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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI SHAMIM YAHYA & SHRI RAVISH SOOD
This appeal by the assessee is directed against order of Ld. CIT- A, dated 31.07.2013, pertaining to assessment year 1997-98, wherein the Ld. CIT-A has affirmed the levy of penalty of Rs.1,49,600/- u/s. 271(1) C of Income Tax Act. 2. In this case AO levied penalty as above by observing as under;
Kavita K. Salian ITA no.6149/Mum./2013 In this case the assessment was completed u/s.143(3) r.w.s 254 of the Act on 27-12-2010, the total income have assessed at Rs.13,96,6101-. While passing the order, the additions was made of Rs.2,00,000/- On account of Cash Credit in hands of the assessee. This addition was made since the assessee has not explained satisfactorily the cash payment of Rs.2,00000/- made to the various labors at the sight of M/s. Shakti Acqva and also by M/s. Shakti Acqva on behalf of the assessee. The another addition was made on account of unproved loans to the extent of Rs.1,75,000/- since the assessee has failed to prove the genuineness of loans transactions for loan taken from the loan creditors alongwith theirs sources of income, credit worthiness and capacity of issuing loans. As the assessee has concealed the particulars of her income and also filed inaccurate particulars of her income in the manner as explained in above the penalty proceedings u/s.271(1)(c) have been initiated by issue of notice u/s.271(1)(C) dated 27-12-2010 and the same was duly served on the assessee. Since the assessee could not comply the notice issue u/s.271(J)(C), a another opportunity is given to the assessee for filing of her written reply by issue of letter dated 07-06-2011 which is also duly served on the assessee. In response to the above notices, the assessee has Kavita K. Salian ITA no.6149/Mum./2013 filed her submissions vide her letter, received in this office on 20-06- 2011, as under: Also, the amount of unproved loan of Rs.1,74,000/- was rightly considered as the assessee's income from undisclosed sources, as the assessee has failed to substantiate this loan transaction alongwith the sources of income of the loan creditors, their credit worthiness and capacity of issuance of loans. Since the genuineness of the loan transactions amounting to Rs.1,74,000/- was not explained by the assessee as the burden of proof to prove the genuineness of loan transaction lies or the assessee, the same was rightly considered as the assessee s income from other sources for the current year. i.e. A.Y. 1997-98.
Upon assessee’s appeal the Ld. CIT-A noted the earlier submission of the assessee in the penalty proceedings as under; “I have received you notice for imposing a penalty u/s. 271(1)(C). It seems that you are proposing to impose penalty u/s/ 271(1)(C) in respect of addtions made on two counts in the assessment order namerly; Unexplained cash credit of Rs. 2lacs. Unproved loans to the extent of Rs. 1.74lacs I wish to submit the following facts for your kind perusal. Cash Credit of Rs. 2 lacs
Kavita K. Salian ITA no.6149/Mum./2013 Rs.2,00,000/- were received from M/s Shakti Aquaculture Ltd to tide over the financial crises faced by me on 05-04-1996, subsequently Rs.2 Lacs were withdrawn on 14-08-1996 and returned to M/s Shakti Aquaculture Ltd. The Ld. AO without taking cognizance of hard realities of Fishing Business gone towards the different direct/or, and tried to disapprove the happening occurred in April & August, 1996. Under these circumstances, the so called additions of Rs.2 Lacs cannot be construed as filing of inaccurate particulars of income or concealment of income. Unsecured loans of Rs.1.74 Lacs During the assessment proceedings, I had submitted all the details of loan creditors of Rs.3.04Lacs. Out of which, the 14 AO had disallowed creditors worth Rs.1.74 lacs and added back to the returned income under the pretext of incomplete details. I respectfully that additions of unsecured loans on account of Incomplete details cannot be construed as fling of inaccurate or false details. I had submitted all the details - address, loan confirmations, GIR Nos (prevalent identification number in Income Tax Department which was similar to PAN). However, the loans were not proven as false. Since many years have been passed, it was very difficult to track the Kavita K. Salian ITA no.6149/Mum./2013 people and obtain evidence of loan and proof of their ability to provide loan. This cannot be interpreted as unsecured loans were fake. Further, the loan amount was very small. The department could have summoned the respective loan creditors to prove that they were false.
I am, already penalized through tax levied on additions made in the scrutiny assessment. Further, penalty will be too harsh and will put me in financial hardships. Further, there is no specific wrong show to have been committed attracting the penalty provisions. In my case, the concept of 'mens rea' is completely absent and it is not proved. 'Mens Rea' is the bask foundation for imposition of penalty. Mens Rea' is evil intention of knowledge of the wrongfulness or the act that a person commits. it is said to be present in a person does something Incorrectly deliberately knowing that his action is against law. In other words, the person has guilty mind in committing the relevant act. only when such mental attitude is present in an act, the person who commits it is said to have acted deliberately in defiance of law or is guilty of dishonest conduct which is not the case in this matter. Guilty mind, or deliberate efforts to conceal the fact is never argued or put on record.”
Kavita K. Salian ITA no.6149/Mum./2013
However the Ld. CIT-A was not convinced. Ld. CIT-A went on to hold that a difference between the returned and assessed income leads to inference of concealment. Learned CIT-A proceeded to conform the penalty. Against above order assessee is in appeal before us.
We have heard the Ld. DR. None appeared on behalf of the assessee. But in our considered opinion the issue can be adjudicated by hearing the learned departmental representative and perusing the records. 6. We find that in this case penalty has been levied on account of addition of 4.74 lacks. These were held to be unconfirmed/unsubstantiated cash credit. Assessee’s claim is that the necessary particulars were duly submitted. The lack of response from the creditors cannot lead to an inference of concealment. As regards the cash credit of Rs. 2 lacks it has been submitted that name of the party was duly disclosed and assessing officer has failed to take cognizance of the same. In these circumstances in our considered opinion assessee cannot be held guilty of concealment or furnishing of inaccurate particulars of income. Ld. CIT was aware of this aspect but has held that the difference between assessed income and the returned income leads to an inference that there was concealment.
Kavita K. Salian ITA no.6149/Mum./2013 This is totally against the exposition of the Hon’ble Apex Court in the case of Reliance Petro product. Furthermore we note that a larger bench of the Hon’ble Apex Court in the case of Hindustan steel Ltd vs State of Orissa 83 ITR 26 had expounded that penalty need not be levied if the conduct of the assessee is not found to be contumacious. In the facts and circumstances of this case in our considered opinion the assessee's conduct is not contumacious to warrant levy of penalty.
Accordingly in the background of aforesaid discussion and precedent's we set aside the order's of Ld. CIT-A and delete the levy of penalty.
In the result this appeal filed by the assessee stands allowed.