SAVITA J PUROHIT,MUMBAI vs. ASST CIT 25(2), MUMBAI

आदेश / O R D E R PER RAMIT KOCHAR, Accountant Member

ITA 3780/Mum/2013 2

“1. That the learned Assistant Commissioner of Income Tax - 25(2), Mumbai has grossly erred in law and on the facts and circumstances of the case in imposing penalty of Rs. 31,16,758/- u/s. 271 (1 )(c) of the Income Tax Act, 1961 without properly appreciating the actual case of the appellant and the learned Commissioner of Income Tax (Appeals) - 35, Mumbai has grossly erred in law and on the facts and circumstances of the case in confirming the penalty of Rs. 31,16,758/- imposed u/s. 271 (1 )(c) of the Income Tax Act, 1961 without properly appreciating the actual case of the appellant.

2. That the learned Commissioner of Income Tax (Appeals) - 35, Mumbai has grossly erred in law and on the facts and circumstances of the case in not accepting the additional evidence submitted by the assessee for establishing the Genuineness of Transaction, Identity of Depositors and Creditworthiness of Depositors.”

i) Disallowance u/s 40(a)(ia) of the Act Rs. 63,16,242/- ii) Out of labour charges Rs. 1,00,000/- iii) Unexplained cash credit u/s 68 Rs. 92,59,530/- Penalty proceedings u/s 271(1)(c) of the Act were initiated against the assessee with respect to the additions on account of unexplained cash credit of Rs.92,59,530/- u/s. 68 of the Act.

ITA 3780/Mum/2013 3 During the course of assessment proceedings u/s 143(3) read with Section 143(2) of the Act, it was observed by the A.O. that the assessee has received unsecured loans to the extent of Rs. 1,32,93,000/- , out of which the assessee has shown to have accepted cash loan of Rs. 92,59,530/- from various parties. The loan confirmation of the lenders barring few were not filed by the assessee before the AO. Since the financial capacity of the lenders was not proved by the assessee, as assessee failed to produce the genuineness of the loan transaction, creditworthiness and identity of the lenders, the A.O. made addition u/s 68 of the Act amounting to Rs. 92,59,530/- with respect to the cash loans of Rs.92,59,530/- received by the assessee during the previous year relevant to the assessment year, vide assessment order dated 26.12.2007 passed u/s. 143(3) of the Act.

During the penalty proceedings u/s 271(1)(c) of the Act, the assessee was asked to produce the loan confirmations, addresses and PAN of the loan creditors from whom the loans of Rs.92,59,530/- were received in cash by the assessee during the previous year relevant to the assessment year. The assessee had received cash loan from 47 parties aggregating to Rs.92,59,530/- during the previous year relevant to the assessment year. The names of the 47 parties submitted by the assessee, from whom cash loans were received by the assessee aggregating to Rs.92,59,530/- has been specified in the penalty orders dated 23-03-2010 passed by the AO u/s 271(1)(c) of the Act, pages 3-6. The assessee submitted that these cash loans were received from close family members being blood relations who are staying in Jalore, District Rajasthan where they are engaged in agricultural activities and being a remote village , banking facility were not available. The assessee submitted that there was Sunday on the earlier day when cash loans were accepted. The assessee is in civil contract business and the same is labour oriented business and hence cash payments arising from day to day ITA 3780/Mum/2013 4 basis were disbursed out of cash loan of Rs.92,59,530/-- received by the assessee, as submitted by the assessee. As per the assesse, the cash loans are returnable as and when feasible. Mostly the lenders are agriculturalist and their crop in cash and being remote village banking is not there and people there are not habitual with banking transactions were the submissions of the assessee.

As per the AO, the creditworthiness of the lenders were not produced during assessment proceedings. The loan confirmations were not submitted by the assessee before the Revenue. The addresses of the lenders were also not complete. The loan creditors were also not produced before the AO.No financial documents were submitted before the Revenue that the lenders were financially capable of giving these cash loans. With respect to the genuineness of the loan, the assessee merely submitted that the lenders are agriculturist, the assesseee being business women in Mumbai was fully aware of the provisions of Section 269SS of the Act as she was availing services of tax professional . As per the AO , the assessee was fully aware that the exemption from receiving cash loans can be granted if both the lender and the borrower are agriculturist and neither of them have any income chargeable to tax. Thus, the assessee having failed to prove the identity and creditworthiness of the lenders nor could discharge the burden of proving the genuineness of the transaction and the assessee has introduced ‘own money’ by giving the name of ‘unsecured loans’ and introduced the same in her books of accounts in the assessment year, the additions were made by the AO u/s 68 of the Act vide assessment orders dated 23.03.2010 passed u/s 143(3) of the Act.

The A.O. during penalty proceedings u/s 271(1)(c) of the Act noted that the additions made by the A.O. in quantum proceedings were accepted by the assessee before the learned CIT(A) . The learned CIT(A) dismissed the appeal ITA 3780/Mum/2013 5 in quantum proceedings as the assessee is unable to prove the creditworthiness as well as genuineness of the transaction.

The assessee during penalty proceedings u/s. 271(1)(c) of the Act submitted that the assessee has never accepted that the money belongs to her. The assessee was not informed by the tax consultant to produce the books of accounts. The assessee submitted that she received the money from the third person(s) and the assessee is ready to prove the identification/ creditworthiness and source of money and the transaction. The assessee submitted that she has filed appeal against the quantum proceedings before the Tribunal and she acted bonafidely. The assessee submitted that she was not represented properly by the earlier tax consultant in quantum assessment proceedings and she worked under the bonafides of the earlier tax consultant and the assessee is not aware as to what he has done during that period without the knowledge / communication of the assesse.

The A.O. after considering the submission observed that the assessee has failed to prove the identity, full address and creditworthiness to establish the genuineness of the creditors. No detail explanation has been provided by the assessee. The A.O. held that the assessee has concealed and furnished inaccurate particulars of her correct income and under reported income of Rs. 92,59,530/- , which is her own money routed through the loan creditors. The A.O. accordingly computed the minimum leviable penalty at Rs. 31,16,758/- being 100% of the tax sought to be evaded vide order dated 23.3.2010 which was confirmed/sustained by the learned CIT(A) vide order dated 19-02-2013.

ITA 3780/Mum/2013 6

“11. We have carefully considered the rival contentions and also perused the material available on record. The assessee has received loans from ITA 3780/Mum/2013 7

47 persons in cash during the relevant financial year, the details of which have been incorporated in Para–3.1 of the appellate order. These cash loans aggregated to Rs.92,59,530. However, there were other loans also, which has been accepted by the Assessing Officer. Before the Assessing Officer, the assessee with regard to these loans taken from 47 persons, could neither furnish any confirmation letter nor any documents relating to the creditworthiness of such persons, in most of the cases. It was only explained that these loans have been taken from family members, relatives and friends, who are mostly agriculturist belonging to her native place Jalore, Rajasthan. Since these people are from village, therefore, the same could not come to Mumbai to give the entire details. The Assessing Officer had added the said loans under section 68, on the ground that neither the identity nor the creditworthiness could be established. Before the learned Commissioner (Appeals), without going on to the merit, the then authorised representative, Mr. Surendra R. Desai, submitted a letter dated 8th July 2008, stating that the assessee was unable to produce all the creditors because most of them are illiterate and are of old age and, therefore, cannot come to Mumbai, to produce details and confirm the said loans. Therefore, in order to buy peace, the said loan amount was offered to be added to the total income of the assessee. The second part of the offer was that no penalty proceeding should be initiated. Based on this letter, the learned Commissioner (Appeals) has confirmed the said additions. Apart from this, he also held that the finding of the Assessing Officer in this regard is upheld. Now at this stage the contents of the said letter has been stated to be without any intimation or knowledge of the assessee and, therefore, such an offer made by the then authorised representative has been denied by the assessee before us. In support of this denial, an affidavit of the assessee has also been filed before us. Under these circumstances, it is very difficult, either to accept the contents of the said offer letter filed before ITA 3780/Mum/2013 8 the learned Commissioner (Appeals), which has been signed by the then authorised representative or to accept the assessee’s affidavit denying such letter, as it is mere self serving statement. The act done by an authorized representative under a power of attorney given by the assessee is binding, unless the authorized person himself accepts his mistake on his own account while acting on behalf of the assessee. Now, whether the offer letter, as filed before the learned Commissioner (Appeals), can be said to be conclusive against the assessee qua these additions. On a perusal of the letter, it can be seen that two offers were made; first, in order to buy peace, the loans have been accepted to be added as income; and second such an offer is being made with a condition that no penalty proceedings should be initiated. The learned Commissioner (Appeals), on such conditions, ought to have rejected the entire offer because addition or penalty thereof can be confirmed or levied only in accordance with the provisions of law and material on record. If such an offer is to be accepted, then it has to be in full not in part. In any case, the learned Commissioner (Appeals) has also affirmed the order of the Assessing Officer on merits also. Hence, the alleged offer letter filed by the then authorized representative should be ignored and the merits of the addition should be examined.

additional evidences have already been filed before the Department in the proceedings under section 153C; and secondly, these additional evidences go to the very root of the addition made, which needs to be considered for adjudication of this issue. Therefore, in the interest of substantial justice, we feel that these documents should be considered for deciding the issue afresh on merits. Since these documents have not been examined by any of the departmental authorities, therefore, in the interest of justice, we are of the considered opinion that the matter should be restored back to the file of the Assessing Officer for fresh adjudication. Consequently, we set aside the impugned order passed by the learned Commissioner (Appeals) and restore the entire issue of addition made under section 68, back to the file of the Assessing Officer, to verify these additional evidences and carry out any enquiries as he may deem fit under the facts and circumstances of the case and in accordance with law only after providing due and effective opportunity of hearing to the assessee to present her case. Thus, the ground raised by the assessee is treated as allowed for statistical purposes.

Under the above circumstances, in the interest of justice, the penalty levied by the A.O. u/s 271(1)(c) of the Act amounting to Rs. 31,16,758/- vide order dated 23.3.2010 as confirmed by the learned CIT(A) is set aside and the matter/issue is restored to the file of the A.O. for de novo determination of the issue of leviability of the penalty on merits, after framing of assessment orders in set aside quantum proceedings vide directions of the Tribunal in its orders dated 30.04.2014 in ITA no. 1081/Mum/2009. Needless to say that proper and adequate opportunity of hearing will be given by the AO to the assessee in accordance with the principles of natural justice in accordance ITA 3780/Mum/2013 10 with law and the assessee will be allowed to produce evidences/explanations in her defense. We order accordingly.

Order pronounced in the open court on 13th May , 2016. आदेश क� घोषणा खुले �यायालय म� �दनांकः 13-5-2016 को क� गई ।