RAMILABEN KALUBHAI KAKADIA,SURAT vs. ITO, WARD-3(2)(3), SURAT

IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No. 216/Srt/2020 (Assessment Year: 2013-14) (Hearing in Virtual Court) Ramilaben Kalubhai Kakadia, I.T.O., 62, Mira Nagar, Bhat Ni Wadi, Ward-3(2)(3), Vs. Varachha Road, Surat-395008. Surat. PAN No. AIPPK 2934 G Appellant/ assessee Respondent/ revenue

Appellant represented by Shri Hiren Vepari, CA Respondent represented by Shri Vinod Kumar, Sr.DR Date of hearing 23/05/2022 Date of pronouncement 06/07/2022 Order under Section 254(1) of Income Tax Act PER: PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by the assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-3, Surat (in short, the ld. CIT(A) dated 22/10/2019 which in turn arises from the order of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 (in short, the Act) dated 29/08/2016 for the Assessment year (AY) 2013-14. The assessee has raised following grounds of appeal: “1. On the facts and circumstances of the case and as per law, the learned CIT(A) was not justified in confirming penalty u/s 271(1)(c) of the Act. (2) The appellant craves leave to add, alter or vary any of the grounds of appeal.”

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO 2. Facts in brief as extracted from the order of lower authorities are that the return of income for the year under consideration was filed and the same was selected for scrutiny. The assessment order was completed under Section 143(3) of the Act on 16/02/2016. The Assessing Officer made addition of Rs. 15,45,000/- on account of unsecured loan and initiated penalty proceedings. The Assessing Officer made addition on account of unsecured loan from Shri Mahesh B Goradia by taking a view that the assessee failed to prove the identity, creditworthiness and genuineness of transaction. The Assessing Officer issued show cause notice under section 274 read with section 271(1)(c) dated 16/02/2016. The Assessing Officer noted that the assessee filed his reply dated 18/06/2016 and contended to waive the penalty proceedings as there was no concealment or furnishing of inaccurate particulars of income. The reply of assessee was not accepted by the Assessing Officer. The Assessing Officer levied the penalty @ 100% of tax sought to be evaded and quantified the amount of penalty of Rs. 4,01,970/- vide order dated 29/08/2016. 3. Aggrieved by the order of penalty, the assessee filed appeal before the ld. CIT(A). Before the ld. CIT(A), the assessee stated that the Assessing Officer has not specified the clear charge in the show cause notice while initiating the penalty, whether it was initiated for furnishing inaccurate particulars of income or concealment of income, thus, the proceeding 2

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO became invalid and no penalty order can be made. The assessee relied on various case laws including the decision of Hon’ble Karnataka High Court in the case of Manjunatha Cotton & Ginning Factory 359 ITR 565. On merit, the assessee submitted that the assessee received loan from one Shri Mahesh B Goradia who is proprietor of Siddhi Vinayak Textile Trading. The assessee is proprietor of Kakadia Taxofab. During the year, the assessee was looking for bank loan from bank for which the assessee was advised to take unsecured loans into the books of account. The assessee made total sale of Rs. 84.00 lacs (round figure) to Siddhi Vinayak Textile Trading which is proprietorship of Shri Mahesh B Goradia and realised Rs. 53,40,804/- during the year from him, resulting balance receivables of Rs. 30,58,902/-. Details of which was furnished. The assessee also realised a sum of Rs. 15,45,000/- against the sale made to Siddhi Vinayak Textile Trading till the month of March, 2013 which can be seen from the bank statement, copy of which was furnished which the assessee has shown as unsecured loan instead of adjusting against receivables. Though the assessee realised Rs. 15,45,000/- against sale of goods, the same was reflected as it was unsecured loan on the basis of advice. The assessee furnished summary of receipt from Siddhi Vinayak Textile Trading and submitted that the entries are clearly discernible from the bank statement. The assessee made emphasis that the amount of Rs. 15,45,000/- is 3

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO nothing but realisation of sales made to Siddhi Vinayak Textile Trading which was classified as unsecured loan. The assessee also furnished his affidavit. 4. The ld. CIT(A) on considering the submission of assessee, held that during the assessment, notice under Section 133(6) of the Act was sent to the creditor and the notice returned back unserved as creditor was not traceable. Inspector of the department also reported that Shri Mahesh B Goradia is not residing on the given address. The ld. CIT(A) on considering the other submissions, held that on perusal of details, it is seen that the assessee in the books of account itself shown that the payment received from Shri Mahesh B Goradia as unsecured loan and when the Assessing Officer made enquiries by issuing notice under Section 133(6) as well as spot verification by the Inspector, the person was not found at the given address. On the transaction against the sale reflected in the ledger account, the assessee has shown unsecured loan instead of adjusting the receivables of Rs. 30,58,902/-. The ld. CIT(A) held that the primary onus is upon the assessee to prove the genuineness of transaction of unsecured loan. The assesse in alternative submission, submitted that the person is not traceable and the assessee failed to prove the existence of lender. The ld. CIT(A) held that the existence of person is to be proved by the assessee then only the subsequent transaction can be considered to be 4

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO genuine. Merely filing an affidavit will not help the assessee as the affidavit is not sacrosanct. The ld. CIT(A) held that explanation (1) to Section 271(1) raises a presumption that as and when any amount is added or disallowed in computing the total income, the same shall be deemed to represent the income in respect of which particulars have been concealed. On the aforesaid observation, the ld. CIT(A) upheld the penalty levied under Section 271(1)(c) of the Act. Further aggrieved, the assessee has filed the present appeal before the Tribunal. 5. We have heard the submissions of ld. authorised representative (AR) of the assessee and the ld. Senior Departmental representative (Sr. DR) for the revenue and have gone through the orders of the authorities below. The ld. AR of the assessee submits that the Assessing Officer initiated penalty for filing inaccurate particulars, however, while levying the penalty, it was levied on concealment of income. The Ld. CIT(A) also confirmed the penalty by invoking the provisions of Explaination-1 of section 271(1)(c). Thus, the Assessing officer was not sure about the limb of charges under which the penalty was initiated and levied. The penalty was levied without proper appreciation of facts vis a vis specifying specific charge. The ld. AR further submits that on identical facts in case of assessee’s daughter in law Saritaben Rahul Kakadia in ITA No. 553/Srt/2019 wherein similar penalty

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO was deleted. The ld. AR furnished copy of decision of Tribunal in Saritaben Rahul Kakadia dated 10/05/2022. 6. Even on merit, the ld. AR submits that during the assessment, the assessee furnished copy of ledger of Shri Mahesh B Goradia and bank book showing all transaction made by account payee cheques. The disallowance was made, the assessment for the reasons that the assessee could not file confirmation of account and the parties were not found at the address when notice was sent under Section 133(6) of the Act. The assessee has neither furnished inaccurate particulars nor concealed any income. The addition in the assessment were only on account of different treatment of liability/unsecured loan as unexplained cash credit. The explanation furnished by the assessee before Ld. CIT(A) in the form of detailed written submissions were not disproved by the lower authorities. To support his all the submissions the Ld. CIT(A) A.R for the assessee relied on the following decisions;  Manjunatha Cotton & Ginning Factory (359 ITR 656 Ker)’  Jalaram Oil Mill (253 ITR 192 Guj),  Baroda Tin Works (221 ITR 661 Guj). 7. On the other hand, the ld. Sr. DR for the revenue submits that all the pleas which have been raised by the ld. AR of the assessee before the Tribunal was considered by the ld. CIT(A) while dismissing the appeal of 6

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO assessee. The assessee while filing return of income has furnished inaccurate particulars thereby concealed the real income. The assessee has shown unsecured loan from such parties, whose identity, creditworthiness and genuineness of transaction was not proved by the assessee during the assessment despite giving full opportunity. 8. We have considered the rival submissions of both the parties and have gone through the orders of the lower authorities carefully. We find that the Assessing Officer made addition while passing the assessment order by taking a view that Shri Mahesh B Goradia was not available at the address given by the assessee. The Assessing Officer made addition for want of identity and creditworthiness of lenders and genuineness of transactions and made addition under Section 68 of the Act. The Assessing Officer initiated penalty for furnishing inaccurate particulars of income. In reply to show cause notice under Section 274 r.w.s. 271(1)(c) of the Act, the assessee filed his reply dated 18/06/2016 before the Assessing Officer and contended that he has already furnished the documents available with him. The creditor is still not found at the address given to him. The assessee fully supported during the assessment and has already paid due tax. There is no concealment or furnishing any inaccurate particulars of income. It was stated that the addition is made as transaction was not believed otherwise all the details furnished by assessee shown real 7

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO transaction. The assessee again furnished copy of ledger, bank statement showing payment through account payee cheque and expressed that there is genuine hardship. The Assessing Officer not accepted the reply of assessee and levied penalty @ 100% of tax sought to be evaded. 9. As recorded above that before the ld. CIT(A), the assessee explained the fact that he made total sale of Rs. 83,99,706/- to proprietary concern of Shri Mahesh B Goradia i.e. Siddhi Vinayak Textile Trading and realized amount of Rs. 53,40,804/- during the year which resulted in closing balance of Rs. 30,58,902/-. The assessee also contended that he realised sum of Rs. 15,45,000/- against the sales till March, 2013 and furnished bank statement which was shown as unsecured loan instead of adjusting against the receivables of Rs. 30,58,902/-. Though, he has realised Rs. 15,45,000/-. The assessee on the basis of advice, treated Rs. 15,45,000/- as unsecured loans. 10. We find that all these transactions are reflected in the bank statement of assessee. The assessee has summarised receipt from Siddhi Vinayak Textile Trading in the following manner: Realisation against sales knocked off against receivable Date Amount 10/12/2012 75,977 18/12/2012 1,82,670 25/12/2012 4,29,175 07/01/2013 4,20,960 17/01/2013 3,21,970 8

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO 17/01/2013 4,02,650 28/01/2013 5,59,740 16/02/2013 3,92,685 07/03/2013 4,59,710 12/03/2013 2,24,400 14/03/2013 7,85,900 25/02/2013 5,33,067 29/03/2013 5,51,900

Realisation against sales shown as unsecured loans Date Amount 15/03/2013 3,30,000 28/03/2013 3,30,000 29/03/2013 8,85,000 Total 15,45,000 11. On comparison of aforesaid statement, we find that the assessee was having regular business transaction with Shri Mahesh B Goradia. Though, before the Assessing Officer, the assessee took a plea that unsecured loan received from the said party. The aforesaid fact about the business receivables is not disproved by the lower authorities. No doubt that before Ld. CIT(A) the assessee raised new plea about the business transaction with Mahesh B Goradia, the plea of the assessee is duly supported with the documentary evidences in the form of bank statement. The pleas raised by the assessee seems to be reasonable and plausible supported with the bank statement. Therefore, we find merit in the submission of assessee that the business receivable was treated by assessee as unsecured loan on advice (wrong advice). It is settled position under law

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO that assessment and the penalty proceedings are separate and independent, no doubt that penalty is initiated in the assessment order on making additions or disallowance. In our view, though, the assessee could not give satisfactory explanation before the Assessing Officer, however, before the ld. CIT(A), the assessee has explained the fact in proper way and gave a reasonable explanation within the meaning of Section 273B of the Act and in such circumstances, no penalty under Section 271(1)(c) of the Act is leviable and we direct the Assessing Officer to delete the entire penalty. Considering the facts that we have accepted the explanation furnished before Ld. CIT(A) and deleted the penalty, therefore, adjudication on various contention of Ld. A.R. of the assessee have become academic. In the result, the grounds of appeal raised by the assessee are allowed. 12. In the result, this appeal of the assessee is allowed Order pronounced in the open court on 06th July, 2022 at the time of hearing of this appeal.

Sd/- Sd/- (Dr. ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 06/07/2022 *Ranjan

ITA No.216/Srt/2020 Ramilaben Kalubhai Kakadia Vs ITO Copy to: 1. Assessee – 2. Revenue - 3. CIT(A) 4. CIT 5. DR 6. Guard File By order

Sr.Private Secretary, ITAT, Surat