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आयकर अपील य अ धकरण “ए” यायपीठ पण ु े म । IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, PUNE ी आर. के. पांडा, लेखा सद य, एवं ी "वकास अव थी, या$यक सद य के सम% । BEFORE SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM आयकर अपील सं. / ITA No. 935/PUN/2014 $नधा'रण वष' / Assessment Year : 2009-10 Vinod Kewalchand Bafna, 20, Mahavir Marg, Sharda Nagar, Nandurbar-425412 PAN : ADIPJ6709L .......अपीलाथ / Appellant बनाम/Vs.
Income Tax Officer, Ward – 3(4), Dhule …… यथ / Respondent
Assessee by Revenue by
: Shri Hari Krishan : Shri Anil Chaware
सन ु वाई क तारख / Date of Hearing
: 27-12-2016
घोषणा क तारख / Date of Pronouncement
: 18-01-2017
आदे श / ORDER PER VIKAS AWASTHY, JM : This appeal by the assessee is directed against the order of Commissioner of Income Tax (Appeals)-I, Nashik dated 03-03-2014 for the assessment year 2009-10 confirming the levy of penalty u/s. 271(1)(c) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”).
2.
The brief facts of the case as emanating from records are: The
assessee is engaged in the business of sale and purchase of plots and is
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also having agricultural income.
The assessee filed his return of
income for the assessment year under appeal on 29-03-2010 declaring income of `2,52,920/- and agricultural income of `8,29,374/-. During the course of scrutiny assessment proceedings, the Assessing Officer made addition in the income returned by the assessee inter alia on account of : (i) unexplained cash deposits `4,05,000/-; (ii) undisclosed closing credit balance in ICICI bank `10,777/-; (iii) undisclosed investment in plots `2,15,070/-; and (iv) purchase of scooter `41,378/-. The Assessing Officer further initiated penalty proceedings u/s. 271(1)(c) of the Act on account of concealment of income in respect of additions made during assessment proceedings. The Assessing Officer vide order dated 28-06-2012 levied penalty of `2,28,572/- u/s. 271(1)(c) on concealed income of `6,72,460/-.
Aggrieved by the penalty order, the assessee preferred an appeal before the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) rejected the contentions of the assessee and upheld the order levying penalty u/s. 271(1)(c) of the Act.
Now, the
assessee is in second appeal before the Tribunal impugning the upholding of penalty by the First Appellate Authority.
3.
Shri Hari Krishan appearing on behalf of the assessee submitted
that the penalty proceedings are bad in law as the notice issued u/s. 274 r.w.s. 271(1)(c) of the Act suffers from defect.
Therefore, the
penalty levied by the Assessing Officer is liable to be set aside on account of technical defect in the notice. The ld. AR submitted that a perusal of assessment order would show that the Assessing Officer has recorded his satisfaction for initiating penalty proceedings u/s.
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271(1)(c) on account of concealment of particulars of income. A perusal of the notice issued u/s. 274 r.w.s. 271(1)(c) would show that irrelevant clause in the notice has not been struck off in the proforma. Thus, the charge for levy of penalty is not clearly evident from the notice. As per notice dated 23-12-2011, penalty is being levied for concealment of particulars of income or furnishing in accurate particulars of income. The ld. AR pointed that the Pune Bench of the Tribunal in the case of Kanhaiyalal D. Jain Vs. The Asstt. Commissioner of Income Tax in ITA Nos. 1201 to 1205/PN/2014 for the assessment years 2003-04 to 2007-08 decided on 30-11-2016 has deleted the penalty where the notice issued for levy of penalty u/s. 271(1)(c) does not specify the charge for levy of penalty in an ambiguous manner.
3.1
The ld. AR further submitted that even on merits the penalty
levied u/s. 271(1)(c) on the additions made during the assessment are liable to be cancelled. The first addition on which the penalty is levied is with respect to deposits in ICICI Bank amounting to `4,05,000/-. The addition has been made u/s. 68 of the Act. The assessee is having income from agriculture.
The deposits in the bank are from
agricultural operations. The Assessing Officer made additions on the basis of entries in the passbook.
It is a well settled law that the
provisions of section 68 cannot be invoked to make additions on the basis of entries in the bank passbook, as bank passbook is not part of books of account.
In support of his submissions the ld. AR placed
reliance on the following decisions: i.
Commissioner of Income Tax Vs. Bhaichand N. Gandhi, 11 Taxman 59 (Bom) : 141 ITR 67 (Bom);
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ii.
Commissioner of Income Tax Vs. Baroda Tin Works, 221 ITR 661 (Guj).
3.2
The ld. AR contended that if the addition made u/s. 68 is not
sustainable, there is no question of levy of penalty on such additions. During the penalty proceedings it was submitted before the Assessing Officer that the assessee has sumptuous agricultural income and the deposits in ICICI bank are from agricultural income.
These cash
deposits are not routed through the regular cash book maintained by the assessee for business purpose as the said income was agricultural income.
However, the Assessing Officer rejected the bonafide
submission of the assessee and made addition of income and even initiated penalty proceedings for concealment of income.
3.3
In respect of undisclosed closing cash balance in ICICI bank
accounts `10,777/-, the ld. AR submitted that the amounts were deposited in the said bank accounts from sale of agricultural produce. Since, the amounts were deposited in the bank accounts from agricultural income, the same were not routed through regular cash book and remain to be included in the balance sheet.
3.4
In respect of investment in purchase of scooter, the ld. AR
submitted that the assessee has purchased scooter for `41,378/-. The payment for scooter was made through ICICI Bank account. The ld. AR referred to the bank statement from ICICI Bank Ltd. at page 9 of the paper book.
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3.5
In respect of investment in plots, the ld. AR submitted that the
assessee had purchased 14 plots on 17-03-2009 i.e. at the fag end of the financial year ending on 31-03-2009 for a consideration of `2,00,000/-. The sale deed of the plots was registered on 17-03-2009. However, the possession of the plots was not received due to error in measurement of the plots. The possession of the plots was received in April, 2009. These facts were confirmed by the vendor of the plots Shri Sanjaykumar M. Gulechha. Since, the possession of the plots was not received during the period relevant to the assessment year 2009-10 the same was not recorded in the financial year 2008-09. The assessee has disclosed the payment of plots in the books in the next financial year.
4.
Au contraire Shri Anil Chaware representing the Department
strongly defended the order of Commissioner of Income Tax (Appeals) in confirming the levy of penalty. The ld. DR submitted that during the course of assessment proceedings, the assessee had failed to offer satisfactory explanation regarding the nature and cash deposits in ICICI bank.
No relevant document was produced by the assessee to
show that the deposits were made from sale of agricultural produce. The ld. DR further submitted that during the assessment proceedings on verification of the balance sheet it transpired that the assessee is having two bank accounts with ICICI Bank which were not disclosed by the assessee. Therefore, the credit balance as on 31-03-2009 in both the bank accounts i.e. `10,777/- was treated as undisclosed income for the year under consideration.
In respect of unrecorded purchase of
land/plots, the ld. DR contended that during the assessment proceedings the assessee had produced possession letter dated 11-11-2011, whereas the sale deed was executed in March, 2011. The
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possession letter is a self serving document and would not get preference over the sale deed which is a registered document.
5.
We have heard the submissions made by the representatives of
rival sides and have perused the orders of the authorities below. We have also considered the case laws and the documents on which the ld. AR of the assessee has placed reliance while making his submissions. Undisputedly, the additions made in the assessment have attained finality.
It is a well settled law that assessment proceedings and
penalty proceedings are two separate and independent proceedings. The Hon’ble Jurisdictional High Court in the case of Commissioner of Income Tax Vs. Dharamchand L. Shah reported as 204 ITR 462 has held : “It is by now trite law that the assessment proceedings and penalty proceedings are two separate and distinct proceedings. The fact that certain additions were made in the assessment proceedings would not automatically justify the Revenue to impose penalty under section 271(1)(c) of the Act.”
Thus, any addition made during assessment ipso facto would not result in levy of penalty.
6.
The ld. AR has made two fold submissions while praying for
cancelling the levy of penalty. The first submissions of the assessee is in respect of notice issued u/s. 274 r.w.s. 271(1)(c) of the Act. According to the assessee, the notice issued for levy of penalty does not clearly specify the charge for levy of penalty.
A perusal of the
assessment order shows that the Assessing Officer has recorded satisfaction for levy of penalty u/s. 271(1)(c) on account of concealment
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of particulars of income. However, while issuing notice u/s. 274, the Assessing Officer has not struck off irrelevant parts in the notice proforma and thus, the charges for levy of penalty in the notice shows concealment
of
particulars
of
income
or
furnishing
inaccurate
particulars of income. The Co-ordinate Bench of the Tribunal in the case of Kanhaiyalal D. Jain Vs. The Asstt. Commissioner of Income Tax (supra) has deleted the levy of penalty where irrelevant charges are not struck off from proforma notice. The relevant extracts of the findings of the Co-ordinate Bench for deleting penalty on account of defective notice are as under : “15. The Hon’ble Karnataka High Court has laid down the proposition that the Assessing Officer is to be satisfied in the course of proceedings that there is either concealment of income or furnishing of inaccurate particulars of income under clause (c) to section 271(1) of the Act. It has been categorically held that concealment of income and furnishing of inaccurate particulars of income are different. The Hon’ble High Court has thus, laid down that the Assessing Officer while issuing notice has to come to conclusion that whether it is case of concealment of income or case of furnishing of inaccurate particulars of income. The reliance in this regard was placed on the ratio laid down by the Hon’ble Supreme Court in T. Ashok Pai Vs. CIT (2007) 292 ITR 11 (SC), wherein at page 19 it was held that concealment of income and furnishing inaccurate particulars of income carry different connotation. Applying the said proposition, it was held that where the Assessing Officer proposes to invoke the first limb being concealment, then the notice has to be appropriately marked. Similarly, for furnishing inaccurate particulars of income, the standard proforma without striking of relevant clauses, as per the Hon’ble High Court would lead to inference as to non-application of mind. 16. Further, the Hon’ble Karnataka High Court in CIT Vs. SSA’S Emerald Meadows (supra) has dismissed the appeal of Revenue, where the Tribunal had allowed the appeal of assessee holding that the notice issued by the Assessing Officer under section 274 r.w.s. 271(1)(c) of the Act to be bad in law as it does not satisfy which limb of section 271(1)(c) of the Act under which it has been initiated The Hon’ble High Court had
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relied on decision of Division Bench of the Court rendered in CIT & Anr. Vs. Manjunatha Cotton and Ginning Factory (supra). The Hon’ble Supreme Court in CIT Vs. SSA’S Emerald Meadows (supra) has dismissed the Special Leave Petition. 17. The Pune Bench of Tribunal in M/s. Sai Venkata Construction Vs. Addl. CIT (supra) and in Sanjog Tarachand Lodha Vs. ITO (supra) have applied the ratio laid down by the Hon’ble Karnataka High Court (supra) and held that where there is no striking off of either of limbs, then notice issued under section 274 r.w.s. 271(1)(c) of the Act was invalid and subsequent penalty proceedings were held to be vitiated.”
The Co-ordinate Bench further held : “23. However, the question which is raised before us by way of additional ground of appeal is root of start of the proceedings i.e. recording of satisfaction and the issue of notice, which has been challenged by the assessee to be invalid. Applying the ratio laid down by the Hon’ble Karnataka High Court in CIT & Anr. Vs. Manjunath Cotton and Ginning Factory (supra) and CIT Vs. SSA’S Emerald Meadows (supra) and in view of SLP being dismissed, we find merit in the plea of assessee that the satisfaction recorded in the present case to initiate penalty proceedings both for concealment of income and furnishing of particulars of income against additional income offered by the assessee is incorrect. Further, where the assessee is not aware of exact charge against him, the ambiguity in the notice issued under section 274 r.w.s. 271(1)(c) of the Act by not striking of portion which is not applicable, prejudice the right of reasonable opportunity to the assessee, as he was not made aware of exact charge he had to face. It is a clear-cut case of concealment since the assessee had offered additional income pursuant to search carried out at its premises. It is not the case of furnishing of inaccurate particulars of income and hence, the Assessing Officer should have recorded the satisfaction accordingly and issued the notice accordingly. 24. We find no merit on the partial reliance placed upon by the learned Departmental Representative for the Revenue on the decision of Jurisdictional High Court in CIT Vs. Smt. Kaushalya (supra). The Hon’ble High Court has clearly laid down the proposition that the Assessing Officer has to make the assessee fully aware of exact charge of the Department against him. As pointed out, in present case, in the
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assessment order itself while recording satisfaction for initiating proceedings under section 271(1)(c) of the Act, exact charge of the Department against the assessee is not clear. The Assessing Officer records the satisfaction for initiating penalty proceedings on both the counts i.e. concealment of
income and furnishing of
inaccurate
particulars of income. The Hon’ble Bombay High Court had also upheld the quashing of penalty proceedings for assessment year 1967-68 to be justified on account of vagueness and ambiguity in the notice issued. But the Hon’ble High Court further held that where the assessee was fully aware of exact charge of the Department against him, then technical nonstriking of certain terms in the notice would not invalidate the proceedings. Where there is default in the first stage of making the assessee aware of exact charge of the Department, then initiation of penalty proceedings are vitiated and the same are to be quashed. The issue of notice under section 274 of the Act on such vagueness and ambiguity makes such notice invalid and proceedings thereafter are to be quashed. 25. The Hon’ble Supreme Court in T. Ashok Pai Vs. CIT (supra) had held as under:“23. Section 271(1)(c) remains a penal statute. The rule of strict construction shall apply thereto. The ingredients for imposing penalty remain the same. The purpose of the Legislature that it is meant to be a deterrent to tax evasion is evidenced by the increase in the quantum of penalty, from 20 per cent under the 1922 Act to 300 per cent in 1985. 24. “Concealment of income” and “furnishing of inaccurate particulars” carry different connotations. Concealment refers to a deliberate act on the part of the assessee. A mere omission or negligence would not constitute a deliberate act of suppression very or suggestion falsi.”
26. Where concealment of
income and furnishing of
inaccurate
particulars of income are two different connotations, then as per provisions of the Act, the satisfaction has to be recorded by the Assessing Officer before initiating penalty proceedings as to under which limb the case of assessee falls. In the present set of facts, the satisfaction as recorded by the Assessing Officer which is evident from the assessment order itself does not establish the case of Revenue against the assessee that it is liable for levy of penalty for concealment under which limb i.e. for concealment of income or for furnishing of inaccurate particulars of income. The notice issued under section 274 of
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the Act by the Assessing Officer also does not show cause the assessee as to make him aware of exact charge levied against him. In the absence of same, it causes prejudice to the right of reasonable opportunity to be allowed to the assessee before levy of penalty under section 271(1)(c) of the Act. Consequently, penalty notice issued in the present case suffers from infirmities i.e. lack of satisfaction and lack of notice being issued in making the assessee aware of exact charge against him, hence the same is quashed. The penalty proceedings completed pursuant to such notice are vitiated and the same are held to be invalid.”
Thus, in view of the fact that the notice issued for levy of penalty u/s. 271(1)(c) does not clearly spell out the charge for levy of penalty, therefore, the same is defective, null and void and the subsequent proceedings arising there from are vitiated. Accordingly, the penalty is liable to be cancelled on this account alone.
7.
On merits, we find that penalty has been levied in respect of
unexplained deposits to the tune of `4,05,000/- in ICICI Bank account. The addition has been made u/s. 68 of the Act. The additions u/s. 68 can be made only where cash credit appears in books of account of the assessee. The Bank passbook is not part of books of account of the assessee. Therefore, the additions made u/s. 68 on the basis of entries in the bank passbooks are not sustainable. Our view is further fortified by the decision rendered in the case of Mayawati Vs. DCIT reported as 113 TTJ 178 (Del.) and the decision of Hon’ble Bombay High Court in the case of Commissioner of Income Tax Vs. Bhaichand N. Gandhi (supra). The Hon’ble Jurisdictional High Court has upheld the order of Tribunal, where the Tribunal deleted the addition u/s. 68 holding that cash credit for the previous year shown in the assessee’s bank passbook issued to him by the bank but not shown in the cash book
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maintained by him for the year, does not fall within the ambit of section 68 of the Act.
8.
The Hon’ble Gujarat High Court in the case of Commissioner of
Income Tax Vs. Baroda Tin Works (supra) observed : “Sections 68, 69, 69A, 69B and 69C are all part of the same scheme where certain amounts though not proved to be the income of the assessee of the previous year concerned are for the purpose of charging to tax are deemed to be so by creating legal fiction absolving the Department from its initial duty to prove that any such is the income of the assessee. But for these provisions, it was for the Revenue to prove that any sum, not disclosed by the assessee but which is sought to be taxed as income of the assessee, is the income of the assessee for the previous year relevant to the assessment year. The law is well settled that though the finding recorded in the assessment orders are relevant evidence to support the allegation of concealment, but these cannot be the foundation for holding the assessee guilty of concealment. Under section 68 as under section 69A no such legal fiction has been created to treat such additions as concealed income of the assessee for the purpose of penalty proceedings.”
The court further observed that the fiction created under sections 68, 69, 69A, 69B and 69C by itself cannot be extended to penalty proceedings to raise the presumption about concealment of such income.
9.
In the present case, the deposits made in the bank account were
not routed through cash book of the assessee. The entries are made in the bank passbook and there are no cash credit entries in the cash book of the assessee.
Therefore, the addition made u/s. 68 is not
sustainable. Once, the addition is held as not sustainable, there is no question of levy of penalty on such addition.
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10.
In respect of purchase of scooter the assessee has pointed that
the payment for purchase of scooter has been made from ICICI Bank account.
The assessee has substantiated his contentions by placing
statement of Bank account at page 9 of the paper book. A perusal of bank statement clearly shows that a sum of `41,378/- has been debited from the account of assessee on 13-08-2008 for payment to Nilesh Motors. The Assessing Officer has made addition in respect of cash credits in the Bank account. Since, the payment has been made from same bank account for purchase of scooter, this would result in double addition. Therefore, in our considered view such an addition is not sustainable and therefore does not attract penalty u/s. 271(1)(c) of the Act.
11.
The last addition on which the penalty has been levied is with
respect to undisclosed investment in plots. It has been contended that the possession of the plots was taken in next financial year i.e. financial year 2009-10, whereas the sale deed of the plots was registered on 17-03-2009 i.e. during the financial year 2008-09.
The ld. AR has
stated at the Bar that the transactions with respect to purchase of plots have been accounted in the next financial year. This fact has not been rebutted by the ld. DR.
The dispute is only with regard to the
assessment year in which transaction has to be recorded in the books of account.
Under such circumstances we are of the view that no
penalty is to be levied on addition, where the dispute is with regard to year of taxability.
12.
Thus, even on merits the assessee has been able to show that no
case for levy of penalty is made. Accordingly, we direct the Assessing
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Officer to cancel the penalty. The impugned order is set aside and the appeal of the assessee is allowed.
13.
In the result, the appeal of the assessee is allowed.
Order pronounced on Wednesday, the 18th day of January, 2017.
Sd/-
Sd/-
(आर. के. पांडा / R.K. Panda)
(!वकास अव"थी / Vikas Awasthy)
लेखा सद"य / ACCOUNTANT MEMBER
$या%यक सद"य / JUDICIAL MEMBER
पुणे / Pune; &दनांक / Dated : 18th January, 2017 RK आदे श क+ ,$त.ल"प अ/े"षत / Copy of the Order forwarded to : 1.
अपीलाथ / The Appellant.
2.
यथ / The Respondent.
3.
आयकर आय' ु त (अपील) / The CIT(A)-I, Nashik
4.
आयकर आय' ु त / The CIT-I, Nashik
5.
!वभागीय %त%न,ध, आयकर अपीलय अ,धकरण, “ए” ब0च, पुणे / DR, ITAT, “A” Bench, Pune.
6.
गाड2 फ़ाइल / Guard File. //स या!पत %त // True Copy// आदे शानुसार / BY ORDER,
सहायक पंजीकार
/ Assistant Registrar,
आयकर अपीलय अ,धकरण, पुणे / ITAT, Pune
