SHRI KIRITBHAI RATANSINGH MANKADIA,BARODA vs. INCOME TAX OFFICER, WARD-3(1), BARODA

By way of this appeal, the assessee appellant has challenged correctness of the order dated 6th June, 2014, passed by the learned CIT(A)-II, Baroda, confirming penalty of Rs.1,71,920/- imposed on the assessee under section 271(1)(c) of the Income Tax Act, 1961 (‘the Act hereinafter’), for the Assessment Year 2007-08.

Assessee has raised the following grievances :-

Briefly stated, the relevant material facts are like this. The assessee is engaged in the borewell business. During the course of scrutiny assessment proceedings the Assessing Officer noticed that there are cash loan deposits from 35 parties aggregating to Rs.6,28,470/-. He sought to verify identity, genuineness and creditworthiness of these parties. While the Assessing Officer was ready to record statement of some of the creditors, summons issued to many of these persons also came back un-served. It was also noted that most of the individual transactions were between Rs.19,000/- to Rs.19,900/- and were in cash. However, having noted that most of the borrowings were of the similar mounts and that there was no explanation for the transactions and there was thus failure in element of genuineness of these amounts which were thus treated as unexplained credits. The matter travelled right upto this Tribunal but without any relief to the assessee. It was in this backdrop and on these facts that the penalty was imposed by the Assessing Officer for concealment of income. Assessee did carry the grievance before the learned CIT(A) but the learned CIT(A) confirmed the action of the Assessing Officer and observed as follows “3.3. I have considered the submissions of the learned Authorized Representative and the order of the Assessing Officer. It is a case where the assessee has taken loans, in cash, from 35 persons during the year, each for Rs.19,500/- approximately i.e. less than Rs.20,000/-. Upon enquiry by the Assessing Officer, the assessee could not establish the identity of 9 persons and credit worthiness and genuineness of the transaction for the remaining 26. In the assessment order, the Assessing Officer has brought out that the primary onus of proof on the assessee, has not been discharged by him. Failing which the Assessing Officer has rightly added

Assessee is not satisfied even in further appeal. 5. I have heard the rival submissions, perused the material on record and duly considered facts of the case in the light of the applicable legal position. 6. As the related quantum addition have also been confirmed by the Tribunal, I refrain from making any observation which may be construed in support of the assessee’s claim on merits but what is glaring is that there was explanation of the assessee which was a reasonable explanation though not accepted that in many of the case creditors came forward to confirm the transactions. The amount of borrowing is so small that a transaction cannot be rejected being not genuine merely on ground that the lender did not have means to give this kind of amount. Yet, while upholding the impugned penalty, the learned CIT(A) has observed, as extracted above, that the assessee did not furnish reasonable explanation about the creditworthiness of the lenders. This approach cannot meet my approval. At the cost of repetition, while I am not really concerned as to whether or not a quantum addition can be made on the totality of circumstances which has been decided against the