DR. K. VELUSAMY (INDIVIDUAL),PALANI vs. DCIT, CENTRAL CIRCLE-III, MADURAI

This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals) 1, Madurai, dated 18.11.2019 relevant to the assessment year 2010-11 challenging the appellate order of confirming the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 [“Act” in short].

Brief facts of the case are that the assessee Dr. K. Velusamy and his spouse Dr. (Mrs.) S. Chandralekha are leading doctors of Palani speacilised in the field of infertility. Dr. S. Chandralekha is running hospital by the name “Ishwarya Fertility Centre” in Palani, Chennai, Coimbatore and Madurai. The assessee filed his return of income for the assessment year 2010-11 on 12.10.2010 admitting an income of ₹.20,37,870/- and agricultural income of ₹.3,40,000/-. On 13.03.2008, the doctors were intercepted at the Chennai Airport while carrying cash of ₹.1,48,50,000/- on board Air Deccan Flight from Coimbatore to Chennai and consequently, a search under section 132 of the Income Tax Act, 1961 [“Act” in short] was conducted on 24.11.2011 on the group cases of Dr. K. Velusamy, the assessee. The notice under section 153A of the Act was issued and served on 22.11.2012. In response to the notice, the assessee filed the return of income on 01.03.2013 admitting income of Rs.25,13,930/- and agricultural income of ₹.3,40,000/-. Thereafter, notice under section 143(2) and 142(2) of the Act were also issued. During the course of assessment proceedings, while comparing the ledger accounts found in the books of the assessee and M/s. Palani Medical Centre P. Ltd., it was found that the assessee has introduced as if they were received from M/s. Palani Medical Centre P. Ltd.: Date on which cash credit Amount (Rs.) was introduced 01.01.2009 4,86,015 30.03.2010 2,85,985 Total 7,72,000 The Assessing Officer further found that there was no corresponding payment entries in the books of M/s. Palani Medical Centre P. Ltd., the assessee could not explain this difference during the course of assessment proceedings and the Assessing Officer, therefore, added the sum of Rs.7,72,000/- introduced in the name of M/s. Palani Medical Centre P. Ltd. as unexplained cash credit under section 68 of the Act and completed the assessment order under section 143(3) r.w.s. 153A of the Act on 24.03.2014. The assessee accepted the addition made by the Assessing Officer in view of the incriminating evidences which arose on comparison of the books of accounts. Accordingly, the Assessing Officer has initiated penalty proceedings under section 271(1)(c) of the Act. After considering the submissions of the assessee against the notice issued under section 271(1)(c) of the Act, the Assessing Officer has levied penalty of Rs. 3,85,651/- under section 271(1)(c) of the Act since the assessee has not declared its true income in the original return of income filed by him and in view of the Explanation 1 to section 271(1)(c) of the Act. On appeal, the ld. CIT(A) confirmed the penalty levied under section 271(1)(c) of the Act by following the decision of the Hon’ble Supreme Court in the case of MAK Data P. Ltd. v. CIT 358 ITR 593 (SC).

On being aggrieved, the assessee is in appeal before the Tribunal against confirmation of penalty levied under section 271(1)(c) of the Act. By replying upon the grounds of appeal, the ld. Counsel for the assessee has submitted that during the course of appellate proceedings on 25.09.2019 and on 15.11.2019, the assessee filed replies both on merits and legality which has not been considered in all its aspects by the ld. CIT(A) and prayed that the penalty of ₹.3,85,651/- levied under section 271(1)(c) of the Act and confirmed by the ld. CIT(A) may be deleted.

On the other hand, the ld. DR supported the orders of authorities below.

We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. Against the levy of penalty under section 271(1)(c) of the Act, the AR of the assessee has submitted before the ld. CIT(A) that the said sum of ₹.7,72,000/- was included in the cash payment of ₹.10,44,460/- and produced the ledger copy of Dr. K. Velusamy in books of M/s. Palani Medical Centre P. Ltd. The issue was remanded to the Assessing Officer for verification. After giving an opportunity to substantiate the claims and evidence filed during the course of remand proceedings and examining the facts and the documents relied upon by the assessee, the Assessing Officer came to conclusion that the evidence submitted by the assessee was not correct. On perusal of the order passed by the ld. CIT(A), we find that the ld. CIT(A) has not at all narrated anything available in the remand report and what was incorrect found by the Assessing Officer in the documents furnished by the assessee during the course of remand proceedings. The ld. DR also could not able to explain in detail on the observations of the Assessing Officer on the documents furnished by the assessee during the course of remand proceedings. Under the above facts and circumstances, the penalty levied under section 271(1)(c) of the Act is deleted.

In the result, the appeal filed by the assessee is allowed. Order pronounced on the 05th May, 2022 in Chennai.