ASHOK P. SHAH,MUMBAI vs. ITO 14(2)(1), MUMBAI

आदेश / O R D E R

PER RAVISH SOOD, JUDICIAL MEMBER:

1. NATURAL JUSTICE: 1.1 The income Tax Officer— 14 (2) (1), Mumbai (“the A.0.”), erred in not granting proper, sufficient and opportunity of being heard to the Appellant while framing the assessment. 1.2 It is submitted that in the facts and the circumstances of the case, and in law, the assessment so Framed be held as bad and illegal , as the same is framed in breach of the principles of natural justice.

2. WITHOUT PREJUDICE TO THE ABOVE: 2.1 The A.O. erred in making additional of Rs. 27,45,000/- to the income of the appellant as alleged Unexplained investment u/s. 69 of the Income tax Act, 1961 ["the Act"]. 2.2 While doing so , the A.O. erred in: (i) Basing his action only on surmises, suspicion and conjecture; (ii) Taking into account irrelevant and extraneous considerations: and (iii) Ignoring relevant material and considerations as submitted by the appellant. 2.3 It is submitted that in the facts and the circumstances of the case, and in law, no such addition was called for. 2.4 Assuming - but not - that any addition was called for, it is submitted that in the facts and the Circumstances of the case, in law, the computation of the addition is not in accordance with the Law. 3.1 The A.O. erred in not granting rebate u/s. 88 of the Act as claimed by the appellant. 3.2 It is submitted that in the facts and the circumstances of the case, and in law, the appellant is to be granted rebate u/s. 88 as claimed for. 5. The appellant craves leave to add alter, delete or modify all or any the above ground at the time of hearing.” 2. Briefly stated, the facts of the case are that the assessee had filed his return of income for A.Y 2009-10 on 01.10.2009, declaring total income at Rs. Nil. The case of the assessee was taken up for scrutiny assessment under Sec. 143(2) of the Act. The A.O being of the view that the assessee could not explain the source of the cash deposit P a g e | Shri Ashok P. Shah Vs. ITO of Rs.27,45,000/- in his bank account with Jansewa Sahkari Bank Borivali Ltd, Branch: Dahisar (East), therefore, treating the same as an unexplained investment under Sec. 69 of the Act, assessed the income of the assessee vide his order passed under Sec. 143(3), dated. 28.12.2011. The A.O while framing the assessment also initiated penalty proceedings under Sec. 271(1)(c) in the hands of the assessee.

3. That after the culmination of the assessment a show cause notice under Sec. 274 r.w.s. 271(1)(c) was issued to the assessee on 28.12.2011. The assessee in his reply submitted before the A.O that as the addition of Rs.27,45,000/- made under Sec. 69 on account of alleged unexplained investment was merely backed by surmises, suspicions and conjectures, without considering the submissions made by the assessee, therefore, no penalty was called for in the hands of the assessee. The A.O after deliberating on the submissions of the assessee did not find favour with the same. The A.O observed that as the unsubstantiated explanation of the assessee that the cash deposit of Rs.27,45,000/- in his bank account represented the sale proceeds of flats which were sold to M/s Talent Infoways Ltd and M/s Buniyaad chemical ltd. did not inspire any confidence, therefore, the same could not be accepted. The A.O in the backdrop of his aforesaid observations, holding a conviction that the amount of Rs.27,45,000/- deposited in the bank account of the assessee represented his concealed income, therefore, imposed a penalty of Rs.8,25,391/- in the hands of the assessee under Sec. 271(1)(c) of the Act.

4. Aggrieved, the assessee carried the matter in appeal before the CIT(A). The CIT(A) after deliberating on the submissions of the assessee was not persuaded to accept the same. The CIT(A) observed that in the case of the assessee for the immediately preceding year, P a g e | Shri Ashok P. Shah Vs. ITO viz. A.Y 2008-09, the penalty imposed by the A.O under Sec.271(1)(c) on the same set of facts was upheld by his predecessor, as under:

The decision of Hon'ble High court of Delhi in the case of CIT vs. Zoom Communication Pvt. Ltd. (233 CTR 465 ( 191 Taxman 179) on concealment penalty u/s. 271(1)(c) provides necessary guidance as decision is rendered after consideration of decision of Hon'ble Supreme Court in the case of Reliance Petroproducts Pvt. Ltd. For ready reference, relevant extract of the decision is reproduced as under :- It is true that mere submitting a claim which is incorrect, in law, would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect, in law is ma/a fide the Explanation 1 to section 271(1) would come into play and work to the disadvantage of the assessee (para 19) The court cannot overlook the fact that only a small percentage of the income-tax returns are picked up for scrutiny. If the asse3see makes a claim which is not only incorrect in law, but is also wholly without any basis and the explanation furnished by him for making such claim is not found to be bona fide, it would be difficult to say that he would still be liable to penalty under section 271(1)(c). If one takes a view that a claim which is wholly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition o penalty, even if he was not acting bona fide while making a claim of this nature, that would give a license to the unscrupulous assessee to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self assessment under section 143(1) and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by a mala fide intention to evade tax otherwise payable by them, would get away without paying the tax legally payable by them, if their cases are not picked up for scrutiny. This would take away the deterrent effect, which these penalty provisions in the Act have (para 20). Accordingly, I confirm the penalty levied of Rs.25,69 ,984/- being minimum @100% penalty tax sought to be evaded. Hence, the ground of appeal is dismissed.

The CIT(A) in the backdrop of the aforesaid facts followed the order of his predecessor and upheld the penalty imposed by the A.O under Sec. 271(1)(c).

P a g e | Shri Ashok P. Shah Vs. ITO