HARESH R. KRIPLANI,MUMBAI vs. ACIT CIR 4(3), MUMBAI

Order u/s.254(1)of the Income-tax Act,1961(Act) लेखा लेखा सद�य लेखा लेखा सद�य सद�य, राजे�� सद�य राजे�� राजे�� केकेकेके अनुसार राजे�� अनुसार अनुसार/ PER Rajendra A.M.- अनुसार Challenging the order dtd.22.01.2016 of the CIT(A)-9,Mumbai,the assessee has filed the present appeal.Assessee, an individual,filed his return of income on 14/03/2001,declaring income of Rs. 10.89 lakhs.The Assessing Officer (AO) completed the assessment u/s.143(3)of the Act on 24 . 12.2012 determining his income at Rs.17.73 lakhs. 2.During the assessment proceedings the AO found that the assessee had obtained unsecured loans from various parties amounting to Rs.72.26 lakhs. He directed the assessee to furnish the details of such loans along with the loan confirmations.After considering the reply of the assessee, the AO held that that the assessee had taken unsecured loan of Rs. 6 lakhs from Suresh M Ranka (SRM). He asked the assessee to prove the creditworthiness of SRM. It was stated that the income SRM was less than basic exemption limit of Rs. 1.60 lakhs. After going through the bank statements of SRM, the AO held that the lender did not possess the capacity to advance Rs. 6 lakhs to the assessee, that the amount in question had been routed through three accounts, further enquiries with bank revealed that one of the accounts was held by wife of SRM. The AO held that assessee had not proved the creditworthiness of the person giving unsecured loan. Invoking the provisions of section 68 of the Act, he made an addition of Rupees Six lakhs to the income of the assessee.The assessee did not contest the addition made by the AO while completing the scrutiny assessment.

2884/M/16-Haresh 3.The AO also initiated penalty proceedings u/s.271(1)(c) of the Act,for furnishing inaccurate particulars of income.In response to the penalty notice, the assessee held that it was a common practice in textile business to accept unsecured loans in regular course of business, that he had obtained loan from SRM.

After considering the submission of the assessee,the AO held that SRM did not have the capacity to lend values amount of Rs. 6 lakhs,that assessee could not establish the creditworthiness and source of the disputed amount.He levied a penalty of Rs. 2.02 lakhs u/s. 271(1)(c) of the Act.

4.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate Authority(FAA).Before him, it was argued that the AO had ignored the financial statement which clearly showed and opening capital of Rs. 12.22 lakhs of SRM, that all the transactions were done through banking channels, that assessee had not evaded taxes, that the loan was still a bearing in the books of accounts of the assessee, that the assessment proceedings were attended by the employee of the assessee, that due to ignorance of law the order of the AO was not challenged. He relied upon the case of Ramchandra G Halwai(ITA/253/PNJ/ 2013, Dt. 23. 01. 2015).

After considering the submission of the assessee and the orders of the AO, the FAA held that the assessee had not agitated quantum addition, that the assessee had relied upon the matter of Ramchandra G Halwai (supra), that in the case of Ramchandra G the issue was about expenses related to petrol and diesel as well as unsecured loan towards cessation of liability, that in the case under consideration penalty was levied with regard to loan of Rs. 6 lakhs, that assessee had not filed any documentary evidence to show that he had accepted the addition to avoid litigation, that he had not given any satisfactory explanation. Finally, he upheld the order of the AO.

5.During the course of hearing before us, the Authorised Representative (AR) argued that the AO had initiated penalty for filing inaccurate particulars, that he had levied a penalty for considering the income, that penalty should not be levied automatically where additions were made. He relied upon the cases of SSA’S emrald meadows(242taxman180),Manjunath Cotton and Ginning Factory (359 ITR 565) and Dharani Developers (61 taxmann.com 208).

2884/M/16-Haresh The Departmental Representative(DR) supported the order of the AO/FAA and stated that the assessee had taken an informed decision about not challenging the quantum addition.

6.We have heard the rival submissions and perused the material before us. We find that AO had made addition of Rs. 6 lakhs invoking the provisions of section 68 of the Act with regard to unsecured loan obtained from SRM, that he had initiated penalty proceedings u/s. 271(1)(c) for filing inaccurate particulars of income, that he levied a penalty for concealing the income, that the FAA confirmed the order of the AO. We find that the issue of living penalty-where penalty is initiated for concealing particulars of income/furnishing inaccurate particulars and penalty is not levied on account of same default-has been dealt by the Hon’ble Karnataka High Court and the Hon’ble Supreme Court in the cases of SSA’S emrald Meadows (supra), Manjunath Cotton and Ginning Factory (supra).The Hon’ble courts have held that where the AO initiates proceedings u/s. 271(1)(c) for concealment particulars of income but levies penalty for furnishing inaccurate particulars the penalty order could not be sustained.Respectfully following the above judgments of the Hon’ble courts, we decide the effective ground of appeal in favour of the assessee.