BHUPENDRA C. DALAL,MUMBAI vs. DCIT (OSD-II) CR-7, MUMBAI

Bhupen C. Dalal Asst. Commissioner of Income Tax, Bhupen Chambers, Ground Floor Vs. (OSD) Circle-7, Mumbai, Dalal Street, Mumbai-23 Appellant .. Respondent PAN No. AABPD3308H Assessee by .. Shri Vipul Joshi, AR Revenue by .. Shri P. Daniel, DR Date of hearing .. 08-02-2017 Date of pronouncement .. 15-03-2017 O R D E R PER MAHAVIR SINGH, JM:

These three appeals by the assessee are arising out of the common order of CIT(A)-40, Mumbai, in appeal No. CIT(A)-40/DCIT(OSD-II) C.R.7/8/12-13 dated 31-05-2013. The Assessments were framed by ACIT (OSD)-II, Central Range-7, Mumbai for the A.Yrs. 1987-88, 1988-89. 1989-90 vide orders dated 31-12-2007 u/s 254 read with section 143(3) of the Income Tax Act, 1961 (hereinafter ‘the Act’). The penalty was levied under section 271(1)(c) of the Act for the A.Yrs. 1987-88, 1988-89. 1989-90 vide order dated 30-03-2012.

2. The only common issue in these appeals of assessee is against the order of CIT(A) confirming the levy of penalty under section 271(1)(c) of the Act. For this assessee has raised following grounds in three assessment years: - “ASSESSMENT YEAR -1987-88

1. a. The Learned Commissioner of Income Tax(Appeals)-40 Mumbai [CIT(A)] erred in confirming ,5321,5322/Mum/2013 Bhupen C. Dalal; AY-87-88, 88-89, 89-90 the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) by the Assessing Officer.

1. b. While doing so, the CIT (A) erred in: -

i) Not considering the detailed written submission made before him and merely relying on the observation made in the quantum appeal by hi predecessor. ii) Failed to appreciate that the quantum proceedings and penalty proceedings are independent. iii) Erroneously not accepting the case law cited by the appellant iv) Relying on case laws which were distinguishable on facts and in law. v) Not considering submissions made by the appellant in respect of each of the addition/ disallowance made by the AO while completing assessment and in respect of which the AO had levied penalty.

1. c It is submitted that in the facts and in law the CIT (A) failed to appreciate that there was neither concealment of income nor filing of inaccurate particulars of income and thereby erred in confirming penalty levied under section 271 (1) (c ) of the Act by the Assessing Officer.

The appellant therefore prays that the order of the CIT (A) be set aside and the AO be directed to delete the penalty levied under Section 271(1) (c) of the Act.

1. a. The Learned Commissioner of Income Tax(Appeals)-40 Mumbai [CIT(A)] erred in confirming the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) by the Assessing Officer.

1. b. While doing so, the CIT (A) erred in:-

i) Not considering the detailed written submission made before him and merely relying on the observation made in the quantum appeal by his predecessor. ii) Failed to appreciate that the quantum proceedings and penalty proceedings are independent. iii) Erroneously not accepting the case law cited by the appellant iv) Relying on case laws which were distinguishable on facts and in law. v) Not considering submissions made by the appellant in respect of each of the addition/ disallowance made by the AO while completing assessment and in respect of which the AO had levied penalty.

1 c. It is submitted that in the facts and in law the CIT (A) failed to appreciate that there was neither concealment of income nor filing of inaccurate particulars of income and thereby erred in confirming penalty levied under section 271 (1) (c ) of the Act by the Assessing Officer.

The appellant therefore prays that the order of the CIT (A) be set aside and the AO be directed to delete the penalty levied under Section 271(1) (c) of the Act.

ASSESSMENT YEAR -1989-90 ,5321,5322/Mum/2013 Bhupen C. Dalal; AY-87-88, 88-89, 89-90 1. a. The Learned Commissioner of Income Tax(Appeals)-40 Mumbai [CIT(A)} erred in confirming the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (the Act) levied by the Assessing Officer. 1.

i) Not considering the detailed written submission made before him and merely relying on the observation made in the quantum appeal by his predecessor. ii) Failed to appreciate that the quantum proceedings and penalty proceedings are independent. iii) Erroneously not accepting the case law cited by the appellant iv) Relying on case laws which were distinguishable on facts and in law. v) Not considering submissions made by the appellant in respect of each of the addition/ disallowance made by the AO while completing assessment and in respect of which the AO had levied penalty.

1 c. It is submitted that in the facts and in law the CIT (A) failed to appreciate that there was neither concealment of income nor filing of inaccurate particulars of income and thereby erred in confirming penalty levied under section 271 (1) (c) of the Act by the Assessing Officer.

The appellant therefore prays that the order of the CIT (A) be set aside and the AO be directed to delete the penalty levied under Section 271(1)(c) of the Act.”

5. We find that the Tribunal has confirmed the addition only on the basis that the assessee did not obtain any confirmation letter from this party, however, the assessee placed reliance on repayment of Rs.93,000/- made on 10-05-1991 to the creditor. Hence, it is a debatable issue whether the assessee has repayment or not. The Tribunal also accepted the assessee’s contention that the source to the extent of 12,000/- is explained in view of the payment of interest. Hence, the Tribunal sustained the addition only by observing as under: - “16. The next addition relates to cash credit available in the name of Ronak Patel. The assessee has received fresh deposit of Rs. 40,000/- from this creditor during the year under consideration. This account had a opening balance of Rs. 85,000/- and with the fresh credit cited above, the closing balance was shown at Rs.1,25,000/-. The assessee did not obtain any confirmation letter from this party. However, he placed reliance on the repayment of Rs. 93,000/- made on 10-05-1991 made to this creditor. The assessee has stated that he could not obtain any confirmation letter from the party due to passage of long time. Thus, we notice that the assessee has simply placed reliance on his books of account to substantiate this credit and the assessee did not produce any confirmation letter pertaining to either prior years or to Page 6 of 9 ,5321,5322/Mum/2013 Bhupen C. Dalal; AY-87-88, 88-89, 89-90 subsequent years. We further notice that the assessee has paid interest of Rs. 11,890/- to this creditor during the year under consideration. Thus, we are of the view that the sources to the extent of Rs. 12,000/- can be considered to have been explained in view of the payment of interest, referred above. Accordingly, we modify the order passed by Ld CIT(A) on this issue and direct the AO to sustain the addition in respect of this cash credit to the extent of Rs. 28,000/-. We order accordingly.”

In view of the above observations of the Tribunal in respect to this cash credit, we are of the view that there is a debate about re-payment of Rs.93,000/- made on 10-05-1991 by the assessee to this creditor Shri Ronak Patel. Hence, in any case penalty for concealment cannot be levied. We delete the penalty and allowed the appeal of the assessee on this issue.

85.3 The third item of the addition relates to the amount of Rs.3.00 lakhs received from M/s Mamta Enterprises. The assessee has furnished account copy of the creditor, copy of receipt issued to the creditor, confirmation letter obtained for the year ending 31.3.1989 and 31.3.1991. The confirmation letters contain the GIR number of the creditor. The submission of the assessee is that the books of accounts were made available to him only in August 2009 and hence due to passage of time of about 20 years, he could not obtain confirmation letter from this creditor. We have examined the ledger account copy of the creditor and the receipt issued to it. It is not clear as to whether this credit was received by way of cheque. Apart Page 7 of 9 ,5321,5322/Mum/2013 Bhupen C. Dalal; AY-87-88, 88-89, 89-90 from giving GIR number, the assessee has not provided the address of the creditor. It is also not clear as to whether the assessee is paying interest to this creditor and the details of repayment were also not given. In these set of facts, we are of the view that the assessee has failed to discharge the initial burden placed upon him u/s 68 of the Act in respect of this creditor. Accordingly, we confirm the assessment of the amount received from this creditor u/s 68 of the Act.

4. We find from the above that the assessee before Tribunal explained that the assessee has furnished copy of account of creditor, copy of receipts issued to the creditor, confirmation letter obtain for the year ended 31-03-1989 and 31-03- 1991. It is admitted fact that the confirmation letters contained the GIR No. of the creditor. Now, it was claimed before us that the assessee could not obtain fresh confirmation for the year ending 31-12-1987 due to long passage of time. Even the books of account were available for inspection only in August 2009 as per the direction of the Hon’ble Bombay High Court. We find from the penalty order of the AO that he has no were discussed the element of concealment in respect to this cash credit and hence we have no reason to sustain the same. The penalty levied by AO and confirmed by CIT(A) is deleted.