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Income Tax Appellate Tribunal, MUMBAI BENCHES “D”, MUMBAI
Before: SHRI SANJAY GARG & SHRI ASHWANI TANEJA
O R D E R
Per ASHWANI TANEJA, AM:
This appeal has been filed against the order of the Commissioner of Income-tax (Appeals)-45, Mumbai (hereinafter called CIT(A)] dated 31-03-2015 passed against the penalty order of the AO u/s 271(1)(c) dated 09-01-2013 for A.Y. 2008-09.
The brief background and facts of the case for levying the penalty by the AO was that return of income was filed on 31st March,2009 at a total income of Rs.92,765/. The assessee is proprietor of M/s Bearing Trade Centre engaged in the business of trading in bearings. During the year, the AO had AIR information that there was cash deposit of Rs.12,30,167/- in the savings bank account maintained with the IDBI Bank Ltd. A show cause notice was issued to the assessee to submit the details of cash deposits in the bank account. The assessee submitted that the account contains the receipt from other states related to the trading business. The amount has been withdrawn in Mumbai. The assessee has shown the cash sales in the proprietary concern during the year of Rs.3,48,400/-. The AO referred to the decision in the case of Aluminium Small Industries vs ITO (Kol.) 103 lTD 142 wherein it was held that the onus was on the assessee to prove prima facie its case u/s 68 with regard to source of the deposits. The amount of Rs.8,81,767/- was added back as explained. As regards the explanation regarding the remaining cash deposits of Rs.3,48,01/-, though the assessee had submitted that these were out of cash sales, however as per AO it was noticed by him that from the cash book only an amount of Rs.23,105/ was deposited in the IDBI Bank. Therefore the assessee’s explanation with respect to the rest of the cash deposits of Rs.3,25,295/- was not accepted. Thus, keeping both the amount together, the addition on account of unexplained cash credits was made at Rs.12,07,062/-. Subsequently, the AO issued notice u/s 271(1)(c) and penalty of Rs.3,84,028/- has been imposed considering that the assessee was not able to explain the source of Rs.12,07,062/-. Aggrieved, the assessee filed appeal before the CIT(A) and explained in detail that in this case though the addition was made for want of proper evidences but the AO could not establish that the amount added by him was concealed income of the assessee and pleaded for deleting the penalty but Ld.CIT(A) was not satisfied and, therefore, the appeal of the assessee was dismissed and penalty levied by the AO was confirmed. Being aggrieved, the assessee is in appeal before the Tribunal.
We have heard both the parties on this issue. It is noted that the addition has been confirmed by the Tribunal inter-alia on the ground that the assessee was not able to prove that the amount withdrawn from one bank account of the assessee was deposited in other bank account of the assessee. We have carefully gone through the orders passed by lower authorities as well as the order of the Tribunal for upholding the addition made in the quantum proceedings. We find that addition was made on the ground that the assessee was not able to prove the amount of cash deposited in his bank account aggregating to Rs.12,07,062/-. It is noted from the perusal of the order of the Tribunal that assessee had contested the addition on following four propositions, as reproduced by the ITAT in its order:
“1) Section 68 is not applicable as the amount was found credited in the bank and the bank statement cannot be construed as book of the assessee. The Ld. Counsel relied upon the decision of Lucknow Bench of ITAT 143 ITD 686 and on the decision of the jurisdictional High Court in the case of Bhaichand H. Gandhi 141 ITR 67.
2) Only peak credit should have been added which was on September, 2007 at Rs. 1,61,074/- 3) The assessee should also get the benefit of cash sales amounting to Rs. 3,48,400/-. 4) Since the assessee is a trader and the deposits and withdrawals in the said bank account relate to the trading business of the assessee only gross profit should have been added.” 3.1. During the course of hearing before us, it has been vehemently argued that though the addition was confirmed on the ground that the assessee could not substantiate the deposits with overwhelming evidences, but the fact remains that while confirming the additions all the four propositions noted above have not been properly dealt with in its order by the Hon’ble Tribunal while confirming the addition. Thus, though addition made by the AO was confirmed but the same being illegal can be independently contested again by the assessee in the penalty proceedings on all the grounds to show that there was no concealment of income.
3.2. We have gone through the orders of lower authorities and submissions made by both sides. We find force in the arguments of Ld. Counsel of the assessee as noted in above para. Further, when the amount has been admittedly withdrawn from one bank account, unless contrary is proved by the Revenue, it cannot be totally ruled out that cash may have been available with the assessee to be deposited in another bank account of the assessee. Thus, it can be said that at the worst, the case of the assessee remained unproved, whereas before levying the penalty the AO is required to disprove the case of the assessee. Further, assessee’s argument that in any case, the whole of amount could not have been added as only peak amount could have been added, has not been properly analysed on facts. Therefore, the quantum of addition is also subject to ifs and buts, thus, under the shadow of doubts. Further, the arguments of the assessee that the AO had made addition u/s 68 which was beyond jurisdiction as no addition could have been made u/s 68 on account of cash deposit in the bank account in view of the direct judgement of the Hon’ble Bombay High Court in the case of Bhaichand H Gandhi 141 ITR 67 (Bom) also remained to be addressed by the Revenue. On this ground also addition was not strictly within the four corners of law. Thus, it is not a fit case for levy of penalty.
3.3. We have considered all the arguments and facts and circumstances of the case and find that in this case penalty should not be levied. We further derive our support from judgment of Hon’ble Bombay High Court in the case of UPENDRA V.MITHANI ( INCOME TAX APPEAL (L) NO.1860 OF 2009 5TH AUGUST, 2009), wherein their lordships had observed as under:
“The issue involved in the appeal revolves around deletion of penalty under Section 271(1)(c) of the I.T.Act. The Tribunal has concurred with the view taken by the Commissioner of Income Tax (A). The Commissioner of Income Tax (A) has rightly taken a view that no penalty can be imposed if the facts and circumstances are equally consistent with the hypothesis that the amount does not represent concealed income as with the hypothesis that it does. If the assessee gives an explanation which is unproved but not disproved, i.e. it is not accepted but circumstances do not lead to the reasonable and positive inference that the assessee’s case is false. The view taken by the Tribunal is a reasonable and possible view. The appeal is without any substance. The same is dismissed in limine with no order as to costs.”
Thus, taking into account all peculiar facts of the case and the legal position as discussed above, we find that neither concealment nor furnishing of particulars of income could be established by the AO in this case, therefore, penalty should not be levied in this case and, therefore, the same is directed to be deleted.
In the result, appeal of the assessee is allowed. Order pronounced in the court on this 30th day of September, 2016.