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Income Tax Appellate Tribunal, COCHIN BENCH, COCHIN
Per CHANDRA POOJARI, ACCOUNTANT MEMBER: This appeal filed by the assessee is directed against the order of the CIT(A), Thrissur dated 19/02/2018, confirming the levy of penalty of Rs.4600/- u/s.
I.T.A. No.207/C/2018 & SP No.22/C/2018 271(1)(c) of the Act and pertains to the assessment year 2000-01. The assessee has also filed Stay Petition in S.P. No.22/Coch/2018.
The facts of the case are that during the course of assessment, it was noticed that the assessee had transferred a total amount of Rs.1,11,65,080/- through his bank account in South Indian Bank, Thrissur. In the assessment it was held that the amount so transferred does not belong to him and he has facilitated the transfer of money for some other persons. The assessee had only earned certain commission from this activity. The commission so earned was determined at Rs.27,912/-. The total income determined in the assessment was Rs.75,912/-. In reply to the notice u/s. 271(1)(c), the assessee stated that he has not earned any income from such activity. He was getting only a monthly salary of Rs.4,000/- from his employer. The Assessing Officer rejected the contention of the assessee stating that it was difficult to believe that the assessee had allowed his bank account for transfer of huge amount of money for other persons without getting any benefit. Therefore, the Assessing Officer was convinced that the assessee had concealed particulars of income and imposed a minimum penalty of Rs.4,600/- u/s. 271(1)(c) of the Act.
On appeal, the CIT(A) observed that concrete information procured from Enforcement Directorate and CBI wing of the Department was available with Assessing Officer regarding routing of money. The CIT(A) observed that it was
I.T.A. No.207/C/2018 & SP No.22/C/2018 hard to believe that the assessee was not aware of the huge cash deposited in his bank. The CIT(A) referred to section 10 of the Evidence Act.
“10. Things said or done by conspirator in reference to common design Where there is reasonable ground to believe that two or more persons have conspired together to commit an offence or an actionable wrong, anything said, done or written by any one of such persons in reference to their common intention, after the time when such intention was first entertained by any one of them, is a relevant fact as against each of the persons believed to be so conspiring as ell for the purpose of proving the existence of the conspiracy as for the purpose of showing that any such person was a party to it. Illustration Reasonable ground exists for believing that A has joined in a conspiracy to wage war against the (Government of India). The facts that B procured some arms in Europe for the purpose of the conspiracy, C collected in Calcutta for a like object D persuaded persons to join the conspiracy in Bombay, E published writings advocating the object in view at Agra, and F transmitted from Delhi to G at Kabul the money which C had collected at Calcutta, and the contents of a letter written by H giving an account of the conspiracy, and to prove A’s complicity in it, although he may have been ignorant of all of them, and although the persons by whom they were done were strangers to him, and although they may have taken place before he joined the conspiracy or after he left it.”
3.1 The CIT(A) relied on the judgment of the Supreme Court in Criminal Appeal No. 179 of 1972 with Criminal Appeal 178 of 1972 in Shivnarayan and Laxminarayan Joshi and Others vs. State of Maharashtra and Criminal Appeal Nos. 252 and 253 of 1973 in State of Maharashtra vs. Loonkaran Hansraj and Others dealt with cases where circumstantial Evidence can be accepted even when there is no direct evidence. In view of the above cases, the CIT(A) held
I.T.A. No.207/C/2018 & SP No.22/C/2018 that there is clear entry of deposit of large amounts in the bank account of the assessee, the source of which he was not able to explain and he has permitted the Hawala agent to use his account. The CIT(A) rejected the argument of the assessee that he was ignorant of the intentions of the Hawala agent and there was no direct evidence against him and that there is no mens rea. According to the CIT(A), in such cases, there would be no direct evidence but only circumstantial evidence which leads to the conclusion that the assessee is a part of the hawala transaction and had intentionally not provided the details of income therefrom to the Assessing Officer for assessment. According to the CIT(A), the observations of ITAT in the case of Shri Bhaskar Sait, the employer of the assessee also confirm the role of the assessee as a link in the chain of hawala activities. Thus, the fact of deliberately concealing the particulars of the income having been established, the CIT(A) confirmed the levy of penalty on the income from hawala activities. Against this, the assessee is in appeal before us.
We have heard the rival submissions and perused the record. Admittedly, in this case, the assessee filed the return of income declaring income of Rs.48,000/- as salary. Later while completing the assessment, the Assessing Officer observed that the assessee had deposited a sum of Rs.1,11,65,080/- into his bank account. The Assessing Officer found that the assessee’s SB account with South Indian Bank was used to deposit the amount belonging to the assessee’s employer Shri Bhaskar Sait who is in hawala business. Accordingly,
I.T.A. No.207/C/2018 & SP No.22/C/2018 the Assessing Officer estimated the income at 0.25% of Rs.1,11,65,080/- which worked out to Rs.27,912/-. Consequently, the Assessing Officer levied penalty on this income which was worked out to Rs.4600/- The contention of the Ld. DR is that even though the income was estimated, the penalty could be levied and for this purpose he relied on the following High Court judgments: 1)CIT(Addl.) vs. Smt. Chandrakanta and Another (205 ITR 607) (MP) 2) A.M. Shah & Company vs. CIT 238 ITR 415 (Guj.)
4.1 The addition was estimated by the Assessing Officer on the amount deposited into the assessee’s bank account. The Assessing Officer adopted the flat rate of 0.25% as income of the assessee on the total deposits made in his bank account. The Assessing Officer did not record the finding of fraud or gross or willful negligence on the part of the assessee. Further, as seen from the facts of the present case, the addition sustained by the CIT(A) is merely by estimation of income made by the Assessing Officer. It is also noted that the Assessing Officer proceeded to levy penalty u/s. 271(1)(c) of the Act on the basis of the findings under the quantum proceedings and had not independently examined the matter in the penal proceedings for levy of penalty u/s. 271(1)(c). Even on this procedural count, the penalty levied cannot be sustained. Though the CIT(A) had sustained the addition, the assessee had not filed any appeal against that order, that by itself does not prove that there is any conclusive material to suggest that the assessee has earned additional income determined by the Assessing Officer. Penalty cannot be levied in this kind of situation. Further,
I.T.A. No.207/C/2018 & SP No.22/C/2018 unless the claim of the assessee was proved to be bogus or that any amount was actually earned by the assessee was proved by the assessee, the addition itself cannot be reason for levy of penalty. The addition was only on account of assessment of income on the deposits made into the account of the assessee’s bank. The A.O. could not prove that there was willful or gross negligence on the part of the assessee, resulting thereby the assessee concealed the income to that extent. There was no deliberate concealment on the part of the assessee. In our opinion, when the income is estimated as above, it is not proper to levy penalty as held by different High Courts in the following cases: 1) New Plaza Restaurant vs. ITO (301 ITR 259) 2) Sajay Ikake vs. CIT (360 ITR 271) 3) Vijay K.Talwar vs. CIT (1 SCC 673) 4) Commissioner Customs vs. Stone and Marble (2011) (12 SCC 758) 5) CIT vs. Target Construction Co. Ltd. 231 taxman 55 (All.)
4.2 Further, it was held by the Allahabad High Court in the case of CIT vs. Raj Bans Singh (276 ITR 351), that when income is estimated by different authorities right from Assessing Officer to Tribunal and it was a simple case of one estimate against another estimate, and therefore, penalty cannot be levied. Similarly, Bombay High Court in the case of CIT vs. Badve (138 ITR 82); Punjab and Haryana High Court in the case of CIT vs. Metal Products of India (150 ITR 714); Delhi High Court in the case of CIT vs. Ajay Hari Dalmia (157 ITR 145); and Madras High Court in the case of Bombay Hardware Syndicate vs. CIT (114 ITR 586) have taken a view that penalty u/s. 271(1)(c) was not imposable in relation
I.T.A. No.207/C/2018 & SP No.22/C/2018 to estimated additions because the factum of either concealment of particulars of income or furnishing of inaccurate particulars of income, were not proved.
4.3 In view of the above judgments, we are inclined to delete the penalty levied by the Assessing Officer and confirmed by the CIT(A).
S.P. No.22/Coch/2018 5. Since we have decided the appeal in favour of the assessee, the Stay Petition filed by the assessee in S.P. No. 22/Coch/2018 has become infructuous and hence, the Stay Petition is dismissed as infructuous.
In the result, the appeal filed by the assessee is allowed and the Stay Petition filed by the assessee is dismissed.
Order pronounced in the open Court on this 5th July, 2018.
sd/- sd/- (GEORGE GEORGE K.) (CHANDRA POOJARI) JUDICIAL MEMBER ACCOUNTANT MEMBER Place: Dated: 5th July, 2018 GJ Copy to: 1. Shri K.V. Joy, Koonan House, Mission Quarters, Thrissur-680 01. 2. The Assistant Commissioner of Income-tax, Circle-2(1), Range-2, Thrissur.
I.T.A. No.207/C/2018 & SP No.22/C/2018 3. The Commissioner of Income-tax(Appeals), Thrissur 4. The Pr. Commissioner of Income-tax, Thrissur. 5. D.R., I.T.A.T., Cochin Bench, Cochin. 6. Guard File. By Order
(ASSISTANT REGISTRAR) I.T.A.T., Cochin