITO 347 ITR 639 (All) • Price Water House Coopers pvt. Ltd. vs. CIT 348 ITR 306 (SC) • CIT vs. Amit Jain 351 ITR 74 (Delhi) • CIT vs. Amtek Auto Ltd. 352 ITR 394 (P &H)

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO • CIT vs. P. rojes 356 ITR 703 (Mad) • Naresh Chandra Agrawal vs. CIT 357 ITR 514 (All) • CIT vs. Manjunatha Cotton & Ginning Factory 359 ITR 565 (Karn) • CIT vs. Krishi Tyer Retreading & Rubber Ind. 360 ITR 580 (Raj.) • CIT vs. Whiteline chemicals 360 ITR 385 (Guj.) • CIT vs. Sandur Manganese & Iron Ores Ltd. 362 ITR 160 (Kar) • CIT vs. Cholamandalam Inv. & Fin. Co. Ltd. 364 ITR 680 (Mad) • CIT vs. Shyam RajSingh 367 ITR 74 (P &H) • CIT vs. Nayan Builders 368 ITR 722 (Bom) • CIT-II Lucknow Vs. Jal Vidyut Nigam Limited

MANU/UP/0358/2016

The above decision has been cited in support of the contention that

disallowance of any claim cannot be become the basis of levy of penalty

u/s 271(1)(c) of the Act. However, we find that the decisions relied

upon by the assessee were rendered in the specific facts of each case

and has no similarity to the facts of the assessee. In the case of the

assessee the addition was made on account of deposits in the bank

account and the assessee failed to explain the source of such deposits.

Therefore, when the assessee has failed explanation source and the

said addition has been confirmed even up to the stage of this Tribunal

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

then, in the penalty proceedings only defence available to the assessee

is that though the explanation of the assessee was not accepted by the

AO however, the same is bonafide. We find that the assessee has not

furnished any such explanation either before the Assessing Officer in

penalty proceeding or before the ld. CIT(A) in the appellate

proceedings. Even what the assessee has contended before the ld.

CIT(A) is only the same decisions as we have referred in the forgoing

paragraphs and nothing else. 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.

The ld. CIT(A) has considered this issue in para 3 to 4.3 as under:-

4.1 The AO has stated as under: "In this case, return of income for Rs. 1,39,837/- was filed on 26- 7-2006 which assessed u/s 144 of the on 20-12-2011 at total

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

income of Rs. 83,03,000/-. The addition of Rs. 15,25,000/- and Rs. 65,80,000/- were made on account of unexplained cash deposits in bank account and u/s 69 for unexplained bank deposits, respectively. As per assessment order, the concealment of the particulars of income, penalty proceeding u/s 271(1)(c) of the I.T.Act. 1961 was initiated for the addition of Rs. 15,25,000/- vide notice dated 30-12-2008 and got served upon the assessee on 31-122008 through Notice Server of this office. The assessee had preferred appeal before the CIT(Appeals)-III, Jaipur on 27- 01-2009. 2. Vide order No. 354/JPR/ 2008-09 dated 31-03-2011, the CIT(A) has rejected the assessee's appeal on this ground. Thereafter, show cause notice u/s 271(1)(c) dated 2506-2012, 05-07-2012,12-09- 2012, and 05-10-2012 were issued to the assessee. In this regard the assessee filed reply repeatedly saying that he has filed appeal before Hon'ble ITAT, Jaipur and to keep the penalty proceedings in abeyance till the disposal of the appeal. 3- In this case, on the basis of AIR information a total cash of Rs. 15,25,000/- was found deposited in the assessee's bank account of Indusind Bank Ltd., Jaipur (A/c No. 0016-586131-001) on various dates during the financial year 2005-06 . The details of the case deposits are as under:- Date Amount 18.05.2005 5000 19.07.2005 300000 03.08.2005 300000 18.08.2005 300000 23.08.2005 350000 07.09.2005 270000 Total 1525000/- During the assessment proceedings, the assessee could not furnish or explain the source of such cash deposits , therefore the addition

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

was made for Rs. 15,25,000/-to the income of the assessee on account of unexplained cash deposits in bank account. The total unexplained income of Rs. 15,25,000/- was added to the income of the assessee and penalty proceedings u/s 271(1)(c) were initiated, accordingly. Thus, even after providing appropriate opportunity of being heard to the assessee, the assessee did not availed the same except to suggestion for kept in abeyance the proceedings till the disposal of the appeal filed before Hon'ble ITAT. In view of these facts, it is clear that the assessee has no explanation regarding concealed income against the proposed action for such penalty. Therefore, it has been deemed fit to impose of the penalty u/s 271(1)(c) of the I.T.Act. 1961. Considering all the facts and circumstances of the case, I satisfied that the assessee has deliberately & willfully concealed the income. Therefore, penalty u/s 271(1)(c) of the I.T.Act. 1961 for Rs. 4,99,321/-/- is hereby imposed, which is worked out as under: 1. Tax on declared income 4,064/- 2. Tax on assessed Income 5,03,385/- 3. Tax sought to be evaded (2-1) 4,99,321/- 4. Minimum penalty 100% of above 4,99,321/- 5. Maximum Penalty 300% of above 14,97,963/- 6. Penalty imposed 4,99,321/- 4.2 During the appellate proceeding the appellant has filed written submission as under and also argued the case on the same basis. " In the present case, the assessee filed a return on 26th July, 2006 declaring income at Rs 1,39,837/-. The assessment proceedings were carried by way of scrutiny assessment. Throughout the course of proceedings the humble appellant continuously protested that the 7

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

notice u/s 143(2) dated 24-07-2007 sent by registered post was not served within the statutory time fixed and was actually delivered on 03- 08-2007. According to the assessee, the scrutiny proceedings were barred by limitation prescribed there for. Resultantly, assessment proceedings were carried out ex-parte in the absence of the assessee appellant. By the assessment order so framed an addition was made on account of cash credits appearing in the savings bank account of the humble appellant. The AO, in the absence of any representation by the appellant, made an addition to the declared income, of the quantum of such deposits, by way of income from undisclosed sources. Such an addition was, to say theleast, made on a presumptuous basis. It may be relevant to state and mention that in making a cash deposit in the bank account, there is always a presumption that the depositer is seeking to bring the amount of deposit within the regular channel, which unless so deposited , may have escaped the entry into the regular channel. Before the CIT(A) in the quantum proceedings, entire set of documents demonstrating the basis, details and reasons for the amount having been received in cash and then deposited in the bank, were sought to be explained. However, the CIT (A) treated the said documents as falling within the ambit of 'Additional Evidence' and refused to look into or to even consider the same. The A's appeal to the ITAT also suffered the same fate. This has resulted in the addition having been made in an ex-parte assessment on a presumptuous basis, having never been subjected to any verification at any stage whatsoever. It is in the light of this fact situation that the provisions of sec 271 (1)( c) have to be looked at and an adjudication made as to whether the A has attempted to conceal any income[ taxable income] at all or has filed any inaccurate particulars of income, which could have enabled the AO to levy any penalty under that provision . In the light of judgments elaborated herein below, it would also have to be determined whether the order impugned contains any consideration of the existence of the necessary 8

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

concomitants, viz., any intention to evade tax at all. Rather it is a case where the A has honestly attempted to bring cash receipts into the regular banking channel. The legal position, as having emerged in the process of judicial churning beginning with the case of Dilip C Shroff 291 ITR 519 and crystallizing after rendering of judgment in Reliance Petro products Pvt. Ltd reported in [2010] 322 ITR 158 , is that dis- allowance of any claim cannot become the basis of the levy of penalty under the said provision. The aforesaid rule has since been followed in umpteen cases: 1. CIT v/s Filterex Technologies p. Ltd. 120161380ITR 222 (Karn). In this case the Hon 'ble Karnataka High Court has taken the view that Penalty proceedings are quite different from assessment proceedings. It is well-settled that the levy of penalty is not automatic if the addition or the disallowance is sustained by the appellate authorities. The ingredients of Sec271 (1)(c) have to be satisfied for levying the penalty. The fact situation emerging in the matter was that a sum of Rs 79,98,878/- was paid without deducting TDS and was accordingly disallowed u/s 40(a)(ia). ITAT 's order cancelling the penalty was sustained by the High Court. 2. CIT v HP State Forest Corporation Ltd. 120121 340 ITR 204(H.P.) In this case the Hon 'ble Himachal Pradesh High Court has taken the view that where assessee discloses the basic facts and does not conceal any material fact, no penalty could be levied. Facts emerging in the matter were that the assessee had disclosed the work in progress with a note that the net provision was for a sum of Rs 2,12,18,295/- but no such provision was made. The explanation was that the closing stock of forest products had reduced on account of deterioration. The Tribunal's view that all necessary facts had been disclosed and as such no penalty could be levied was upheld by the Hon'ble High Court. 3.CIT v/s S.L.N.Traders(no.2) 341 ITR 235(Karn). In this case the Hon'ble Karnataka High Court was dealing with an almost identical 9

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

fact situation wherein the unproven credits in the assessee's books of account to the tune of Rs 14 Lacks were added to his declared income. In proceedings for penalty, the assessee took a simple plea of having offered the credits to tax only because of its inability to prove genuineness. The penalty levied by the AO was cancelled by the CIT[A] and such cancellation was upheld by the ITAT and the High Court. 4. CIT v/s Saneeta Leasi' 2012 343 ITR 428(Delhi). In this case the assessee had claimed depreciation based on a transaction of sale and simultaneous lease of assets. The authorities found that the claim was bogus as no sale was affected and the assessee was cheated. The CIT (A) deleted the penalty as the particulars filed and the claim made by the assessee was bonafide and deleted the penalty. His order was upheld both by the ITAT and the Hon'ble Delhi High Court. 5. CIT v/s Sadhu Singh & Sons[2012] 344ITR316(P&H) In this case there was a finding that the difference in valuation stock was due to lower GP rate and cash credits were due to bona fide mistakes. In this case also the penalty levied by the Ao was deleted by the CIT(A) . Revenue's contentions to the contrary were dismissed by the ITAT who took the view that there was no mens rea for concealment of Income which had formed the basis for making additions to the Income and in the absence of such mens rea , no penalty can be levied. 6. CIT v/s Lakhani Footwear Ltd [2012] 347 ITR 478(P&H). In this case the assessee had made claims for the grant of depreciation which were debatable and were disallowed in quantum proceedings. However, in an appeal from the order levying penalty, the CIT(A) took the view that merely because the claim was debatable and was disallowed by the revenue authorities, would not ipso facto convert the declaration made by the assessee into a non-declaration or the particulars into incorrect particulars. His order was upheld by the ITAT and the Hon'ble High Court took the view that no penalty could be levied in such a case. 10

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

the above circumstance, this court is of the view that no substantial question of law arises for consideration and the same is dismissed. 10. CIT v/s Amtek Auto Ltd. [2013] 352 ITR 394(P&H) Assessee disclosed the nature of transactions in its return. It was on the basis of the interpretation of the provisions of the statute, the Assessing Officer found that such expenditure claimed by the assessee is not the revenue expenditure but the capital expenses. There is a fine distinction as to when an expenditure can be treated as a revenue or a capital expenditure. Therefore, merely for the reason that the assessee has claimed the expenditure to be revenue will not render the assessee liable to penalty proceedings. The order passed by the Tribunal does not give rise to the questions of law sought by the Revenue. Consequently, we do not find any merit in the present appeal and the same is dismissed 11. CIT v/s P. Roles [2013] 356 ITR 703(Mad) The Madras high Court held that it was not clear as to whether it was a case of suppression of turnover or of estimation of income at a lower rate. When the revenue itself had not come out with clear case of suppression of turnover and where there was no specific finding with regard to such factual aspect, imposition of penalty under section 271(1)(c) was not warranted.

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

from FDRs. Interest income from FDRs was duly shown. ft was for the AO to treat this income as business income or income from other sources and the same was upheld by appellate authorities. But the fact remains that there was no concealment on the part of assessee. So, no penalty for concealment was leviable. 13. CIT v/s Maniunatha Cotton & Ginnin2 Factory [2013] 359 ITR 565(Karn) It is clear that merely because the assessee agreed for addition and accordingly assessment order was passed on the basis of this addition and when the assessee has paid the tax and the interest thereon in the absence of any material on record to show the concealment of income, it cannot be inferred that the said addition is on account of concealment. Moreover, the assessee has offered the explanation. The said explanation is not found to be false. On the contrary, it is held to be bona fide. In fact in the assessment proceedings there is no whisper about these concealment. Under these circumstances, the entry found in the rough cash book could have been reflected in the accounts for the said financial year in which the survey took place as the last date for closing the account was still not over. The very fact that the assessee agreed to pay tax and did not challenge the assessment order, it is clear the conduct of the assessee cannot be construed as mala fide. Therefore, the Tribunal was justified in setting aside the orders passed by the appellate authority as well as the assessing authority. The Tribunal was justified in holding that the entire proceedings are vitiated as the notice issued is not in accordance with law and accordingly justified in interfering with the order passed by the appellate authority as well as the assessing authority and in setting aside the same. If the appellate authority was satisfied with the addition it has to be made on the ground of undervaluation of the closing stock, which was not the finding recorded by the assessing authority, which was not the basis for the initiation of the penalty proceedings by the assessing authority then in view of the law aforesaid, it is the appellate authority who should have initiated penalty proceedings and issued notice to the assessee to show cause why penalty should not be imposed. The said procedure is not followed and, therefore, though for different reasons, the first appellate authority set aside the order levying 13

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

penalty, the Tribunal correctly appreciated the facts and in a proper perspective and was justified in not interfering with the order passed by the appellate authority setting aside the penalty order. In that view of the matter, we do not see any justification to interfere with the well considered order passed by the Tribunal. Thus, the substantial questions of law are answered in favour of the assessee and against the revenue. 14. CIT v/s Krishi Tver Retreadinji & Rubber Ind. [2014] 360 ITR 580 Raj.The Hon'ble Rajasthan High Court speaking through division bench held that the additions were sustained purely on estimate basis and no positive fact or findings had been found to make the said addition. Penalty under section 271(1) (c) could not be levied on such guesswork or estimation. 15. CIT v/s Whiteline Chemicals [2014] 360 ITR 385 Gui In this case Tribunal had observed that no penalty could be imposed merely because account books of assessee were rejected and profit was estimated on basis of fair gross profit ratio. Tribunal found no additional matter for sustaining penalty. With respect to retention of sales-tax by assessee, Tribunal found that revenue could not establish such charge. Explanation offered by assessee could not be termed as not bona fide. No question of law arises. 16. CIT v/s Sandur Manjianese & Iron Ores Ltd 120141 362 ITR 160(Kar) In the instant case a wrong claim is made for deduction and an explanation was offered, in the absence of a finding that he has failed to prove such explanation as bona fide, no penalty can be imposed. In the instant case, a particular stand is taken based on the decisions-the High Court and is not able to substantiate the same. But as long as there is no finding by the Appellate Authority that the explanation offered is not, a bona fide one, the imposition of penalty is illegal. That is precisely what the Tribunal has held. It is settled law, imposition of penalty is not automatic. It is only when there is an attempt to evade tax by offering explanation which is found to he false or not bona fide the penalty can be imposed In the facts of the case we are also 14

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

satisfied that the imposition of penalty by the lower Appellate Authority was not justified or the material on record and the Tribunal was justified from setting aside the order of imposing penalty. The court found no merits in the appeal by revenue and the same was dismissed 17. CIT v/s Cholamandalam Inv. & Fin. Co Ltd [2014]364 ITR 680(Mad) The contention raised by the assessee was not held to be not according to truth or an inaccurate particulars furnished or with a view to conceal the actual income. In fact, the Assessing Officer in the penalty order dated 26.04.2000, has not given any independent finding in support of his conclusion that there was a deliberate design on the part of the assessee to inflate the cost of acquisition. As pointed out by the first Appellate Authority all the details of the transactions were placed before the Assessing Officer and an explanation was given as to why the market value of the property need not be equivalent to the WDV. The Assessing Officer while completing the assessment proceedings, chose to adopt the WDV. Therefore, that by itself would not amount to furnishing inaccurate particulars or with a view to conceal the actual income. Therefore, the order passed by the Tribunal calls for no interference. Accordingly, the Tax Case (Appeal) fails and it is dismissed 18. CIT v/s Shvam RajSin'h [2014] 367 ITR 74 (P&H) It was claimed that there was no intentional understatement of income or deliberate furnishing of inaccurate particulars on the part of the assessee. The plea of the assessee was found to be plausible and it cannot be held to be without any substance. Thus, under the circumstances, the levy of penalty by the Assessing Officer and Commissioner of Income-tax (Appeals) was not justified. In view of the above, the appeal disposed of dismissed accordingly. 19. CIT v/s Navan Builders [2014[ 368 ITR 722(Bom) Once it turns out that the claim of the assessee could have been considered for deduction as per a person properly instructed in law and is not completely debarred at all, the mere fact of confirmation of disallowance would not per se lead to the imposition of penalty. Since 15

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

addition and disallowances on which penalty was imposed was highly debatable issue, Tribunal was justified in deleting the penalty levied under section 271(1) (c).

As such, the onus lying on the department to show that the necessary con-commit ants of section 271(1)© of the Income Tax Act, have not been discharged in the case in hand and the penalty levied by the impugned order is without any basis whatsoever. The same may therefore be quashed and set-aside."

4.3 I have carefully considered the facts of the case, findings of the AO and

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO

submission of the appellant. It is seen that AO levied penalty u/s 271(1)(c) w.r.t. unexplained deposit of Rs. 15,25,000/- deposited in bank account. The assessment was completed u/s 144 as assessee did not produce evidence in his support. In appellate proceedings also, the addition was confirmed as evidence given was not accepted. Even in penalty proceedings, no evidence was furnished. These facts show that assessee has concealed the income and AO has rightly imposed the penalty. Accordingly the penalty imposed by the AO is confirmed.”

Thus, it is clear that even before the ld. CIT(A), the assessee did not

furnish any explanation regarding the source of the deposits made in

the bank account. Hence, in the facts and circumstances of the case,

we do not find any error or illegality in the orders of the authorities

below. Accordingly we confirmed the levy of penalty u/s 271(1)(c) of

the Act.

In the result, the appeal of the assessee is dismissed.

Order pronounced in the open court on 19/03/2018. Sd/- Sd/- ¼Hkkxpan ½ ¼fot; iky jko½ (Bhagchand) (Vijay Pal Rao) ys[kk lnL;@Accountant Member U;kf;d lnL;@Judicial Member

Tk;iqj@Jaipur fnukad@Dated:- 19/03/2018. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू vihykFkhZ@The Appellant- Vishnu Kumar Bhargava, Jaipur. 1. 17

ITA No. 694/JP/2017 Vishnu Kumar Bhargava vs. ITO izR;FkhZ@ The Respondent- ITO, Ward-7(3),Jaipur. 2. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 694/JP/2017}

vkns'kkuqlkj@ By order,

सहायक पंजीकार@Aेेज. त्महपेजतंत