INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘E’ NEW DELHI

I.T.A. No. 3075/Del/2013 Assessment Year: 2009-10
Nikunj Jain (Appellant) vs Commissioner of Income Tax (Respondent)
Date of Order: 09-12-2015

ORDER

PER H.S. SIDHU, JM
This appeal is filed by Assessee against the order dated 20.3.2010 passed by the Ld. CIT(A), Muzaffarnagar relating to Assessment Year 2009-10 on the following grounds:-

“1. That the appellant neither concealed any income nor furnished inaccurate particulars of income. On facts and in the circumstances of the case, there was no legal warrant to invoke the provisions of section 271(1)(c) of the Income Tax Act.

2. That the initiation of proceedings u/s. 271(1)(c) and consequent levy of penalty of Rs. 1,59,500/- vide order dated 20.3.2013 u/s. 271(1)(c) of the Act and subsequently reduced to Rs. 16,090/- vide Notice of demand dated 9.5.2013 deserves to be quashed and cancelled being void, illegal and without jurisdiction.”

2. The brief facts of the case are that an AIR information was received by the AO wherein it was mentioned that the Assessee had deposited Rs. 10,17,500/- in his savings bank account with Oriental Bank of Commerce, Khatauli during FY 2008-09. On such basis, the AO requisitioned copy of bank statement and AO found that the Assessee had deposited Rs. 5,00,000/- each on 17.2.2007 and 24.2.2009 respectively totalling to Rs. 10,00,000/-. The AO asked the Assessee to furnish source of cash deposits in the aforesaid bank account totalling to Rs. 10,00,000/-. However, the Assessee failed to furnish evidence regarding source of deposits. The AO also found that on the same the entire amount was transferred to one Smt. Santosh Jain. The AO initiated action u/s. 147 of the Act on 23.3.2011 by way of issue of notice u/s. 148 of the Act. In response to the same the Assessee submitted that the original return filed be treated as return filed in compliance to notice u/s. 148 of the Act. The AO finally issued notice u/s. 144 of the Act dated 1.12.2010 requiring the Assessee to show cause regarding proposed addition of Rs. 10 lacs. However assessed did not comply with the notice. In the absence, AO held that the Assessee had nothing to offer/ reply regarding the cash deposited at Rs. 10,00,000/- and the cash deposit was made out of unexplained source of income. Thus the AO proceeded to add the amount of Rs. 10, 00,000/- as unexplained credit u/s. 68 of the Act to the income of the assessed vide his order dated 8.12.2011 passed u/s. 143(3) of the I.T. Act, 1961.

3. Aggrieved by the assessment order dated 8.12.2011, the Assessee filed an Appeal before the Ld. CIT(A) who vide the order dated 31.8.2012 deleted the addition of Rs. 10 laces made u/s. 68 of the I.T. Act. But during the course of appellate proceedings, the Ld. CIT(A) thoroughly examined the ledger, cash book and found that peculiar feature of the cash book and find that it contain 9 Ledger Accounts of such persons from whom cash was received from May, 2008 to January, 2009. Assessee was asked to produce 9 persons whose accounts got squared up In March, 2009, but amounts from them were received from May, 2008 to January, 2009. In case of nonproduction of the said persons the Assessee was required to show cause as to why the total amount of Rs. 1, 59,500/- so introduced in cash book could not be treated as assessor’s income and added as undisclosed income which tantamount enhancement of income. In response to the same Assessee filed reply which the Ld. CIT(A) has reproduced at Page 2 of the impugned order. The Assessee pleaded that all these 9 persons are small shop keepers and they deposited the money for purchase of different items. The Assessee is maintaining proper books of accounts i.e. cash book, ledger etc. All amounts in dispute are duly reflected in the cash book and verifiable. Assessee also requested that if the Ld. CIT(A) is not satisfied with the reply of the assessee, then for peace of mind and to avoid further litigation assessee is ready to surrender part of the above amount and in toto subject to no penal action. After considering the reply filed by the Assessee, the Ld. CIT(A) has held that Assessee has not produced 9 persons but in  his submissions has pleaded to surrender the amount of Rs. 1,59,500/-, hence, he added Rs. 1,59,500/- to the income of the Assessee as income from undisclosed sources which resulted in enhancement of income and simultaneously initiated the penalty proceedings u/s. 271(1)(c) of the I.T. Act by issuing the cause notice to the Assessee. In response to the same, show cause notice to the penalty proceedings Assessee filed the reply which the Ld. CIT(A) has reproduced at page 32 of the impugned order. Assessee stated that he has surrendered the amount in dispute for his mental peace and to avoid further litigation subject to no penal action. After considering the reply of the Assessee, the ld. CIT(A) has held that the assessee instead of establishing the genuineness of cash deposits aggregating to Rs.1,59,500/- by such persons has surrendered the impugned sum subject to no penal action. He also held that once the cash introduced in the cash book at Rs. 1,59,500/- the onus was squared up upon the Assessee to establish the genuineness by producing the aforesaid 9 persons for examination, but the Assessee failed to do so and he made the addition of Rs. 1,59,500/- u/s. 68 of the I.T. Act and also held that the Assessee has concealed particulars of his income or furnishing of inaccurate particulars of his income and therefore, the onus is on the Assessee to establish his to establish that his failure to return correct income did not arise from any fraud or any gross or wilful neglect on his part. He concluded that the cash deposits created as income from undisclosed sources, burden is on the assessee to prove that there was no concealment of income of true particulars. But the Assessee has failed to produce any satisfactory explanation, therefore, he levied the penalty of Rs. 1,59,500/- and directed the AO to compute the penalty on the amount of Rs. 1,59,500/- @100% and completed the assessment and accordingly, levied the penalty of Rs. 1,59,500/- and directed the AO to compute the penalty on the amount of Rs. 1,59,500/- @100% u/s. 271(1)(c) of the I.T. Act, 1961.

4. Now the Assessee is in appeal before us against the aforesaid Penalty order dated 20.3.2013 passed by the Ld. CIT(A) and pleaded that there was change of opinion and thus penalty on Rs. 1,59,500/- may please be deleted. In support of his contention, Ld. Counsel for the Assessee has filed a Paper Book containing pages 1 to 24 consisting of copy of notice u/s. 271(1)(c) dated 31.8.2012; Copy of written submission filed before the Ld. CIT(A) in response to Notice u/s. 271(1)(c); copy of assessment order dated 8.12.2011; copy of CIT(A) order dated 31.8.2012; copy of Case Law in the case of CIT vs. Aggarwal Pipe Co. 240 ITR 880 (Del.).

5. On the contrary, Ld. DR relied upon the order of the authorities below.

6. We have heard both the parties and perused the records available with us, especially the penalty order passed by the Ld. CIT(A) and the Paper Book including the Case Law in the case law cited by the Ld. Counsel for the assessee. We find that addition of Rs. 10 lacs has been deleted by the Ld. CIT(A) during the appellate proceedings vide order dated 31.8.2012 and he was agreed to make the addition of Rs. 1,59,500/-. Accordingly, the Ld. CIT(A) in penalty proceedings u/s. 271(1)(c) vide order dated 20.3.2013 has imposed the penalty of Rs. 1,59,500/- which was reduced to Rs. 16,090/- by the AO on the application of the Assessee, as there was total addition of Rs. 1,59,500/- to the return income of Rs. 1,43,610/-. This penalty of Rs. 1,59,500/- was further reduced to Rs. 16,090/- vide Notice of Demand dated 9.5.2013, as stated by the Assessee in the grounds of appeal before the Tribunal. We are in agreement with the contention of the Ld. Counsel of the assessee that in the present case there was a change of opinion and no concealment of income or furnishing of inaccurate particulars on the part of the Assessee. Therefore, we find force in the contention of the assessor’s counsel that the issue involved in the present case is squarely covered by the decision of the Hon’ble High Court of Delhi in the case of CIT vs. Aggarwal Pipe Co. (240 ITR 880) [Del.] wherein the Hon’ble Court has held as under:-

“Held, dismissing the application for reference, that the Tribunal had found that the assessee had furnished confirmations from the cash creditors and it was only when the Assessing Officer wanted him to produce these creditors, including Y in whose case summons sent under section 131 of the Income Tax Act, 1961, were received back unserved, that the assessee found it expedient to surrender the amounts, but merely because the assessee had surrendered the amounts it did not follow that the amount agreed to the added represented its concealed income. The surrender so made also stood accepted and the Revenue had brought no material on record, besides the factum of the assessee. The Tribunal was justified in cancelling the penalty. No question of law arose from the order.”

7. We further find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. In this regard, we draw our support from the decision of the CIT vs. Reliance Petroproducts Pvt. Ltd. (2010) 322 ITR-158 (SC) wherein the Hon'ble Supreme Court has held that 'where there is no findings that any details supplied by the Assessee in its return are found to be incorrect or erroneous or false, there is no question of inviting the penalty u/sec. 271(1)(c) of the Act. A mere making a claim, which is not sustainable in law, by itself, will not amount of furnishing inaccurate particulars regarding the income of the Assessee. Such claim made in the return cannot amount to furnishing a inaccurate particulars of income. As the Assessee has furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely, because the Assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty u/sec. 271(1)(c). If we accept the contention of the Revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the Assessee will invite penalty u/sec. 271(1)(c). That is clearly not the intendment of the Legislature".

8. In the background of the aforesaid discussions and precedents, we are of the considered view that the Assessee has not furnished inaccurate particulars of income, however, it is a case of change of opinion. Under these circumstances, in our view the penalty in dispute is totally unwarranted and deserve to be deleted. Accordingly, we delete the penalty in dispute made u/s. 271(1)(c) of the I.T. Act and cancel the orders of the authorities below on the issue in dispute.

9. In the result, the appeal filed by the Assessee stands allowed.

Order pronounced in the open court on 09/12/2015.

[PRASHANT MAHARISHI]       [H.S. SIDHU]
ACCOUNTANT MEMBER       JUDICIAL MEMBER