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Income Tax Appellate Tribunal, AMRITSAR BENCH, AMRITSAR
Before: DR. M. L. MEENA & SH. ANIKESH BANERJEE
This appeal has been filed by the assessee against the order dated 31.10.2020 passed by the Ld. Commissioner of Income Tax (Appeals)-2, Amritsar, in respect of the Assessment Year 2011-12.
2. The assessee has raised the following grounds of appeal:
Sukhdev Singh v. ITO “1. The Learned AO erred in imposing penalty of Rs. 39,504/- being addition made on credit summation made by the assessee. The Learned AO completely ignores the facts submitted by the assessee and takes a different view.
There is mere a difference of opinion between the assessee and the AO. Merely difference of opinion does not construed that the assessee has furnished inaccurate particulars of return. Rather the subject matter is debatable. So, the question of levying penalty u/s 271(1)(c) does not arise at all.
Further, the Worthy Commissioner of Income Tax (Appeals)-l, Amritsar, has also dismissed the same and upheld the decision made by Assessing Officer.
4. The appellant craves leave to add, alter or amend the grounds of appeal at later stage.”
3. None attended on behalf of the assessee. However, considering the small addition of Rs.4,93,984/- made on account of undisclosed income earned without being substantiated, after hearing of the ld. DR, it is decided to hear the appeal.
During the course of assessment proceedings, the AO was not satisfied with the explanation of the assessee about the nature and source of cash deposits of Rs. 43,48,500/- with YES bank as the assessee had not maintained any books of accounts. The AO discussed that even no bills or vouchers were produced in support of the purchases and sales and other expenses. Accordingly, AO estimated the turnover of the appellant and assessment was completed by applying NP rate of 8% u/s 44 AD of the Sukhdev Singh v. ITO Act, on the gross turnover of Rs. 66,76,816/- which came to Rs. 5,34,145/- as against Rs. 1, 82,270/- declared in the original return of income.
Accordingly, the impugned penalty of 39,504/- has been levied u/s 271(l)(c) of the Act for furnishing inaccurate particulars of income which has been confirmed by the Ld. CIT(A) by observing as under:
“6. I have considered the facts of the case and written submissions of the appellant.
Grounds of appeal 1 and 2 are against the penalty of 39,504/- levied u/s 271(1)(c) of the Act.
(i). Facts of the case are that the assessee is an individual engaged in the business of trading in jewellery items, Return of income for assessment year 2011 - 12 was filed b the assessee on 13. 04. 2012 u/s 139 of the Act declaring income u/s 44 AD of the Act. Total income of Rs. 1, 82,972/- was declared at the rate of 8% on total turnover of Rs, 14,86,302/-. In addition labour income was shown at Rs. 2, 33,720/-. Proceedings u/s 147/148 of the Act were initiated on the basis of information that the assessee had made cash deposits of Rs. 43,48,500/- in his bank account number 00001847 with YES bank Ltd.
During the course of assessment proceedings, the assessee was asked to explain the nature and source of cash deposits of Rs. 43,48,500/- with YES bank along with supporting documentary evidence and books of accounts. The assessee failed to produce the same as he had not maintained any books of accounts. Even no bills or vouchers were produced in support of the purchases and sales and other expenses. During the year the assessee had maintained the following bank accounts as proprietor in which cash credits were made as under:
Name of the Bank Account no. Amount Rs. Yes bank, Mall Road, Amritsar CA 005183800001847 43,48,500/- P & S Bank, Parag Dass, Amritsar CC 04891300001119 P & SBank, Parag Dass, Amritsar CA/1119 4,000/-
Loan a/c with P&S bank, Amritsar 04891200000012 1,00,000/-
Sukhdev Singh v. ITO P& S Bank, Parag Dass, Amritsar CA 881 23,28,316/-
Accordingly, Rs. 56,76,816/- was taken as the turnover of the appellant and assessment was completed by Ld AO applying NP rate of 8% as applied u/s 44 A.D. of the Act on the gross turnover of Rs. 66,76,816/- which came to Rs. 5,34,145/- as against Rs. 1, 82,S 70/- declared in the original return of income.
The impugned penalty of 39,504/- has been levied u/s 271(l)(c) of the Act for furnishing inaccurate particulars of income on the above addition to the returned income.
(ii) During appeal, it is contended by Ld AR that the penalty u/s 271(l)(c) has been wrongly levied on mere difference of opinion. It is further submitted that cash sums Rs,43,48,500/- deposited in the YES Bank had no bearing on the sales/turnover of the assessee. The account with Yes Bank was used only for transferring cash from 'Amritsar to Raipur to avoid any risk involved in handling of cash.
(iii) Upon due consideration, the above explanation cannot be accepted and is rejected. The appellant is engaged in trading in jewellery items and most of the sales were admittedly made in Raipur. A reference to the statement of account of YES Bank shows that most of the cash has been deposited in Raipur and withdrawn through self cheques at Amritsar.
Date Narration Debit Credit 28.05.2010 Cash deposit Raipur 5,00,000/- 14.06.2010 Chq withdrawal, Self, Asr 1,00,000/- 08.07.2010 Cash deposited Raipur 5,00,000/- 09.07.2010 Chq withdrawal, Self, Asr 5,00,000/- 10.07.2010 Chq withdrawal, Self, Asr 21,000/- 19.07.2010 Cash deposited, Raipur 49,000/- 27.08.2010 Chq withdrawal. Self, Asr 1,00,000/- 03.09.2010 Chq withdrawal, Self, Asr 1,00,000/- 09.09.2010 Cash deposited, Raipur 2,00,000/- 10.09.2010 Lash deposited, Raipur 3,00,000/- 13.09.2010 Chq withdrawal, Self, Asr 7,00,000/- 16.09.2010 Cash deposited, Raipur 3,00,000/- 24.09.2010 Cash deposited, Raipur 5,00,000/- 24.09.2010 Cash deposited, Raipur 40,000/- 27.09.2010 Chq withdrawal, Self, Asr 8,50,000/-
Sukhdev Singh v. ITO 28.09.2010 Cash deposited, Raipur 4,99,500/- 28.09.2010 Chq withdrawal, Self, Asr 5,00,000/- 07.10.2010 Cash deposited, Raipur 1,50,000/- 12.10.2010 Chq withdrawal, Self, Asr 1,50,000/- 16.10.2010 Cash deposited, Raipur 50,000/- 15 11.2010 Cash deposited, Raipur 5,00,000/- 29.11.2010 Cash deposited, Raipur 5,00,000/- 32,12.2010 Cash withdrawal, Self, 5,00,000/- Asr In other words, the sale proceeds were deposited at Raipur and that cash was Withdrawn at Amritsar Hence, the submission of the appellant that the Yes Bank was used for transferring cash from Amritsar to Raipur is factually incorrect. It is evident from the bank account that sales were being deposited in this bank account. Hence, the exp nation that the cash credits were not sales is also rejected. During assessment proceedings, no bills /vouchers were produced by the appellant in support of sales/purchases. The appellant had not disclosed these sales to the department. Assessment was rightly completed @ 8% of the gross turnover of Rs. 56,76,816/- as against 8% on total turnover of Rs. 14,86,302/- declared by the appellant in the return of income. The argument of Ld. AR that the addition has been made on a mere difference of opinion is rejected. The addition to the returned income has been made in this case on the basis of cash credits in the bank account of the appellant which were far in excess for the declared turnover.
In view of the above facts, it is held that the penalty of Rs.39,504/- has been rightly levied u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income.”
The appellant assessee contended in grounds that the Learned AO erred in imposing penalty of Rs. 39,504/- being addition made on credit summation made by the assessee, completely ignoring the facts submitted by the assessee and that there was mere a difference of opinion between the assessee and the AO. Merely difference of opinion does not construe that the assessee has furnished inaccurate particulars of return. The subject matter is debatable. It is a case of estimation of income where levying penalty u/s 271(1)(c) is not justified.
Sukhdev Singh v. ITO 6. Having heard the ld. additional CIT DR, perusal of record and impugned order, we find that undisputedly, assessee’s income has been estimated considering the deposits made in the bank account under section 44 A.D. of the Income Tax Act. In our view, penalty under section 271(1)(c) based on estimation of income is not justified. It was noted that Assessing Officer himself had found that said deposit was not made on a single day and, thus, it could not be said that assessee had failed to furnish complete particulars. Even otherwise, revenue had not come out with clear case of suppression of turnover and, penalty had been imposed merely on basis of enhancement of estimated income where impugned penalty would not sustain.
In the case of CIT, Chennai vs. P. Roses, the Hon’ble Madras High Court observed vide para6 and 7 as under:-
Though the Assessing Officer invoked penalty under Section 27(1)(c) of the Act and stated that the assessee failed to furnish complete details from bank statement, on going through the materials placed before this Court, it is seen that the Assessing Officer has subsequently found that the said deposit was made for the period commencing from 01.04.2004 to 29.03.2005. Therefore, when the Assessing Officer himself has found that the said deposit was not made on a single day, in our considered view, it cannot be said that the assessee had failed to furnish complete particulars. The Tribunal has categorically found that in the return, the assessee had shown the income on estimate basis at Rs. 1,99,440/- and such estimation of income was enhanced by the Assessing Officer and consequently, imposed penalty. Therefore, from the above facts it is clear that levy of penalty was based on the estimation of income. In our considered view, there cannot be any imposition of penalty based on estimation of income.
7. The Tribunal has rightly found that the present case is not a fit case for levy of penalty
Sukhdev Singh v. ITO under Section 27(1)(c) of the Act by finding that the initial impression of the Assessing Officer was incorrect with regard to the deposit of a sum of Rs. 47,36,000/-. The Tribunal has also pointed out that it was not clear as to whether, according to Assessing Officer, it was a case of suppression of turn over or of estimation of income at a lower rate. When the Revenue itself has not come out with clear case of suppression of turn over and where there was no specific finding with regard to such factual aspect, we find that imposition of penalty under Section 27(1)(c) of the said Act is not warranted. In this connection, it is relevant to quote the decision of the Hon'ble Supreme Court reported in CIT v. Reliance Petroproducts (P) Ltd. [2010] 322 ITR 158/189 Taxman 322 (SC) in which it is observed that in order to bring the case under Section 271(1)(c) of the Act, there has to be concealment of particulars of the income of the assessee and the assessee must have furnished inaccurate particulars of his income. It was further pointed out by the Hon'ble Supreme Court that in order to expose the assessee to the penalty unless the case is strictly covered by the provision, the penalty provision cannot be invoked. It is further pointed out that making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. The relevant portion of the decision reads as follows:- "7. As against this, the learned counsel appearing on behalf of the respondent pointed out that the language of Section 271(1)(c) had to be strictly construed, this being a taxing statute and more particularly the one providing for penalty. It was pointed out that unless the wording directly covered the assessee and the fact situation herein, there could not be any penalty under the Act. It was pointed out that there was no concealment or any inaccurate particulars regarding the income were submitted in the return. Section 271(1)(c) is as under: 27(1) If the AO or the CIT(A) or the CIT in the course of any proceedings under this Act, is satisfied that any person (c) has concealed the particulars of his income or furnished inaccurate particulars of such income. A glance at this provision would suggest that in order to be covered, there has to be concealment of the particulars of the income of the assessee. Secondly, the assessee must have furnished inaccurate particulars of his income. Present is not the case of concealment of the income. That is not the case of the Revenue either. However, the learned counsel for the Revenue suggested that by making incorrect claim for the expenditure on interest, the assessee has furnished inaccurate particulars of the income. As per Law Lexicon, the meaning of the word 'particular' is a detail or details (in plural sense); the details of a claim, or the separate items of an account. Therefore, the word 'particulars' used in Section 271(1)(c) would embrace the meaning of the details of the claim made. It is an admitted position in the present case that no information given in the return was found to be incorrect or inaccurate. It is not as if any statement made or any detail supplied was found to be factually incorrect. Hence, at least, prima facie, the assessee cannot be held guilty of furnishing inaccurate particulars. The learned counsel argued that 'submitting an incorrect claim in law for the expenditure on interest would amount to giving inaccurate particulars of such income'. We do not think that such can be the interpretation of the words concerned. The words are plain and simple. In order to expose the assessee to the penalty unless the case is Sukhdev Singh v. ITO strictly covered by the provision, the penalty provision cannot be invoked. By any stretch of imagination, making an incorrect claim in law cannot tantamount to furnishing inaccurate particulars. In CIT v. Atul Mohan Bindal [2009] 183 Taxman 444 (SC) where this Court was considering the same provision, the Court observed that the AO has to be satisfied that a person has concealed the particulars of his income or furnished inaccurate particulars of such income. This Court referred to another decision of this Court in UOI v. Dharamendra Textile Processors [2008] 166 Taxman 65 (SC), as also, the decision in UOI v. Rajasthan Spinning & Weaving Mills [2009] 180 Taxman 609 (SC) and reiterated in para 13 that: "13. It goes without saying that for applicability of S.271(1)(c), conditions stated therein must exist."
Therefore, it is obvious that it must be shown that the conditions under Section 271(1)(c) must exist before the penalty is imposed. There can be no dispute that everything would depend upon the return filed because that is the only document, where the assessee can furnish the particulars of his income. When such particulars are found to be inaccurate, the liability would arise. In Dilip N. Shroff v. CIT [2007] 161 Taxman 218 (SC), this Court explained the terms 'concealment of income' and 'furnishing inaccurate particulars'. The Court went on to hold therein that in order to attract the penalty under Section 271(1)(c), mens rea was necessary, as according to the Court, the word inaccurate signified a deliberate act or omission on behalf of the assessee. It went on to hold that clause (iii) of Section 271(1) provided for a discretionary jurisdiction upon the assessing authority, inasmuch as the amount of penalty could not be less than the amount of tax sought to be evaded by reason of such concealment of particulars of income, but it may not exceed three times thereof. It was pointed out that the term 'inaccurate particulars' was not defined anywhere in the Act and, therefore, it was held that furnishing of an assessment of the value of the property may not by itself be furnishing inaccurate particulars. It was further held that the assessee must be found to have failed to prove that his explanation is not only not bona fide but all the facts relating to the same and material to the computation of his income were not disclosed by him. It was then held that the explanation must be preceded by a finding as to how and in what manner, the assessee had furnished the particulars of his income. The Court ultimately went on to hold that the element of mens rea was essential. It was only on the point of mens rea that the judgment in Dilip N. Shroff (supra) was upset. In Dharamendra Textile Processors (supra) after quoting from Section 271 extensively and also considering Section 271(1)(c), the Court came to the conclusion that since Section 271(1)(c) indicated the element of strict liability on the assessee for the concealment or for giving inaccurate particulars while filing return, there was no necessity of mens rea. The Court went on to hold that the objective behind enactment of Section 271(1)(c) read with the Explanations indicated with the said section was for providing remedy for loss of revenue and such a penalty was a civil liability and, therefore, wilful concealment is not an essential ingredient for attracting civil liability as was the case in the matter of prosecution under Section 276-C of the Act. The basic reason why the decision in Dilip N. Shroff (supra) was overruled by this Court in Dharmendra
Sukhdev Singh v. ITO Textile Processors (supra) was that according to this Court the effect and difference between Section 271(1)(c) and Section 276-C of the Act was lost sight of in Dilip N. Shroff (supra). However, it must be pointed out that in Dharamendra Textile Processors (supra), no fault was found with the reasoning in the decision in Dilip N. Shroff (supra), where the Court explained the meaning of the terms 'conceal' and 'inaccurate'. It was only the ultimate inference in Dilip N. Shroff (supra) to the effect that mens rea was an essential ingredient for the penalty under Section 271(1)(c) that the decision in Dilip N. Shroff (supra) was overruled."
8. In view of the above, we hold that the observation and finding of the Ld. CIT(A) are perverse to the facts on record in respect of penalty u/s 271(1)(c ) of the Act. Accordingly, the penalty of Rs.39,504/- imposed by the AO u/s 271(1)(c) of the Act for furnishing inaccurate particulars of income and confirmed by the Ld. CIT(A) is deleted.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 22.09.2022 Sd/- Sd/- (Anikesh Banerjee) (Dr. M. L. Meena) Judicial Member Accountant Member *GP/Sr/PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(Appeals) (4) The CIT concerned (5) The Sr. DR, I.T.A.T