SMT. ARTI SHADIJA,INDORE vs. ACIT-4(1), INDORE

आदेश/O R D E R

Per B.M. Biyani, A.M.:

Feeling aggrieved by appeal-order dated 18.05.2023 passed by learned Commissioner of Income-tax (Appeal), NFAC, Delhi [“Ld. CIT(A)”], which in turn arises out of penalty-order dated 29.03.2018 passed by learned ACIT, Circle 4(1), Indore [“Ld. AO”] u/s 271(1)(c) of Income-tax Act, 1961 [“the Act”] for assessment-year [“AY”] 2010-11, the assessee has filed this appeal on following grounds:

Smt. Arti Shadija,Indore. Vs. ACIT, Cir.4(1), Indore. Assessment year 2010-11 3. The levy of penalty is unjust and bad-in-law and hence be deleted.” 2. Thus, the assessee has challenged the penalty of Rs. 1,30,000/- imposed by AO u/s 271(1)(c). Ld. AR for assessee carried us to the relevant orders of lower-authorities and demonstrated that the assessee is having income from salary and other sources. The AO initially passed assessment- order dated 25.03.2013 after making an addition of Rs. 27,00,000/- u/s 68 on account of bogus loans alongwith disallowance of Rs. 2,39,700/- being interest deduction claimed by assessee on those loans. The assessee carried matter in first-appeal whereupon the CIT(A), vide order dated 03.10.2016, granted part-relief by deleting addition of Rs. 23,00,000/- out of Rs. 27,00,000/- and also by deleting the disallowance of Rs. 2,39,700/- relatable to interest. Thus, after first-appeal, there survived an addition of Rs. 4,00,000/- only on account of bogus loan u/s 68. Thereafter, the AO passed penalty-order dated 29.03.2018 imposing a penalty of Rs. 1,23,600/- qua the sustained addition of Rs. 4,00,000/-, treating the same as representing income in respect of which inaccurate particulars had been filed by assessee. Against penalty-order, the assessee went in first-appeal but the CIT(A) has, vide order dated 18.05.2023, which is impugned order in present-appeal, upheld the action of AO and dismissed assessee’s appeal.

Now, the assessee has come in next appeal assailing the impugned order.

Smt. Arti Shadija,Indore. Vs. ACIT, Cir.4(1), Indore. Assessment year 2010-11 demonstrated that the assessee took this loan from one Shri Laxmi Chand Ramchandani [“Shri Laxmi”]. The AO issued a summon u/s 131 to Shri Laxmi and recorded statement. His statements are re-produced by AO wherein while replying to Q.No. 5 raised by AO, Shri Laxmi clearly acknowledged and admitted to have given a loan of Rs. 2,50,000/- and Rs. 1,50,000/- on 09.10.2019 and 12.10.2019, aggregating to Rs. 4,00,000/-, to assessee. Further, Shri Laxmi’s Bank statement was also before AO which is re-produced by AO himself in the very same para of assessment-order. The bank statement clearly reveals the two transactions on 09.10.2019 and 12.10.2019 as stated by Shri Laxmi. Thus, there is no doubt about the loan having been given by Shri Laxmi to assessee and in fact the AO has also not expressed any doubt. However, the AO has simply noted that Shri Laxmi failed to explain the source of cash deposits in his bank a/c before giving loan to assessee. Ld. AR drew our attention to the Bank Statement and showed that the said Bank A/c was in fact an Over-draft A/c of Shri Laxmi in which Bank has granted overdraft facility. Further, the deposits made by Shri Laxmi in that A/c, before giving loan to assessee, were sourced from clearings except a sum of Rs. 1,00,000/- deposited on 09.10.2019 in cash.

Therefore, the outright conclusion taken by AO that Shri Laxmi could not explain the sources of ‘cash-deposit’ in his bank a/c is factually wrong and baseless. Ld. AR submitted that although the CIT(A) has upheld the addition and the assessee also did not contend CIT(A)’s order in further appeal in order to end litigation, yet the fact remains that in the statements of Shri

Smt. Arti Shadija,Indore. Vs. ACIT, Cir.4(1), Indore. Assessment year 2010-11 Laxmi recorded by AO himself u/s 131, Shri Laxmi has categorically admitted having given loan of Rs. 4,00,000/- to assessee. Further, the sources of giving loans to assessee from Over-draft A/c of Shri Laxmi are also explained. Therefore, had the assessee properly contested issue in first- appeal before CIT(A) or by filing next appeal to ITAT, the addition of Rs. 4,00,000/- itself would have been deleted. Although that has not been done yet the case of assessee does not warrant imposition of penalty u/s 271(1)(c) since it is very clear that the assessee has not furnished any inaccurate particulars. Relying upon decision in CIT Vs. Agro Chemicals (India)

(2007) 288 ITR 149 (P&H), Ld. AR submitted that penalty proceedings are independent and merely because an addition is upheld, penalty cannot be automatically upheld. Finally, Ld. AR submitted that in the present case, there is no justification to impose penalty; the same ought to be deleted.

Smt. Arti Shadija,Indore. Vs. ACIT, Cir.4(1), Indore. Assessment year 2010-11 ascertainable that Shri Laxmi accepted having given a loan of Rs.

4,00,000/- to assessee on two dates. That apart, the bank statement of Shri Laxmi is also re-produced by AO in assessment-order which corroborates the amounts and dates of loans acknowledged by Shri Laxmi in statements u/s 131. It is further noticeable that the said bank a/c is actually an a/c in which Shri Laxmi has taken over-draft facility from bank and there are deposit entries through clearings except one cash-deposit of Rs. 1,00,000/-.

Therefore, the sources available to Shri Laxmi for making loans are suitably explainable. Even otherwise, it is an accepted law that the assessee is not obliged to explain ‘source of source’. It is sufficient for assessee to prove the source only. In the present case, by a clear statement in the independent summon u/s 131 invoked by AO, Shri Laxmi has admitted having given loan to assessee. Therefore, the assessee has explained the source of loan. In the circumstances, there is nothing like furnishing of inaccurate particulars by assessee. It is also accepted in judicial rulings including that of Agro Chemicals (India) relied upon by Ld. AR that penalty proceeding are independent proceeding and additions made in assessment-proceeding cannot automatically lead to penalty. We believe that the case of assessee gets support from this decision. Therefore, in the situation, we are of the considered view that no penalty was imposable upon assessee.

Consequently, we delete the penalty imposed by AO. The assessee succeeds in this appeal.

Smt. Arti Shadija,Indore. Vs. ACIT, Cir.4(1), Indore. Assessment year 2010-11

Order pronounced in the open court on 20.12.2023.