SHRI DEVENDRA J. KOTHARI,AHMEDABAD vs. THE INCOME TAX OFFICER, WARD-11(4), AHMEDABAD

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ITA 210/AHD/2015Status: DisposedITAT Ahmedabad22 September 2017AY 2010-113 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that while the assessee's explanation for the entire amount was not fully substantiated, a penalty to the extent of reasonable profit on a portion of the deposits (Rs. 4,37,265/-) was justified. The balance penalty was deleted.

What were the facts?

The Assessing Officer added Rs. 43,72,650/- as undisclosed income from cash deposits in the assessee's bank account and levied a penalty. The assessee claimed the deposits were from his used cloth business but did not maintain books of account or disclose business income.

What were the issues?

Whether penalty under Section 271(1)(c) is leviable on undisclosed income added under Section 69 when the assessee offers an explanation, even if not fully proved, and whether the penalty should be confirmed on the entire addition or a portion thereof.

Which sections of the Income-tax Act were involved?

Section 271(1)(c),Section 69

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, AHMEDABAD ‘C’ BENCH, AHMEDABAD

ITA No.210/Ahd/2015 Assessment Year : 2010-11 Page 1 of 3

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD ‘C’ BENCH, AHMEDABAD [Coram: Pramod Kumar, AM and Mahavir Prasad, JM] ITA No.210/Ahd/2015 Assessment Year: 2010-11 Devendra J. Kothari, .......…………...........Appellant 37-C-201, Shree Ghantakarna Mahavir Market, Sarangpur, Ahmedabad. [PAN : ACFPK 2973 H] Vs. Income Tax Officer, Ward – 11(4) Ahmedabad. ............................Respondent

Appearances by: Divyakant K. Parikh for the appellant Alok Kumar for the respondent Date of concluding the hearing : 24.07.2017 Date of pronouncing the order : 22.09.2017 O R D E R Per Pramod Kumar, AM:

1.

By way of this appeal, the assessee appellant has challenged correctness of the order dated 8th October 2014, passed by the learned CIT(A)-XVI, Ahmedabad, confirming penalty of Rs.13,00,990/- for the assessment year 2010-11, on the following grounds :- 1. The Id. CIT(Appeals) erred both in law and on facts in confirming the penalty of Rs.13,00,990/- levied under section 271(1)(c) of the Income Tax Act. 1961 in respect of alleged undisclosed income added u/s 69 on voluntary surrender made by the appellant. The Id. CIT(Appeals) failed to appreciate that the appellant's main source of income was from Salary and that the surrender of amounts borrowed and deposited in hank account was made for the valid reasons. The Id. CIT(Appeals) ought to have accepted the plea raised and deleted penalty. 2. The Id. CIT(Appeals) erred in law and on facts in confirming the order levying penalty u/s. 271(1)(c) when the explanation furnished by the appellant was not found to he false and since penalty proceedings are quite independent of assessment proceedings, the penalty ought not to have been levied based on

ITA No.210/Ahd/2015 Assessment Year : 2010-11 Page 2 of 3

mere addition. It he so held now and penalty levied b AO and confirmed by the CIT(Appeals) be cancelled. 3. The Id. CIT(Appeals) further erred in law and on facts in not considering the binding judgments of the jurisdictional High Court and the Tribunal which were relevant to the facts of the case and erred in holding that the same were irrelevant. The judgment relied upon by the Id. ClT(Appeals) is not relevant to the legal point raised regarding absence of firm charge as to concealment of particulars or inaccuracy in furnishing particulars. It be so held now and orders of the lower authorities being illegal and invalid, he cancelled. 4. The Id CIT(Appeals) ought to have held that order passed by AO levying penalty is illegal, invalid and against the sanction of law. It be so held now.” 2. Briefly stated, the relevant material facts are like this. During the course of scrutiny assessment proceedings and based on AIR information available with the assessee, the Assessing Officer noticed that the assessee has deposited a sum aggregating to Rs.43,72,650/- on various dates in cash in his savings bank account. When the Assessing Officer probed the matter further, the assessee submitted that he was in the business of used cloths and the profit margin of this business after deducting various expenses is very low at 3 to 4%. This stand was, however, not accepted and the Assessing Officer proceeded to add the entire amount as income of the assessee. The matter did not stop there. Assessing Officer also imposed penalty of Rs.13,00,990/- being equivalent to 100% tax sought to be evaded in respect of such income. Aggrieved, assessee carried the matter in appeal before the learned CIT(A). It was inter alia pointed out by the assessee that the deposits in one of the bank account in the immediately preceding year have been considered on peak credit basis and accordingly brought to tax. He also submitted that he agreed to addition of Rs.43,72,650/- on agreed addition basis just to buy peace and to avoid litigation. The explanation of the assessee that he was in business on small scale and did not maintain books of account and that these deposits represented sale proceedings. None of these explanation, however, impressed the learned CIT(A). He confirmed the action of the Assessing Officer by observing that “the appellant has not offered any explanation for the cash deposits in his bank account.” Assessee is aggrieved and is in further appeal before us. 3. We have heard the rival contentions, perused the material on record and duly considered facts of the case in the light of the applicable legal position.

4.

We find, as evident from undisputed past history of this case, that the assessee was stated to be engaged in some business and his bank account was being used in respect of the same. Learned Departmental Representative has also very fairly not disputed this possibility. We have, however, also noted that even if the explanation of the assessee is to be accepted, the assessee does not have any explanation for not disclosing the reasonable profits and on the

ITA No.210/Ahd/2015 Assessment Year : 2010-11 Page 3 of 3

business which he stated to have carried out. As a matter of fact, his return only shows interest income and salary income. When we put it to the assessee as to why he did not disclose, going by his version, any business income, the assessee has nothing to say. In these circumstances, in our considered view, the penalty deserves to be confirmed at least to the extent of reasonable profit on turnover of the assessee reflecting by cash deposits. Thus, as against an addition of Rs.43,72,650/- penalty to the extent relatable to addition of Rs.4,37,265/- will certainly be justified. Learned counsel for the assessee does not also dispute this position. As regards the balance quantum addition, we find that similar deposits have been treated as deposits in the course of business, in past, and, to that extent, explanation deserves to be accepted at least for penalty purposes. Accordingly, in our considered view, accepting assessee’s explanation, though not proved to the hilt, that the deposits represent dealings in connection with business, we confirm the impugned penalty to the extent relatable to the addition of Rs.4,37,265/-. The balance amount of penalty stands deleted. 5. In the result, appeal is partly allowed in the terms indicated above. In the result, Pronounced in the open court today on the 22nd day of September, 2017.

Sd/- Sd/- Mahavir Prasad Pramod Kumar (Judicial Member) (Accountant Member) Ahmedabad, the 22nd day of September, 2017 Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad

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