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M/S. O.N.G.C. Ltd vs Commnr. Of Customs, Mumbai on 24 August, 2006
The Assistant Cit vs Rang International on 29 July, 2004
R. Vinit & Co. vs Ito on 11 July, 2002
Ajay Kumar Shah Jagati vs Cit on 24 January, 2008

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Income Tax Appellate Tribunal - Ahmedabad
Krunal Jayvadan Rotiwala, Surat vs Assessee on 27 November, 2012

IN THE INCOME TAX APPELLATE TRIBUNAL

AHMEDABAD "D" BENCH AHMADABAD

Before Shri D.K.Tyagi, Judicial Member and

Shri T.R. Meena, Accountant Member

ITA No. 295/Ahd/2013

Assessm ent Year :2008-09

Krunal Jayvadan Rotliwala V/s. Income Tax Officer S.No.59, Udhna Magdalla W ard 2(2), Surat Road, Opp. Govalak

Jakatnaka, Bamroli Road,

Surat.

PAN No. AATPR2766D

(Appellant) .. (Respondent)

अपीलाथȸ कȧ ओर से Shri Rasesh Shah, A.R. By Appellant

ू×यथȸ कȧ ओर से/By Respondent Shri T. Sankar, Sr. D.R. सुनवाई कȧ तारȣख/Date of Hearing

28.05.2013

घोषणा कȧ तारȣख/Date of Pronouncement 05.07.2013 ORDER

PER : T.R.Meena, Accountant Member

This is an appeal at the behest of the assessee which has emanated from the order of CIT(A)-II, Surat, dated 27.11.2012 for assessment year 2008-09. The sole ground of appeal is against confirming the penalty u/s.271(1)(c) of Rs.58,092/- by the CIT(A).

2. The assessment for the A.Y. 08-09 was completed by the A.O. u/s. 143(3) of the IT Act on 30.12.2010. The assessee is engaged in the business of manufacturing of art silk cloth. There was an AIR information in this case pertained to the cash deposit of Rs.14,82,990/- in City Bank, 2 Club House Road, Anna Salai, Chennai. In view of the above, the ld. A.O. vide order I T A No . 2 95 / Ah d /1 3 A . Y . 08- 0 9 Page 2 sheet entry dtd. 29.12.2010, asked to explain the details and source of cash deposited in the said saving bank account. The appellant submitted the reply before the A.O. and submitted that it was a personal business of trading of trading of cut pieces and grey cloth of second quality. This type of business is not his regular business and therefore, the same was not shown in regular books of account. The transactions of sales and purchases were carried out through his saving account no. 5 - 530383 - 389 with City Bank, N.A. The statements of account for the said bank account were prepared and were given to the A.O. by the appellant. The total transaction in this account was Rs. 14,82,990/- which were not continuous deposits but the appellant had deposited and withdrawals were also made frequently from this account. The closing balance was Rs.1,41,226/-. The withdrawals were made for purchases and the deposits were made out of sales of this business. The appellant derived total profit from this business at Rs.2,24,666/-. The appellant claimed before the A.O. that he has offered the said income for taxation but assessee's contentions were not found satisfactory to the A.O. and personal business of trading of cut pieces and grey cloth of second quality which is not his regular business and therefore, the same was not shown in his regular books of account. The assessee had produced p&l account and other connected details showing the cash sales of Rs.13,92,205/-. From the cash sales of Rs.13,92,205/-, the assessee has offered net profit of Rs.2,24,666/- @ 16.13% for taxation. Since the assessee himself has offered net profit of Rs.2,24,666/- @ 16.13% for taxation from his personal business, the same was accepted by the A.O. However, he initiated penalty proceeding I T A No . 2 95 / Ah d /1 3 A . Y . 08- 0 9 Page 3 u/s. 271(1)(c) for concealment of income and thereby furnishing inaccurate particulars. The A.O. made addition of Rs.2,24,666/- in the income of the assessee.

2(i). Before imposing penalty u/s. 271(1)(c), the ld. A.O. gave reasonable opportunity of being heard. The assessee also replied in response to his show cause notice. The reply of the assessee was not found convincing to him and held that the appellant himself had admitted that income from personal business was not shown in the return of income/books of account. He had mainly submitted very general reply. The assessee's case is auditable and appellant was taking the service of the tax expert. It is not possible that turn over more than Rs.14 lacs was not in the knowledge of the appellant. Otherwise the assessee was systematically carrying out the business and knew about the profit being earned from it. The assessee's case had not been selected for scrutiny, the assessee would have succeeded in concealing the said income and saved the tax. The Revenue had collected the complete information having said bank account by the assessee. The same was admitted by the assessee only after being pointed out by the department. This leads to the only conclusion that the assessee intentionally concealed such income to avoid payment of tax. The assessee did not file any appeal against the quantum addition. The object of Section 271(1)(c) read with Explanation is to provide for remedy for loss of revenue and the provisions of creates strict liability. The A.O. satisfied himself and imposed 100% penalty of tax sought to be evaded at Rs. 58,092/-. I T A No . 2 95 / Ah d /1 3 A . Y . 08- 0 9 Page 4

3. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A) who has also confirmed the penalty by observing as under:

"I have considered the facts of the case and decisions as quoted by appellant in his submissions. The perusal of facts clearly reveals that the income was not admitted by appellant voluntarily. Once the AO detected the unexplained bank account of appellant and issued show cause notice to explain the source of cash deposits, not able to explain the same, appellant offered net profit for taxation. The offer of appellant was not bonafide or on his own rather it was made when he was caught having no option other than to disclose the income and pay the taxes. Had this offer been made before the show cause letter issued by AO, it would have been considered voluntarily and bonafide. As it is held in the case of jurisdictional ITAT, as mentioned by appellant himself in his submissions, in the case of R. Vinit and Co. vs. ITO reported in 76 TTJ 673, that imposition of penalty u/s.271(1)(C) was not justified when the additional income was voluntarily offered by assessee on this first effective hearing and such additional income was disclosed prior to any detection by department. In the case of appellant, income was offered after detection and issuance of show cause noticed by A.O. Therefore it cannot be treated voluntarily. From the facts of the case, it is clear that the details of transactions of cash deposits were concealed by appellant and deliberately not disclosed in the return of income. The offer of profit of Rs.2,24,666/- was not bonafide rather he was having no option other than to disclose it. This view is supported by Hon'ble High Court of Delhi in a recent judgment vide order dated 5.11.2011 in the case of CIT vs Usha International Ltd. (ITA 1696/2006) wherein it was held that 'the question whether additional income offered is "voluntary" or not has I T A No . 2 95 / Ah d /1 3 A . Y . 08- 0 9 Page 5 to be decided in the light of the entire material brought on record and whether the additional income was offered when the assessee was cornered by the evidence or material collected by AO before that stage.' In the case of appellant also, when he was cornered by AO with the facts related to cash deposits and he had no option other than to surrender them, additional income was offered for taxation. In such situation, the only conclusion which can be drawn is that the appellant has intentionally and deliberately concealed the particulars of income, as held by AO. In view of this, I hold that the penalty of Rs.58,092/- levied by AO is justifiable which deserves to be confirmed. The ground of appeal taken by appellant is dismissed."

4. Now, the assessee is before us. Ld. Counsel for the appellant contended that additional income disclosed before the A.O. voluntary before completing the assessment. Therefore, no penalty can be imposed on additional income disclosed. He further relied in case of Shri Rajesh C. Gandhi vs. ITO, Mumbai ITAT 'D' Bench, in ITA No. 3158/M/2009 for A.Y. 2005-06, wherein the appellant had revised the return before the A.O. due to investment in mutual fund were not disclosed in the return of income, but admitted additional income when department have information of this investment in mutual fund in AIR. The Co-ordinate Bench had decided that after considering the totality of the facts of the case, they found that the assessee had surrendered the income during the assessment proceeding before any satisfaction recorded by the A.O. that the assessee has concealed particulars of income or furnished inaccurate particulars of income. They also noticed that the explanation furnished by the assessee also bonafide explanation. Accordingly, the Co-ordinate Bench deleted the penalty. The ld. I T A No . 2 95 / Ah d /1 3 A . Y . 08- 0 9 Page 6 Counsel further relied in case of Hon'ble Gujarat High Court decision in case of CIT Vs. Shankerlal Nebhumal Uttamchandani, 311 ITR 327 (Guj.), wherein the A.O. raised the query but no detection of undisclosed income was made and the appellant filed revised return surrendering amount standing in the name of family members and the family members assessed such income but held no concealment of income and penalty cannot be imposed u/s.271(1)(C) of the IT Act.

5. At the outset, ld. Sr. D.R. relied upon the orders of A.O. and CIT(A) and further relied in case of A M Shah & Co. vs. CIT [1999] 238 ITR 415 (Guj) and argued that even penalty can be imposed on estimated addition. He further relied in case of CIT vs. Sangmeshwara Associates [2012] 345 ITR 396 (Karnataka High Court), wherein penalty u/s.271(1)(C) held valid on the ground that credit in accounts discovered to be untrue. There was re- assessment proceeding and revised return was filed by the appellant by including the cash credit of Rs.4,85,000/-. The appellant admitted the concealment of income and there is no burden of Revenue to prove the concealment and penalty imposed u/s.271(1)(C) held justifiable and prayed to confirm the penalty imposed by the A.O.

6. We have heard the rival contentions and perused the material on record. In this case, assessee gave the first notice u/s. 143(2) of 26.08.2009 and notice u/s. 142(1) on 04.02.2010 and which were replied by the assessee from time-to-time. The ld. A.O. first made query on this issue vide order sheet entry dated 29.12.2010 and assessment was completed on 30.12.2010. Before that, on this issue, there was no inquiry by the A.O. The copy of bank I T A No . 2 95 / Ah d /1 3 A . Y . 08- 0 9 Page 7 account also submitted by the appellant before the A.O. He had not inquired from the Bank about he nature and magnitude of the transaction. The ld. A.O. himself admitted that the assessee had offered the said income for taxation in assessment order. The satisfaction recorded by the ld. A.O. for initiation of penalty u/s. u/s.271(1)(C) was after that, this offer made by the appellant. Respectfully, following the decision of 'D' Bench Mumbai in case of Shri Rajesh C. Gandhi vs. ITO (supra), wherein on identical issue, the penalty imposed by the A.O. held unjustified. Therefore, we reverse the order of the CIT(A) and allow the appeal of the assessee in his favour. Accordingly, assessee's appeal is allowed.

7. In the result, the assessee's appeal is allowed. This Order pronounced in open Court on O5.07.2013

Sd/- Sd/- (D.K.Tyagi) (T.R. Meena) Judicial Member Accountant Member True Copy

S.K.Sinha

आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-

1. अपीलाथȸ / Appellant

2. ू×यथȸ / Respondent

3. संबंिधत आयकर आयुƠ / Concerned CIT

4. आयकर आयुƠ- अपील / CIT (A)

5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड[ फाइल / Guard file.

By order/आदे श से,

उप/सहायक पंजीकार

आयकर अपीलीय अिधकरण,

अहमदाबाद ।