SHRI DILIPBHAI KANTILAL PANCHAL,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-3(3)(6), AHMEDABAD

The learned CIT(A) erred in law and on facts in confirming the penalty of Rs.2,79,960/- imposed by AO under section 271(1)(c) of the Income Tax Act, 1961, which is requested to be deleted.

In this particular case the assessee has challenged the penalty u/s.271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The assessee is an individual who has filed the return through electronic media on 30.08.2012 declaring the total Dilipbhai Kantilal Panchal vs. ITO income at Rs.7,10,790/-. Upon Scrutiny, notice u/s.143(2) of the Act dated 06.08.2013 followed by notice u/s.142(1) of the Act dated 01.08.2014 was duly served along with questionnaire upon the assessee. During the assessment proceedings, in response to a notice u/s.133(6) of the Act, the Branch Manager, Axis Bank Ltd., Law Garden Branch, Ahmedabad forwarded the bank statement of account No.003010100278010 in the name of the assessee wherefrom it was found deposits in cash to the tune of Rs.10,05,500/- was made by the assessee. The plea of the assessee was this that cash was brought by his wife against the settlement of property dispute. In the absence of any evidence to support the same, the assessee offered the same for taxation for peace of mind. The explanation, however, was not satisfactory as observed by the Ld.AO and the entire amount of Rs.10,05,500/- was added to the income of the assessee u/s.68 of the Act followed by penalty proceeding u/s.271(1)(c) of the Act which was separately initiated on 10.11.2014 on the ground that the assessee has concealed his income to the tune of Rs.10,05,500/-.

The Ld. Assessing Officer ultimately levied penalty against the assessee to the tune of Rs.2,79,960/- which was confirmed by the Ld. CIT(A) and hence the instant appeal.

The Ld.Representative of the assessee at the time of hearing of the appeal submitted before us that the Ld. Assessing Officer levied penalty u/s.271(1)(c) of the Act without mentioning any specific charge. He relied upon the relevant paragraph of the Ld. Assessing Officer where the Ld. Assessing Officer has concluded by levying both the charges i.e. “furnishing inaccurate particulars of income” and thereby concealed income.

During the penalty proceeding, a show-cause notice dated 10.11.2014 u/s.274 r.w.s. 271(1)(c) of the Act was issued against the assessee “for furnishing inaccurate particulars of income” leading thereby concealment. Further that, by and under a letter dated 07.04.2015, the assessee was asked to furnish reply on such penalty proceedings u/s.271(1)(c) of the Act, in response thereof the assessee made the following submissions:

1 However, the submissions made by the assessee was not found acceptable and the Ld. Assessing Officer has formed an opinion of furnishing of inaccurate particulars of income and thereby concealment of income by the assessee. The case law relied upon by the assessee was also not found applicable by the Ld. Assessing Officer. But while imposing the penalty, the Ld. Assessing Officer observed as follows:

Assessee preferred an appeal against the order passed by the Ld. AO which was dismissed on merit.

We find that in the assessment order, the Ld. Assessing Officer came to a finding of concealment of income by the assessee to the tune of Rs.1,05,000/- while initiating the penalty proceedings u/s.271(1)(c) of the Act. The third para of the notice u/s.274 r.w.s.271(1)(c) of the Act speaks about the concealment of particulars of income or furnishing inaccurate particulars of such income by the assessee. Admittedly, the same has not leveled any specific charge against the assessee. The penalty order at the very onset of it speaks as follows:

It is true that in appeal the Ld. CIT(A) has not dealt with as to whether the act and/or conduct/ and/or charge against the assessee is of concealment of particulars of income or whether furnishing inaccurate particulars of income, but on merit confirmed the order passed by the Ld. Assessing Officer.

In this regard, we would like to rely upon the judgement passed by the Hon'ble Commissioner of Income Tax reported in 42 taxmann.com 54 has held that penalty cannot be imposed without mentioning the specific charge. The relevant extract of the order is reproduced below:

Regarding the contention that the Assessing Officer was ambivalent regarding under which head the penalty was being imposed namely for concealing the particulars of income or furnishing inaccurate particulars, we may record that though in the assessment order the Assessing Officer did order initiation of penalty on both counts, in the ultimate order of penalty that he passed, he clearly held that levy of penalty is sustained in view of the fact that the assessee had concealed the particulars of income. Thus insofar as final order of penalty was concerned, the Assessing Officer was clear and penalty was imposed for concealing particulars of income. In light of this, we may peruse the decision of this Court in case of Manu Engineering Works (supra). In the said decision, the Division Bench came to the conclusion that language of "and/or" may be proper in issuing a notice for penalty, but it was incumbent upon the Assessing Authority to come to a positive finding as to whether there was concealment of income by the assessee or whether any inaccurate particulars of such income had been furnished by them. If no such clear cut finding is reached by the authority, penalty cannot be levied. It was a case in which in final conclusion the authority had recorded that "I am of the opinion that it will have to be said that the assessee had concealed its income and/or that it had furnished inaccurate particulars of such income." It was in this respect the Bench observed that "Now the language of "and/or" may be proper in issuing a notice as to penalty order or framing of charge in a criminal case or a quasi-criminal case, but it was incumbent upon the IAC to come to a positive finding as to whether there was concealment of income Dilipbhai Kantilal Panchal vs. ITO by the assessee or whether any inaccurate particulars of such income had been furnished by the assessee. No such clear cut finding was reached by the IAC and, on that ground alone, the order of penalty passed by the IAC was liable to be struck down."

Therefore, whether the Ld. Assessing Officer has come to a clear cut finding while imposing/levying penalty against the assessee is to be considered finally in terms of the ratio of the judgment cited above.

It appears in the case in hand that though Ld. Assessing Officer initiated penalty proceeding on both the limbs of furnishing inaccurate particulars of income and concealment of income as well but ultimately having been satisfied on specific limb on the count of furnishing of inaccurate particulars of income in respect of the issues involved levied the penalty against the assessee. Needless to mention that the ratio of the judgment laid down by the Hon’ble Jurisdictional High Court has rightly been followed by the Ld. Assessing Officer in the instant case.

We now proceed to deal with the merit of the matter. The case of the assessee is this that the impugned amount which was found to be deposited in his account to the tune of Rs.10,05,500/- was received from his wife which was acquired out of family settlement which she did not deposit in her own account. However, no independent corroborative evidences has been produced in the form of notarized agreement and/or affidavit or deed of gift or a bank account or income tax record of his wife to substantiate his claim. It is needless to mention that if the money belongs to the wife of the assessee that ought to have been deposited in her account or that the same can also be deposited in the account of the assessee with her consent. But such consent must be supported with certain documents which has sanctioned in the eye of law in the form of an evidence as mentioned hereinabove. None of such evidence has been submitted by the assessee either before the authorities below or before us. In the absence of the same, we can conclude that such a Dilipbhai Kantilal Panchal vs. ITO statement has been made by the assessee in order to evade to tax liability. Furthermore, this particular fact of deposits of cash has come to the light much after the filing of return of income by the appellant as rightly been observed by the Ld. CIT(A). In view of that matter, we are of the considered opinion that this is nothing but concealment of income on the part of the assessee in which penalty is required to be imposed in terms of law which the authorities below has rightly performed. Taking into consideration the entire aspects of the matter particularly the facts of the case and the records, we do not find any infirmity in the order of penalty made by the Ld. Assessing Officer, confirmed by the Ld.CIT(A) and thus dismiss the appeal preferred by the assessee.

In the result, assessee’s appeal is dismissed. This Order pronounced in Open Court on 04/ 10 /2018 ( WASEEM AHMED ) JUDICIAL MEMBER Ahmedabad; Dated 04/ 10 /2018

""यथ" / The Respondent. 3. संबं"धत आयकर आयु"त / Concerned CIT 4. आयकर आयु"त(अपील) / The CIT(A)-3, 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 ////