SHRI VAJUBHAI N. KANANI,AMRELI vs. THE ITO, WARD-2(4),, AMRELI

The instant appeal at the instance of the assessee is directed against the order dated 13.01.2020 passed by the Commissioner of Income Tax (Appeals)-3, Rajkot, (hereinafter referred to as ‘the CIT(A)’) arising out of the penalty order dated 25.04.2013 passed by the Learned ITO, Ward-2(4), Amreli under Section 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2007-08.

The brief facts leading to this case is that the assessee, an individual, engaged in the business of civil construction on contract basis, filed his return of income declaring total income at Rs.6,18,060/- on 29.10.2007. The said assessment proceeding under Section 143(3) of the Act was completed on 29.12.2009 determining total income of Rs.31,23,930/- upon making inter alia addition of Rs.24,90,000/- on account of unexplained unsecured loan. Penalty proceeding under Section 271(1)(c) of the Act was initiated for furnishing inaccurate particulars of income for unexplained unsecured loan of Rs.24,90,000/-. A notice dated 29.12.2009 was served upon the assessee.

In the meantime, the assessee filed an appeal before the First Appellate Authority challenging the quantum proceeding, as a result whereof, the penalty proceeding was kept in abeyance. However, on 19.03.2012, the addition of Rs.24,90,000/- on account of unsecured loan was deleted by the Ld. CIT(A), upon which, an appeal was preferred before the Tribunal by the Revenue and by and under order dated 05.10.2012, the Tribunal has been pleased to reverse the order of Ld. CIT(A) and restore the order passed by the Ld. AO. Subsequently, a show cause was issued to the assessee on 09.11.2012 and served upon the assessee by RPAD on 16.11.2012.

In fact, during the course of assessment proceeding, the fact of unsecured loan of Rs.24,90,000/- was found from Tax Audit Report filed by (Shri Vajubhai N. Kanani vs. ITO) A. Y. 2007-08 - 3- the assessee. The document being accounts of depositors containing thumb impression/signature though filed by the assessee, no PAN number or address was found to have been mentioned in such confirmation letters. Neither source and/or creditworthiness of the depositors were filed, nor parties were produced personally as directed by the Ld. AO. Affidavits from the depositors together with letter dated 23.12.2009 from such depositors ultimately was found to have been filed on the last day of proceeding i.e. 29.12.2009. The details of agricultural land holding, a copy of bank pass books in case of depositors having bank account were filed. However, the capacity of the depositors and genuineness of the transaction was not found to have been proved by the assessee by the Ld. AO and ultimately addition was made under Section 68 of the Act to the tune of Rs.24,90,000/-. Penalty proceeding under Section 271(1)(c) of the Act was separately initiated against the assessee for furnishing inaccurate particulars of income.

During the course of penalty proceeding, show cause dated 29.12.2009 and 09.11.2012 were issued to the assessee as to why the penalty under Section 271(1)(c) of the Act for furnishing inaccurate particulars of income in regard to the unsecured loan to the tune of Rs.24,90,000/- should not be imposed whereupon on 29.12.2009, the assessee requested for not taking any further step in such penalty proceeding pending appeal before the Ld. CIT(A).

However, the Ld. CIT(A) though deleted the addition, the same was quashed by the Hon’ble ITAT and the order of quantum was upheld as already narrated by us hereinbefore. In that view of the matter, the Ld. AO finally imposed penalty under Section 271(1)(c) of the Act for furnishing inaccurate (Shri Vajubhai N. Kanani vs. ITO) A. Y. 2007-08 - 4- particulars of income to the tune of Rs.8,52,430/- which stood confirmed by the First Appellate Authority. Hence, the instant appeal before us.

Though none appeared on behalf of the assessee before us today, it appears from the file that on very many occasions, adjournments were sought for. The assessee further filed written notes of submission. Upon perusal of which, it appears that the assessee is seeking for adjournment on the ground that the rectification application made on 20.07.2015 is pending with the Ld. CIT(A) in respect of the quantum appeal decided by him while passing his order dated 19.03.2012, requesting him to give decision on the ground of appeal remained to be decided. Against such submissions, we find from the records that the Ld. DR on 15.03.2023 informed us that such rectification application filed by the assessee before the Ld. CIT(A), on the basis of which, the assessee is seeking for adjournment has already been disposed of in the year 2020 itself. We further find that the Ld. CIT(A) in penalty appeal has already taken into consideration this particular aspect of pendency of application under Section 154 of the Act filed on 20.07.2015 against the order of Ld. CIT(A). The Ld. CIT(A) was of the opinion that the impugned addition with respect to which penalty has been levied has attained finality by virtue of the order passed by the Tribunal and therefore, the application under Section 154 of the Act against the CIT(A)’s order contending that some grounds have not been decided by the Ld. CIT(A) lacks merit. The same has no relevance to the appeal proceeding against the penalty order based on addition sustained by the Ld. Tribunal. Such contention made by the assessee, therefore, has been rejected by the First Appellate Authority in the order impugned before us. The decision on the issue out of which the penalty proceeding has been initiated has already attained finality by virtue of order passed by the ITAT on (Shri Vajubhai N. Kanani vs. ITO) A. Y. 2007-08 - 5- 05.10.2012 which is reflecting at paragraph 6 of the order passed by the ITO in imposing penalty. Therefore, asking for adjournment on the plea of rectification application pending before the Ld. CIT(A) seems to be frivolous and misleading, thus, rejected.

In the result, assessee’s appeal is dismissed.