ARUNKUMAR MUCHHALA,MUMBAI vs. DCIT 10(2)(2), MUMBAI

On the facts and circumstances the assessing officer was not satisfied by the detailed submissions and mere lack of additional evidence and personal presence of creditors though agreed to produce, is not ground to attract penalty u/ s 271(1J(c) of IT Act 5. The Appellant craves to add; amend; alter delete the grounds of appeal at or before the hearing of the appeal" 2 We have heard the Ld: Representatives of both the parties, perused the orders of the lower authorities and the material available on record: We are not impressed by the contention of the assessee that the penalty imposed under Sec.271(1J(c) cannot be sustained, for the reason that the additions made by the A.0 as regards the credits in the Bank account' of the assessee by invoking Sec. 68, was in itself unsustainable in the eyes of law, and had wrongly been upheld by the CIT(A) and the Tribunal on the said count: We are of the considered Page_L4 view that now when the order of the Tribunal upholding the making of the addition by the A.O under Sec: 68 had attained finality, therefore no benefit could justifiably be drawn by the assessee in the course of the penalty proceedings, by alleging mistakes in the order of the Tribunal Thus we reject the 'Ground of appeal No. 2' raised by the assessee.

We are further unable to persuade ourselves to subscribe to the contention of the assessee that the A.0 had failed to record proper satisfaction as regards initiation of penalty proceedings in the body of the assessment order. We find that though the A.O in the assessment framed under Sec: 144, vide his order dt. 12.03.1999, had initiated penalty proceedings for "Concealment of particulars of income" as regards the additions made therein, however the said assessment order was set aside by the Tribunal, vide its order passed in ITA No. 4212/Mum/2004, dt 18.11.2008, while disposing of the quantum appeal of the assessee, with a direction that a 'fresh assessment' be framed as per its directions. The A.O thereafter framed assessment under Sec. 143(3) r.WS 254, vide his order dated 24.12.2009, and made addition as regards the credits pertaining to 4 parties. We find that the A.0 had in' the body of the fresh assessment order clearly initiated penalty under Sec. 271(1)(c) for "furnishing inaccurate particulars of income" We are thus of the considered view that the A.O had validly assumed jurisdiction &nd proceeded with the penalty proceedings under Sec: 271(1)(c) in the hands of the assessee. We are thus unable to persuade ourselves to subscribe to the contention of the assessee that the assumption of jurisdiction by the A.O suffered from a jurisdictional defect: We thus in the backdrop of our aforesaid Pa g e | 5 observations reject the 'Ground of appeal No.3' raised by the assessee before us.

We now advert to the contention of the Ld A.R that no penalty u/s 271(1)(c) was called for in the hands of the assessee on the basis of the merits of the case. That succinctly stated, the facts of the case are that an addition of Rs. 58 lac as regards 'Cash credits' of 4 parties made by the A.O, vide his assessment framed u/s 144, was dt.12.03.1999, details of which are as under:- S.No. Particulars Amount 1_ M/s Pooja Corporation M]s. Pooja Enterprises Sh_ Ashok Mehta Sh: Ajay Shah Total Rs_ 9,00,000 / Rs. 7,00,000 / Rs. 24,00,000 / Rs_ 18,00,000 / Rs: 58,00,000/ 2 3 4. That on appeal against the quantum assessment; the matter came up before the Tribunal, which vide its order dt.18.11.2008 directed the to decide afresh the issue as regards the addition of Rs. 58 lac A.O (supra), after affording reasonable opportunity to the assessee. The had thereafter framed assessment vide his order under Sec. A.0 143(3) I.W.s 254. That during the course of the set aside assessment proceedings, the A.O deliberated on the facts pertaining to the 'Cash credits' of the aforesaid 4 parties, in light of the 'material' placed on his record by the assessee in support of his claim, as under:- Page_L6 (1). Pooja Corporation The assessee submitted that it had received a sum of Rs: 9 lac vide cheques (Rs. 3 lac on 22.06.1995 and Rs. 6 lac on 04.07.1995) as an advance for investment in the residential project 'Sai Baba Tower' in Versova It was further submitted by the assessee that as the project did not materialize, therefore the amount was refunded viz Rs. 2 lac On 19.02.1996 and Rs: 7 lac on 22.03.1996. The assessee in order to fortify his claim, therein furnished before the A.O the following documents:- (i): Confirmation from M/s Pooja Corporation giving details of the advances alongwith its address (ii) . Bank statement of the assessee reflecting the transaction. (iii) Affidavit of Mr. Nitin Reshamwala, the real estate agent who had introduced the aforesaid client to the assessee. (2): Pooja Enterprises The assessee submitted that it had received a sum of Rs. 7 lac on 04.07.1995 by cheque, which was refunded to the aforesaid party as on 22.03.1996. The assessee had placed on record the following documents: (i) . Confirmation letter of the aforesaid party. (ii) . Bank statement of the assessee reflecting the aforesaid transaction: (iii). Affidavit of Sh: Nitin Reshamwala, the real estate agent who had introduced the aforesaid client to the assessee. Pa g e | 7 (3) Ashok Mehta That it was submitted by the assessee that he had received the of Rs. 24 lac (i.e Rs. 3 lac on 17.06.1995, Rs. 7.5 lac sum on 07.07.1995, Rs. 6 lac on 10.07.1995 and Rs. 7.5 lac on 02.09.1995). The assessee during the course of the assessment placed on the record of the A.O the following proceedings had documents: - (i) . Bank statement of the assessee. (ii) . Confirmation of the aforesaid party. (iii) . Certificate of K & P Accountants (iv) Copy of passport of the aforesaid party. (4)_ Ajay Shah submitted by the assessee that it had received the That it was of Rs. 18 lac (i.e Rs. 3 lac on 17.06.1995, Rs_ 7.5 lac on sum 07.07.1995 and Rs. 7.5 lac on 07.07.1995). The assessee during the assessment proceedings had placed on the the course of record of the A.O, the following documents:- (i). Bank statement of the assessee. (ii) . Confirmation of the aforesaid party (iii) . Letter addressed to the Jt. Commissioner: (iii) . Certificate from Livingstone Accountant U.K (iv). Copy of passport Page_ | 8 4 We have perused the aforesaid documents furnished by the assessee to fortify his explanation as regards the genuineness of the loans received from the aforementioned respective parties We are of the considered view that the A.0 during the course of the set aside proceedings, had at no stage doubted the genuineness of the aforesaid 'documents' which were placed on his record. That as regards the transactions of the assessee with Mr. Ashok Mehta and Mr. Ajay Shah, bboth of whom were NRI s, the identities of the said respective persons stood established, confirmations as regards the nature of the bank transactions executed by them with the assessee were placed on record, and their credit worthiness was established on the basis of the certificates of their accountants However, the A.O not being satisfied with the evidence placed on record by the assessee to prove the mode of receipt of the aforesaid respective advances and the absence of any material which could prove that the amounts had been remitted by the said respective parties from U.K, therein declined to accept the claim of the assessee. The AO further in the course of the set aside proceedings raised doubts as regards the genuineness of the transaction projected before him by the assessee, for the reason that despite lapse of 16 years the said parties had not enquired about the status of the properties for which the amounts had been advanced, nor had asked for refund of the amounts. Thus the A.O being of the view that the explanation of the assessee was in the nature of a self serving statement; had thus made an addition of the aforesaid amount in the hands of the assessee.

We further find that the A.O had during the course of the set aside proceedings drawn adverse inferences as regards the claim of P a g e | 9 the assessee that the parties M/s Pooja Enterprises and M/s Pooja Corporation were its prospective clients, and the respective amounts received from them through cheques were towards advance for investment in the residential project Sai Baba Tower' in Versova, which project did not be materialize and the respective amounts were thereafter refunded by the assessee to the said parties, by cheques. The complete details of the aforesaid parties alongwith their respective confirmations, complete details of the real estate agent (including his PAN No. etc) who had introduced the aforesaid parties to him, were duly placed on the record of the AO. The assessee had expressed his inability to produce the aforesaid parties due to shortage of time, specifically in light of the fact that he had interacted with them 15 The A.O however declined to accept the claim of the years ag0_ assessee, for the reason that the assessee had neither produced the said parties for verification, nor placed on record the income-tax credentials of the said respective parties alongwith the details of the bank a/c' from where the respective amounts were advanced by them: The A.O thus for the aforesaid reasons did not accept the explanation of the assessee and had made an addition of the aforesaid amounts in the hands of the assessee. 6 We have given a thoughtful consideration to the facts of the case, the orders of the lower authorities and the material and perused available on record: We are of the considered view that though there is the fact that the assessee had not been able to no escape from substantiate the genuineness of the respective transactions with the aforesaid parties, to the satisfaction of the A.0, but then we are observe that the mmaterial' placed on record by the persuaded to P a g e 10 assessee during the course of the set aside assessment proceedings, viz. Confirmations of all the 4 parties, refund of the amounts by the assessee to M/s Pooja Corporation and M/s Pooja Enterprises, Complete details of the real estate agent Mr_ Nitin Reshamwala, Copies of the passports and certificates of the accountants of Sh_ Ashok Mehta and Sh. Ajay Shah, therein establishing their identities and creditworthiness etc-, though may not strictly satisfy the 'Onus' cast on the assessee with respect to the nature and source of the aforesaid amounts in the course of the quantum proceedings, as a result whereof the same had witnessed additions of the said respective amounts as unexplained credits in the hands of the assessee, but then fairly stating, the aforesaid documents placed on record by the assessee to substantiate his explanation as regards the nature and source of the amounts received by him; could however safely be held to be fairly sufficient to dispel doubts as regards the genuineness of the explanation of the assessee. We would not hesitate to observe that though the aforesaid documents placed on record by the assessee may not be sufficient for the assessee to wriggle out of an addition of the same as an unexplained credit in his hand; however then we are of a strong conviction that the same also fall sufficiently short to prove furnishing of any inaccurate particulars of income by the assessee, specifically in light of the fact that the assessee had been called upon to substantiate his explanation as regards the transactions which were executed way back 15 years ago. We further find ourselves to be in agreement with the assessee, who had expressed his inability to produce the concerned persons of M/s Pooja Corporation and M/s Pooja Enterprises, for the reason that as he had interacted with them P a g e 11 15 years back, and that too as regards a transaction which did not materialize , therefore keeping in view the paucity of time it would not be easy for him to persuade the said persons to put up an appearance before the A.O. We are of the considered view that though the A.O had drawn adverse inferences as regards the claim of the assessee by raising serious doubts as regards the genuineness of the respective transactions, however he had not taken any step on his own to verify the said claim of the assessee, and thus had failed to place on record any material which could go to dislodge the claim of the assessee beyond and scope of doubt, and as such conclusively prove that the assessee had raised a false claim. We are not oblivious of the fact that doubts how SO ever strong they may be, however can under no circumstance be allowed to form the basis of imposing penalty under Sec. 271(1)(c) in the hands of an assessee. We are of the considered view that though the assessee had failed to discharge the onus as stood cast upon him; in order to substantiate his claim as regards the nature and source of the aforesaid amounts, as a result whereof he had already suffered additions of the said amounts by getting them characterized as unexplained credits in his hands, but then merely for the reason that an addition is made in the hands of an assessee, the same would not automatically lead to levy of penalty, for the reason that though an addition made in the hands of an assessee during the course of assessment may be a good item of evidence in the course of the penalty proceedings, but the same cannot be held to be conclusive for levy of penalty. We are thus of the considered view, that now when as per the settled position of law, no penalty under section 271(1)(c) is Pag e 12 liable to be imposed in the hands of an assessee, unless it is proved by the A.0 on the basis of concrete material that the assessee had consciously concealed the particulars of income or had deliberately furnished inaccurate particulars of income, therefore in the absence of satisfaction of the said requisite conditions in the case of the present assessee, the CIT(A) had erred in upholding the penalty of Rs. 26,68,000/- imposed by the A.0 under Sec. 271(1)c). We thus set aside the order of the CIT(A) and delete the penalty imposed in the hands of the assessee: 7 . The appeal of the assessee is thus partly allowed Order pronounced in the open court on 24/01/2017. / - / - (Ravish Sood) (R.C Sharma) du4a4 Accountant Member 7f4o 447 / Judicial Member %os Mumbai; frd Dated 24.01.2017 exow@fftfcopy o{the_Order forwarded to 1. afcreff The Appellant 2. Yryrff The Respondent 3 3143r 31yda(dld) The CIT(A) 4 H143r &14J7 CIT concerned 5. @fy WAf; &14aR &iaiy &flarU;, Tjaf / DR, ITAT;, Mumbai 6. T W1&t Guard File P a g e 13 JaYIR / BY ORDER, 3ure14o tufaR (Dy-_ Asstt: Registrar) 3Tyaor eiaiy &fudrul; Haef / ITAT, Mumbai