Income Tax Appellate Tribunal - Amritsar
Arjun Singh, Prop. M/S. Sansar Palace, , ... vs Assessee on 26 March, 2015
IN THE INCOME TAX APPELLATE TRIBUNAL
AMRITSAR BENCH; AMRITSAR.
BEFORE SH. A.D.JAIN, JUDICIAL MEMBER
AND SH. B.P.JAIN, ACCOUNTANT MEMBER
I.T.A. No.631(Asr)/2014
Assessment year:2007-08
PAN :AZEPS1753M
Sh. Arjun Singh Prop. Vs. Income Tax Officer,
M/s. Sansar Palace, Udhampur (J&K).
Jakhani, Udhampur.
(Appellant) (Respondent)
S.A.No.72(Asr)/2014
(Arising out of I.T.A. No.631(Asr)/2014)
Assessment year:2007-08
Sh.Arjun Singh, vs. Income Tax Officer
Jakhani, Udhampur. Udhampur.
Appellant by:Sh.P.N.Arora, Advocate
Respondent by:Sh.Tarsem Lal, DR
Date of hearing:25/02/2015
Date of pronouncement:26/02/2015
ORDER
PER A.D.JAIN, JM:
This is assessee's appeal for the assessment year 2007-08 against the order dated 28.08.2014 passed by the ld. CIT(A), Jammu, confirming the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 ( In short, 'the Act'), on the assessee.
2. At the outset, the ld. counsel for the assessee has submitted that post passing of the impugned order, the Tribunal, vide order dated 30.09.2014 (APB 11 to 20) has decided the quantum appeal filed by the Department in 2 ITA No. 631(Asr)/2014 favour of the assessee, upholding the ld. CIT(A)'s action deleting the addition forming the basis of the penalty presently in question; and that thus, when the deletion by the ld. CIT(A) on the very basis of the penalty stands confirmed by the Tribunal, the penalty cannot stand.
3. The Ld. Counsel for the assessee, however, has drawn our attention to the first sentence at page-7 of the impugned order, as per which the deletion of the addition was confirmed by the Tribunal. The ld. CIT(A) in the impugned order, has observed as follows:
"Ground of appeal no. 3 relates to the plea of the appellant that the penalty imposed is not valid as the appellant has filed an appeal against the order of the Appellate Tribunal before the Hon'ble High Court. It is observed that the section 275(1)9a0 provides for levy of penalty within six months from the end of month in which the appellate order of ITAT is received by the Commissioner of Chief Commissioner of Income tax. Further, sub section 1A of section 275 of the Act provides for the revision of penalty order based on the findings of the High Court. It is observed that Misc. Application filed by the appellant was disposed of the Hon'ble ITAT Bench on 20.02.2013 and the appellate order was received in the office of the CIT on 04.03.2013. Therefore, the AO was required to pass the penalty order on or before 30th Sept., 2014. Therefore, the penalty order passed by the AO on 27th Sept., 2014 is a valid order. This ground of appeal of the appellant is dismissed. Ground of appeal No.4 relates to penalty of Rs.14,41,388/- imposed by the AO on addition made u/s 40(a)(ia) of the Act. It is found that an addition of Rs.37,89,327/- on account of difference in cost of construction of banquet Hall on the basis of valuation report of DVO and Rs.5,00,000/- on account of unsecured loans. The addition made by the AO has been confirmed by the Hon'ble ITAT, Amritsar. The appellant has argued that the valuation report of the DVO is very precise and 3 ITA No. 631(Asr)/2014 does not provide details of cost of construction. It is observed that the report of DVO has been accepted by the ITAT Bench and confirmed additions on the basis on said report. Further, the DVO is an expert in valuation and the appellant is not technical person to challenge such report by just making a general statement that the report is very precise. The appellant has not pointed out any specific defect in the valuation report. Further, since the ITAT Bench has already considered the valuation report and accepted the same, it is not within my domain to make any adjudication on the same. The appellant has not given any valid reason as to why the penalty u/s 271(1)(c) of the Act should not be imposed on the additions made by the AO on the basis valuation report. It is also observed from the order of Hon'ble Tribunal that the appellant has not even maintained proper books of account. It is clearly established that the appellant has under stated the cost of construction of banquet Hall and in my opinion, the penalty for concealment of income and furnishing of inaccurate particulars is attracted in this case. Therefore, this plea of the appellant is rejected.
Regarding the addition of Rs.5,00,000/- on account of unexplained creditors, the appellant has provided submission making objection on the additions made by the AO. It is observed that the addition has been confirmed by the Hon'ble ITAT Bench after considering the submission of the appellant. It is not within my domain to adjudicate as to whether the addition confirmed by the ITAT was genuine or not. From the perusal of order of Appellate Tribunal, it is observed that the Hon'ble Tribunal has examined the explanations given by the appellant regarding these unsecured loans which were not accepted by the Hon'ble Tribunal. Regarding the imposition of penalty, the appellant has not provided any valid arguments as to why the penalty u/s 271(1)(c) of the Act should not be imposed on the addition made u/s 68 of the Act. The explanation 1 of the section 271(1)(c) is reproduced hereunder to understand the provision of the Act in this regard-
Explanation 1 - Where in respect of any facts material to the computation of the total income of any person under this Act, -4 ITA No. 631(Asr)/2014
A) such person fails to offer an explanation or offers an explanation which is found by the AO or the CIT(A) or the Commissioner to be false, or B) such person offers an explanation which he is not able to substantiate and fails to prove that such explanation is bona fide and that all the facts relating to the same and material to the computation of his total income have been disclosed by him, then, the amount added or disallowed in computing the total income of such person as a result thereof shall, for the purposes of clause(c) of this sub-
section, be deemed to represent the income in respect of which particulars have been concealed.
This explanation places the onus of proof on the assessee to establish that the income has not been concealed by him as the assessee has to offer an explanation which he has to substantiate and prove that is bona fide and prove that he has disclosed all facts which are material to computation of total income. Thus, it is clear that the addition of Rs.5,00,000/- made by the AO as the appellant fails to provide cogent explanation about the credits in the accounts, is deemed to represent the income in respect of which particulars have been concealed. This ground of appeal is dismissed and penalty is confirmed."
4. A perusal of the Tribunal order dated 30.09.2014 (supra) shows that the addition, which was the very basis on which the penalty was imposed was deleted by the ld. CIT(A) and this action of the ld. CIT(A) has been confirmed by the Tribunal while dismissing the Department's appeal.
The relevant portion of the Tribunal order reads as follows:
8. The department's first objection regarding this being a 'no account case' is not sustainable. The Assessing Officer himself did not treat it as a 'no account case'. In this regard, in para 2 of the assessment order, it has been observed as follows:5 ITA No. 631(Asr)/2014
"The assessee has stated that this is a 'no account case'. The assessee was requested to explain as to how he has prepared the balance-sheet and the profit and loss account in respect of the banquet ball receipts. He stated that these were prepared on the basis of a diary maintained for this purpose. He could not give any satisfactory explanation. The assessee has also furnished a photo copy of the booking register market as annexure "H" in which the entire receipts have been recorded. He has also furnished details of the expenses claimed on account of salary, generator POL, travelling, sanitation and cleaning, generator running and maintenance, tentage and waiter etc. Therefore, it cannot be treated as a 'no account case'."
9. Apropos the department's objection that no books of account were produced before the Assessing Officer, as available from para 2 of the assessment order, reproduced above, the assessee maintained a diary, which was the very basis for preparation of assessee's balance-sheet and profit and loss account in respect of the banquet hall receipts. The assessee filed a copy of the booking register in which the entire receipts stood recorded. The assessee also furnished details of expenses claimed on account of salary, generator POL, traveling, sanitation and cleaning, generator running and maintenance, tentage and waiter, etc. All these documents were duly furnished before the Assessing Officer by the assessee. It was on this basis alone that the Assessing Officer refused to treat the case as a 'no account case', though the assessee had himself requested it to be treated as such. Then, Section 44AA(3) of the Act reads as follows:
"44AA- (3) The Board may, having regard to the nature of the business or profession carried on by any class of person, prescribe, by rules, the books of account and other documents (including inventories, wherever necessary) to be kept and maintained under sub-section (1) or sub-section (2), the particulars to be contained therein and the form and the manner in which and the place at which they shall be kept and maintained.6 ITA No. 631(Asr)/2014
10. Rule 6F of the Income Tax Rules, 1962 provides for books of account and other documents to be kept and maintained under Section 44AA(3) of the Act. The relevant portion of this Rule reads as follows:
"6F (1) Every person carrying on legal, medical, engineering or architectural profession or the profession of accountancy or technical consultancy or interior decoration or authorized representative or film artist shall keep and maintain the books of account and other documents specified in sub-rule (2) (2) The books of account and other documents referred to in sub-rule (1) shall be the following, namely:-
(i) a cash book;
(ii) a journal, if the accounts are maintained according to the
mercantile system of accounting;
(iii) a ledger;
(iv) carbon copies of bills, whether machine numbered or otherwise
serially numbered, wherever such bills are issued by the person, and carbon copies of counterfoils of machine numbered or otherwise serially numbered receipts issued by him:
(v) Original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, whether such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person;"
11. Further, Explanation (b) to Rule 6F (2) of the Income Tax Rules, 1962 states that "cash book' means a record of all cash receipts and payments, kept and maintained from day-to- day and giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a month.
12. It has not been shown before us by the department as to how the record maintained by the assessee, as produced by him before the Assessing Officer and noted by the Assessing Officer himself in the assessment order, does not fall within Rule 6F (2) and Explanation (b) thereof.
7 ITA No. 631(Asr)/201413. These books of account were not rejected by the Assessing Officer, rather he consciously took them as such and subsequently rejected the assessee's contention of it being treated as a 'no account case'.
14. Coming to the applicability of 'M/s Sargam Cinema' (supra) by the learned CIT(A), the department has not been able to come out of the ratio contained therein, i.e., where books of account are not rejected, no reference can be made to the Valuation Cell. The learned CIT(A) has duly considered the position of law by following 'M/s Sargam Cinema' (supra). Accordingly, when no reference could itself have been made to the Valuation Officer, in the absence of rejection of books of account, the addition made by the Assessing Officer was entirely uncalled for and was rightly deleted by the learned CIT(A). Therefore, ground nos. 1 and 2 raised by the department are rejected.
15. Regarding ground nos. 3 and 4, the Assessing Officer made the addition of Rs. 5,00,000/-, observing that the loans were not in cash; that though all the four creditors had given their statements before the Assessing Officer, admitting to have advanced the money to the assessee for construction of a banquet hall, they could not justify the availability of funds with them as they, according to the Assessing Officer, were not men of means. The learned CIT(A) deleted the addition, observing that the identity, source and confirmations in writing and oral depositions of the creditors had not been disputed by the Assessing Officer, and that, therefore, the onus cast on him had not been discharged by the Assessing Officer and that it had not shifted on to the assessee. The learned CIT(A) followed the cases 'M/s Aravali Trading Co.', 220 CTR 622 (Raj.) and 'M/s First Point Finance Ltd.', 286 ITR 477 (Raj.).
16. The learned DR has contended that the learned CIT(A) has not appreciated the fact that the creditworthiness and genuineness of the transactions remained un-established in respect of the unsecured loan of Rs. 5,00,000/- and it is the primary onus of the assessee to establish all the three components in case of loans, i.e., identity, creditworthiness & genuineness. He further contended that if the assessee fails to establish any one of the three components, the cash credit cannot be accepted as explained.
17. The learned counsel for the assessee has placed strong reliance on the impugned order.
8 ITA No. 631(Asr)/201418.It remains undisputed that the Assessing Officer never challenged either the identity, or the source, or the confirmations given in writing, or even the oral statements of the creditors of the assessee. The Assessing Officer made the additions by observing merely that since the creditors could not justify the availability of funds with them, they being men of no means, the addition was called for.
19. In 'M/s Aravali Trading Co.' (supra), it has been observed, inter alia, that merely because the depositors' explanation about the sources of money was not acceptable to the Assessing Officer, it cannot be presumed that the deposit made by the creditors was money belonging to assessee itself; that if the creditors' explanation about the source of deposits is not found to be acceptable, the investment owned by such persons may be subjected to proceedings for inclusion of the amounts as their income from undisclosed sources, or if they are found benami, the real owner can be brought to tax; and that in the absence of anything to establish that the sources of the creditors' deposits flowed from the assessee, the cash credits cannot be treated as unexplained income of the assessee.
20. In 'M/s First Point Finance Ltd.' (supra), the Tribunal's finding that the investors were genuinely existing persons and they had filed confirmations in respect of investments made by them and their statements had also been recorded, was confirmed to hold that the amount deposited could not be treated as unexplained cash credits.
21. Before us, the department has not cited any decision opposed 'M/s Aravali Trading Co.' (supra) and 'M/s First Point Finance Ltd.' (supra). The facts in the present case, as correctly noted by the learned CIT(A), are in pari materia with these cases inasmuch as, it was nowhere established that the flow of the amounts under consideration originated from the assessee. Therefore, the learned CIT(A) correctly held that no addition could have been made in the hands of the assessee.
22. In view of the above discussion, finding no error therein, the order of the learned CIT(A) qua grounds nos. 3 and 4 before us is confirmed and ground nos. 3 and 4 are rejected.
23. In the result, the appeal of the Department is dismissed."
9 ITA No. 631(Asr)/20145. The said Tribunal order has not been shown either set-
aside or even stayed on appeal.
6. Since the Tribunal order was passed post ld. CIT(A)'s order presently under appeal, the ld. CIT(A) obviously did not have the benefit thereof. The CIT(A)'s observation that the Tribunal confirmed the addition is, apparently erroneous.
7. In view of the above, since the Tribunal has dismissed the Department's appeal against ld. CIT(A)'s action of deleting the addition forming the very basis of the penalty, obviously the penalty cannot stand and it is hereby cancelled.
8. Since we have allowed the appeal, the stay application has become infructuous and the same is dismissed as infructuous.
9. In the result, the appeal is allowed and stay application is dismissed as infructuous.
Order pronounced in the open court on 26th February, 2015.
Sd/- Sd/-
(B.P. JAIN) (A.D.JAIN)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 26th February, 2015
/SKR/
Copy of the order forwarded to:
1. The Assessee:Sh.Arjun Singh Prop. Sansar Palace, Jakhani, Udhampur.
2. The ITO, Udhampur.
3. The CIT(A), Jammu
4. The CIT, Jammu. 5)The SR DR, ITAT, Amritsar.