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Income Tax Appellate Tribunal, SURAT BENCH, SURAT
Before: SHRI C.M.GARG & SHRI O.P.MEENA
आदेश /O R D E R PER O. P. MEENA, ACCOUTANT MEMBER: 1. This appeal filed by Assessee is directed against the order of the Ld. Commissioner of Income Tax(Appeals), [CIT(A)], Valsad dated 19.01.2015 for the assessment year 2007-08 in respect of penalty order passed under section 271(1)(c) dated 30.03.2013 by
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the Assistant Commissioner of Income Tax, Circle – Valsad (in short the AO ) of the Income Tax Act, 1961 (in short ‘the Act’).
During the currency of appeal, the assessee has raised an additional ground by stating that the CIT(A) has erred in confirming penalty. When the ld. Assessing Officer (AO) has not specified as whether the penalty was leviable for concealment of income or for furnishing of inaccurate particulars of income. However, this additional ground of appeal is not pressed before us, therefore same is treated as dismissed as not pressed.
Ground No.1 and 2 relates to confirming penalty of Rs.10,09,800/- levied u/s.271(1)(c) of the Act.
Short facts of the case are that an addition of Rs.30 lacs was made on account of unexplained cash credit being share application money receipt for which penalty proceedings were initiated u/s.271(1)(c) read with section 274 of the Act. After considering the facts and the reply of the assessee, the Assessing Officer has levied a penalty of Rs.10,09,800/- being 100% of tax sought to evaded of Rs.30 lacs.
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Being dissatisfied of the order, the assessee filed appeal before the ld. CIT(A) who has upheld the levy of penalty by observing that the quantum addition has been confirmed by the ITAT. Further, admission of appeal by Hon`ble High Court in quantum appeal cannot be an indication that the issue is debatable as held in the case of CIT v. Prakash S. Vyas [2015] 58 taxmann.com 334 (Gujarat) / [2014] 232 Taxman 352/ [2015] 272 CTR 353 (Gujarat) . Further, the Finance Act 2008 has inserted a sub- section (1B) to section 271 that retrospective effect from 1st April, 1989, according to which an amount is added or disallowed in computing total income or loss of assessee in any order of an assessment or reassessment shall be deemed to be constitute satisfaction of Assessing Officer for initiation of penalty u/s.271(1)(c).
Being aggrieved, the assessee filed appeal before this Tribunal. The ld. Counsel for the assessee has pointed out that during the course of assessment proceedings the assessee had furnished various documentary evidences such as share application form account, account confirmation, I.T. Returns Acknowledgment, Bank Statements of the share applicants. Thus,
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by furnishing these documents, the assessee has discharged onus cast upon it, therefore, the addition does not represent any income actually earned by the assessee and nothing wrong had been found in documentary evidences furnished by the assessee. Further, the CIT (A) holding the explanation and evidences of the assessee as satisfactory deleted the addition. However, ITAT has restored the addition by taking different view. Therefore, the issue involved is most debatable issue on which two views are possible and revenue authorities have expressed two view of same set of addition. The learned counsel for the assessee also placed reliance in the case of National Textile v. CIT [2001] 249 ITR 125 (Guj) and CIT v. Jalaram Oil Mills [2002] 253 ITR 192 (Guj). Therefore, it has been claimed that the assessee has not furnished any inaccurate particulars of income or concealed the income. Besides, the learned counsel for the assessee has pointed out that the additions on which penalty has been levied has been admitted by the Hon'ble High Court of Gujarat, Ahmedabad in Tax Appeal No.146/2013 dated 09.07.2013, hence, the issue becomes debatable one as the Hon`ble High Court has admitted it as substantial question of law on which no penalty is leviable.
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Further, the penalty order is also invalid as penalty order by limitation as the same has been passed beyond the time limit of six months prescribed under section 275(1)(a) of the Act on the ground that the appeal order restoring the addition was passed by the Hon'ble ITAT on 29.06.2012 and same might have been received within two months whereas the order levying the penalty has been passed on 30.03.2013 i.e. after 9 months of passing the tribunal order, which is clearly beyond the prescribed period of six months from the end of month in which order of subject matter was received by the Commissioner of Income-tax. The ld. Counsel further placed reliance in the case of ACIT vs. SREI Infrastructures Finance Ltd. (2013) 36 taxmann.com 361 (Del) Tribunal in which, it was held that very claim is held by High Court to give rise to substantial question of law, then there cannot be any allegation of furnishing inaccurate particulars or concealment of particulars of income in relation to such a claim so as to attract levy of penalty u/s.271(1)(c) of the Act.
On the other hand, the ld. Senior Departmental Representative supported the orders of the Lower Authorities.
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We have heard the submissions and perused the material available on record. We have considered the facts and perused the material on record. The perusal of the assessment order reveals that the AO has made addition on account of unexplained cash credit of Rs. 30 Lakh inspite of the assessee having furnished share application Form, copy of account confirmation, ITR return acknowledgement, copy of bank statement and by furnishing these documents, the assessee has discharged the onus cast upon it. Thus, addition is made on the facts disclosed by the assessee in the return of income and also during the course of assessment proceedings. The addition so made is deleted by the ld. CIT (A) in appeal. However, the said addition was restored by the Tribunal by taking different view in the matter. The assessee has filed an appeal before the Hon`ble High Court against the order of Tribunal. The Hon`ble High Court has admitted substantial question of law by observing as under “The present Tax Appeal is ADMITTED for consideration of following substantial question of law
“ Whether on facts and evidence on record. The Tribunal has substantially erred in law in confirming addition of Rs.30
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lakhs made by the Assessing Officer towards alleged unexplained credit in respect of share application money received by the appellant Company?”
Thus, there is difference of opinion between two Income-tax authorities being CIT (A) and the AO as well as Tribunal, and further on the issue the Hon`ble High Court has admitted the appeal hence, the issue becomes most debatable in law. It is trite law that penalty proceedings are distinct and separate proceedings from assessment proceedings. The finding recorded in the assessment order is not conclusive for deciding the imposition of penalty. It only has a persuasive value. Any finding recorded in the assessment order does not mean that the penalty has to be imposed automatically. Explanation 1 to section 271 (l) (c) provides that the penalty would be deemed to attract where in respect of a fact material to the computation of income either no explanation is offered, or explanation offered is found to be false. Thus, the explanation offered was not found to be false and accordingly Clause (A) of Explanation 1 does not cover its case. Clause (B) of Explanation 1 provides that where the assessee is not able to substantiate its explanation and fails to prove that such
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explanation is bonafide and all the facts relating to the same have been disclosed, penalty is leviable. It is seen that CIT (A) has deleted the addition. Though the Tribunal has restored the same, thus, issue become debatable. This being the factual position, therefore penalty u/s 271(1) (c) is not leviable. Just because Appellant’s explanation was not found acceptable by the AO, it does not follow that that the Appellant was unable to substantiate his explanation by providing various evidences and judicial opinions. Explanation 1 does therefore, not cover the case of the Appellant. Based on the above facts of the case, It can be held that the Appellant had made all the necessary disclosures on a bonafide belief, which is not agreeable to the AO, it will not automatically lead to a case for penalty under section 271(1)(c) of the IT Act, 1961. The learned counsel for the assessee has placed reliance on the decision of Co-ordinate Bench of Mumbai tribunal in the case of Hungry Jacks Fast Food (P) Ltd. v. ITO [2016] 69 taxmann.com 80 ( Mumbai –Trib) wherein it was held that where there is difference of opinion amongst the revenue authorities themselves , penalty is such cases is not exigible. The learned counsel for the assessee further relied on the decision in the case
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of Salman Khan v. ACIT [2014] 40CCH 594 Mum-Trib wherein facts were that the deduction claimed of legal expenses was disallowed by the AO which were deleted by the CIT (A). However, Tribunal has restored the same. In such facts it was held that claim was accepted by CIT (A) on merit clearly shows that the claim made was on a possible view of matter. Therefore, on such situation penalty was deleted by CIT (A) and Tribunal. The facts of the assessee`s case similar to that case. Here the CIT (A) has deleted addition by holding that the assessee has submitted sufficient evidences proving identity and creditworthiness of investors and genuineness of transactions. However, Tribunal has restored the addition without finding any wrong in the order of CIT (A). It is settled law that penalty cannot be levied qua such debatable issue on which different authorities have taken different view and Hon`ble High Court has admitted the same as substantial question of law. The learned counsel for the assessee relied in the case of CIT v. Shree Rama Multi Tech Ltd. [2013] 34 taxmann.com 177 (Guj.) and Ranchhod Jivabhai Nakhava 208 Taxman 35 (Guj) which also supports the contentions of the assessee. Therefore, the penalty in this case cannot be levied as the issue is of debatable
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nature, on which two views are possible and merely the claim of receipt of share application money is not accepted even though documentary evidence were furnished by the AO, same cannot be a basis for levy of penalty. In view of these facts and circumstances, we direct the AO to cancel the penalty. Accordingly, Ground No.1 and 2 of appeal are allowed. 10. In the result, the appeal of the assessee is partly allowed. 11. The order pronounced in the open Court on 29.05.2018 Sd/- Sd/- (सी.एम.गग�) /(C.M. GARG) 1(ओ.पी.मीना) /(O.P.MEENA) �याियक सद�य/JUDICIAL MEMBER लेखा सद�य/ ACCOUNTANT MEMBER सुरत/ Surat: �दनांक /Dated : 29th May, 2018 / SGR Copy sent to- Assessee/AO/Pr. CIT/ CIT (A)/ ITAT (DR)/Guard file of ITAT. By order / / TRUE COPY / / Assistant Registrar, Surat