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Income Tax Appellate Tribunal, ‘C’ BENCH: CHENNAI
Before: SHRI GEORGE MATHAN & SHRI INTURI RAMA RAO
आदेश / O R D E R
PER SHRI GEORGE MATHAN, JUDICIAL MEMBER : These are appeals filed by the assessee directed against the order of the learned Commissioner of Income Tax (Appeals), Salem (hereinafter called as ‘CIT(A)’) in confirming the penalty levied u/s.271(1)(c) of the Income Tax Act, 1961 in Appeal No.17/2017-18 , 1704 & 1705/Chny/2019 :- 2 -: dated 18.03.2019 for the assessment years 2006-07, 2007-08 & 2008- 09.
Mr. Devanathan, Advocate represented on behalf of the Assessee and Ms. R. Anitha, JCIT represented on behalf of the Revenue.
It was submitted by the learned Authorized Representative that the assessee is an individual. The assessee is a person responsible in JR Group, Hosur. The group is in the business of manufacturing craft paper and corrugated boxes. The assessee was subjected to a search u/s.132 of the Income Tax Act, 1961 on 13.03.2009. Notice u/s.153A was issued, returns were filed and assessments were completed u/s.153A r.w.s143(3) of the Act on 31.12.2010. In the course of assessment, substantial additions had been made representing unproved credit in the cash flow statement, deemed dividend, unaccounted investment in properties and unproved credits. On appeal, the assessee had been granted certain reliefs and on further appeal, the Tribunal had confirmed certain additions in the assessment and had restored certain issues in respect of the cash credits to the file of the Assessing Officer for re-adjudication, as the assessee had not produced any evidences before the lower authorities. It was a submission that evidences had been produced before the Tribunal for the first time in the form of confirmation letters and these were also restored to the file of the Assessing Officer for re-adjudication. It was a submission that the learned Assessing Officer after giving effect to the order of the Tribunal confirmed the additions in , 1704 & 1705/Chny/2019 :- 3 -: respect of the unaccounted investments as also the addition made on account of the cash flow statement prepared and submitted by the assessee. It was a submission that the Assessing Officer had initiated penalty proceedings to which the assessee had responded. The Assessing Officer without considering the submissions of the assessee levied penalty in respect of the additions representing the deemed dividend, addition in respect of the credit shown in the cash flow statement as loans from friends and relatives as also the addition on account of stamp duty and registration charges and the credits representing amounts alleged to have been drawn from the companies in which the assessee was a Director. It was a submission that the learned CIT(A) also without considering the explanation of the assessee has confirmed the levy of penalty. It was a submission by the learned Authorized Representative that the levy of penalty was discretionary in view of the decision of the Hon’ble Madras High Court in the case of Mainland Theatres & A.R. Srinivasan (by LRS) Vs. Assistant Commissioner of Income Tax [2013] 350 ITR 676 (Mad). It was a submission that as the Assessing Officer has been granted the discretion to levy penalty, the discretion should normally be in favour of the tax payer. It was also a prayer by the learned Authorized Representative that in view of the decision of the Hon’ble Supreme Court in the case of T. Ashok Pai Vs Commissioner of Income Tax in [2007] 292 ITR 11 (SC), the penalty should be viewed liberally. It was a submission that in view of the decision of the Hon’ble Madras High Court in the case of the Commissioner of Income Tax, Salem Vs. Victory Spinning Mills Limited in , 1704 & 1705/Chny/2019 :- 4 -: T.C.(A) Nos.309 to 311 of 2014, it was the duty of the Department to prove that the sum was emanating from the assessee. It was thus a submission that the penalty as levied by the Assessing Officer and as confirmed by the learned CIT(A) was liable to be deleted.
In reply, the learned Departmental Representative drew our attention to the penalty order in para-2, whether the Assessing Officer has extracted the written submissions filed by the assessee. It was further a submission that no evidence to substantiate any of the additions made have been filed by the assessee. It was a submission that the assessee claimed to have taken funds from friends and relatives but the PAN No. nor the addresses of such friends and relatives are provided by the assessee. It was a submission that before the Assessing Officer, no evidence whatsoever was produced.
The learned Departmental Representative further drew our attention to the order of the learned CIT(A), wherein in para-8 the learned CIT(A) categorically states the assessee’s claim that he cannot remember having availed a loan from one Shri Vairamuthu whose PAN No. and address has not been provided. He further records that the assessee claims that he does not remember the names and addresses from whom he has availed the loans. In respect of the assessee’s claim that he borrowed funds from the company in which he is a Director, the same has been shown to be false. It is further a submission that the learned CIT(A) categorically recorded that the assessee failed to substantiate his claim against the penalty order in the appellate , 1704 & 1705/Chny/2019 :- 5 -: proceedings. It was a submission by the learned Departmental Representative that even before the Tribunal other than claiming the levy of penalty is discretionary and that liberal approach must be taken, no evidence has been produced. It was a submission that the search has brought out the evidence that the assessee has concealed his income and that evidence having not been disproved nor explained by the assessee, the Revenue cannot be expected to prove anything further. She vehemently supported the order of the learned Assessing Officer and the learned CIT(A).
We have considered the rival submission and perused the materials available on record.
Admittedly in the present case, the assessee has not produced any evidence whatsoever to dislodge any of the findings as made by the Assessing Officer in his penalty order. Even though the decision of the Hon’ble Supreme Court in the case of Shri T. Ashok Pai Vs Commissioner of Income Tax in [2007] 292 ITR 11 (SC) does give room for liberal interpretation in respect of the penalty proceedings, still the primary requirement of their being a plausible explanation is an absolute necessity.
The plausible explanation itself is missing in the present case much less any explanation. In fact, the claim of the assessee that he does not remember from whom he has taken loans is farfetched to accept in so far as the amounts are not small amounts and the persons from whom he has taken the amounts would not keep quite. The assessee’s claim that he has drawn money from , 1704 & 1705/Chny/2019 :- 6 -: the companies in which he is a Director has been categorically proved by the Revenue to be false. The addition what has been sustained is basically on the basis of the cash flow statement prepared by the assessee himself. The assessee is unable to explain his own cash flow. In such a situation, it would be farfetched to demand that the Assessing Officer or the Appellate Authority should apply discretion in favour of the tax paper, especially when concealment is proved and substantiated as is evident from the facts of the case. In the circumstances, we find no merit in the appeals filed by the assessee and consequently the same stands dismissed.
In the result, the appeals of the assessee stands dismissed.
Order pronounced in the open Court on 26th November, 2019 in Chennai.