M/S. KRUPANIDHI CONSTRUCTION,AHMEDABAD vs. THE DY.CIT, CIRCLE-5, BARODA

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ITA 2332/AHD/2014Status: DisposedITAT Ahmedabad24 May 2017AY 2007-084 pages

In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.

AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that the quantum addition under Section 68 was made solely due to lack of creditworthiness, not lack of identity or genuineness. Relying on the Supreme Court decision in CIT vs. Reliance Petro Products, the Tribunal stated that quantum and penalty proceedings are separate, and not every addition attracts penalty.

What were the facts?

The assessee firm received an unsecured loan of Rs. 3.45 lacs from Shri Rajendra C Shah. While the assessee provided confirmation, bank statements, and return of the creditor, the Assessing Officer found the creditor's salary to be too low to support such a loan, deeming it not creditworthy.

What were the issues?

Whether the addition made under Section 68 of the Income Tax Act, solely on the grounds of lack of creditworthiness of the creditor, can be a basis for imposing penalty under Section 271(1)(c) for concealment of income or furnishing inaccurate particulars.

Which sections of the Income-tax Act were involved?

Section 68,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(1)Show list

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Income Tax Appellate Tribunal, AHMEDABAD “C” BENCH AHMEDABAD

Before: SHRI PRAMOD KUMAR, & SHRI S. S. GODARA.

Hearing: 23.05.2017Pronounced: 24.05.2017

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD “C” BENCH AHMEDABAD

BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA No.2332/Ahd/2014 (Assessment Year:2007-08) M/s. Krupanidhi Construction, 7, Kalyan Nagar Society, Near Vithalnagar Wadi, Karelibaug, Baroda – 390018 Appellant Vs. Dy. Comm. of Income Tax, Cricele-5, Baroda Respondent PAN: AAGFK7000E

आवेदक क� ओर से/By Assessee : Mr. Anil Shah with Kinjal Shah, A.R. राज�व क� ओर से/By Revenue : Mr. James Kurian, Sr. D.R. सुनवाई क� तार�ख/Date of Hearing : 23.05.2017 घोषणा क� तार�ख/Date of Pronouncement : 24.05.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER

This assessee’s appeal for assessment year 2007-08 arises from the CIT(A)-V, Baroda’s order dated 16.06.2014, passed in case no. CAB(A)- V/02/12-13, upholding Assessing Officer’s action imposing penalty of Rs.1,26,460/- , in proceedings u/s. 271(1)(c) of the Income Tax Act, 1961; in short “the Act”.

ITA No. 2332/Ahd/2014 (M/s. Krupanidhi Construction vs. DC IT) A.Y. 2007-08 - 2 - 2. Relevant facts are in a very narrow compass. This assessee is a firm engaged in civil construction business. The Assessing Officer completed a regular assessment in its case on 23.12.2009. He came across assessee’s books of accounts stating unsecured loan of Rs. 3.45lacs obtained from one Shri Rajendra C Shah. The assessee had produced the said creditor’s confirmation alongwith bank’s statement and copy of return. The Assessing Officer found his salary in the relevant previous year to be of Rs.81,760/- as against the huge loan in question compared to the said salary figure. He further noticed Shri Rajendra C Shah to have deposited cash by six entries from 30.05.2006 to 26.06.2006 followed by a cheque of Rs.2lacs given to assessee. He further deposited two cash figures of Rs.45,000/- each on 14 & 15.07.2006 and issued a cheque of Rs.1lac on said latter date to the assessee. The Assessing Officer observed in these facts that all this explanation failed to clear creditworthiness test u/s.68 of the Act. He thus invoked the quantum addition qua the above principal amount as well as interest of Rs.30,695/- in assessment order dated 23.12.2009. The Assessing Officer further initiated the impugned penalty proceedings u/s.271(1)(c) of the Act. The assessee preferred quantum appeal. The CIT(A) upheld the abovestated quantum addition in his order dated 08.06.2010. The assessee filed ITA No.2526/Ahd/2010 before this tribunal. A co-ordinate bench again upheld the impugned addition. Quantum proceedings accordingly attained finality.

3.

We now advert to the impugned penalty proceedings. The Assessing Officer placed heavy reliance upon the above quantum developments to treat the said Section 68 addition of Rs.3,75,695/- as a case of concealment of particulars of income so as to impose the impugned penalty of Rs.1,26,460/- as upheld in the lower appellate proceedings.

ITA No. 2332/Ahd/2014 (M/s. Krupanidhi Construction vs. DC IT) A.Y. 2007-08 - 3 - 4. We have heard rival submissions. Case file perused. There is no dispute that right from Assessing Officer up to this tribunal, none of the quantum proceedings has raised any question about identity of the abovestated creditor Shri Rajendra C Shah. It is evident that the abovestated quantum addition has been made u/s.68 of the Act for the sole reason that the assessee’s explanation supported by all due evidence lacks creditworthiness as the creditor in question had a very meager salary amount as compared to the loan in question in the relevant previous year. It is therefore clear that the assessee’s explanation cleared the first test of identity followed by the second criteria of genuineness. We reiterate hon’ble apex court’s decision in CIT vs. Reliance Petro Products 322 ITR 158 (SC) holding that quantum and penalty proceedings are separate and each and every addition made in course of former does not attract latter penal proceedings to conclude that the assessee’s act and conduct in showing the unsecured loans in question in his books followed by relevant supportive evidence could not be held as a case of furnishing of inaccurate particulars of income or concealment of income. We therefore delete the impugned penalty of Rs.1,26,460/- imposed by the Assessing Officer and upheld in the course of lower appellate proceedings.

5.

This assessee’s appeal is allowed.

[Pronounced in the open Court on this the 24th day of May, 2017.]

Sd/- Sd/- (PRAMOD KUMAR) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 24/05/2017 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee

ITA No. 2332/Ahd/2014 (M/s. Krupanidhi Construction vs. DC IT) A.Y. 2007-08 - 4 -

3.

संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,

उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।

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