SOWDHA,PONDICHERRY vs. ACIT PONDICHERRY CIRCLE, PONDICHERRY

Both the appeals filed by the assessee are directed against different orders of the ld. Commissioner of Income Tax (Appeals) - Puducherry, both dated 15.05.2019 relevant to the assessment year 2015-16 towards confirmation of quantum addition as well as penalty order passed under section 271(1)(c) of the Income Tax Act, 1961[“Act” in short].

Brief facts of the case are that the assessee filed her return of income for the assessment year 2015-16 on 18.04.2016 admitting total income of ₹.28,66,970/-. The return filed by the assessee was processed under section 143(1) of the Act and subsequently, the case of the assessee was selected for scrutiny. Against statutory notices, the assessee furnished the details as called for. After considering the submissions and accounts of the assessee, the Assessing Officer completed the assessment under section 143(3) of the Act by assessing total income of the assessee at ₹.34,96,970/- after making addition under section 68 of the Act towards unexplained cash credit. On appeal, the ld. CIT(A) confirmed the addition. Against the quantum addition, the Assessing Officer initiated penalty proceedings and levied penalty under section 271(1)(c) of the Act, which was also confirmed by the ld. CIT(A) on appeal.

On being aggrieved, the assessee is in appeal before the Tribunal against confirmation of quantum addition as well as penalty levied under section 271(1)(c) of the Act. Against the quantum addition, the ld. Counsel for the assessee has submitted that despite furnishing confirmation letters from assessee’s in-laws towards gift to the assessee as well as filing of the capital account of assessee’s mother-in-law, by ignoring the same, the ld. CIT(A) has confirmed both the quantum addition as well as penalty levied under section 271(1)(c) of the Act are against the law and principles of natural justice and prayed for deleting both the quantum addition as well as penalty. On the other hand, the ld. DR dutifully supported the orders of authorities below.

We have heard both the sides through video conferencing, perused the materials available on record and gone through the orders of authorities below. When the details for cash deposits to the tune of ₹.1,26,94,000/- was called for during the course of assessment proceedings, it was the submission that the assessee had a net income of ₹.45,15,939/- and also had taken loans from HDFC Bank and Catholic Syrian Bank. Apart from this the assessee had taken unsecured loan of ₹.6,65,000/- from her husband Shri Saravanan and gift of ₹.6,30,000/- from her parents. Since the assessee was not able to submit confirmation from her parents, the Assessing Officer disallowed the gift of ₹.6,30,000/- and brought to tax as unexplained cash credit under section 68 of the Act. However, while initiating penalty proceedings under section 271(1)(c) of the Act, the AR of the assessee has furnished confirmation letters from assessee’s in- laws towards gift to the assessee as well as filing of the capital account of assessee’s mother-in-law and details of the sundry creditors on 22.06.2018. But, the Assessing Officer ignored the above confirmations and other details and levied penalty under section 271(1)(c) of the Act on the ground that the assessment under section 143(3) of the Act was already completed. On perusal of the penalty order, we find that the Assessing Officer has not at all disputed the confirmation letters and other details furnished on behalf of the assessee are bogus or otherwise. Before the ld. CIT(A), the assessee has raised six grounds, wherein, in ground No. 4, the assessee has stated that “4. The Dy. CIT further failed to appreciate that her in-laws had filed confirmation letters later, since the assessee could not obtain them before the completion of assessment but the same was available in the course of penalty proceedings and hence the addition as u/s. 68 needs to be deleted”, whereas, in the appellate order, the ld. CIT(A) has reproduced grounds No. 1 to 3 only. Once the confirmations and other details furnished by the assessee was not disputed by the Assessing Officer during the course of penalty proceedings, we are of the considered opinion that the ld. CIT(A) was incorrect to confirm the quantum and accordingly, the quantum addition of ₹.6,30,000/- made by the Assessing Officer stands deleted. Once the quantum addition has been deleted hereinabove, the penalty levied under section 271(1)(c) of the Act shall not survive.

In the result, both the appeals filed by the assessee are allowed.