Income Tax Appellate Tribunal - Lucknow
Income Tax Officer vs Dr. Sameer Kant Agarwal on 11 May, 2007
Equivalent citations: (2008)113TTJ(LUCK)252
ORDER
H.L. Karwa, J.M.
1. This appeal filed by the Revenue is directed against order of CIT(A), Bareilly in cancelling penalty of Rs. 2,20,000 imposed under Section 271(1)(c) of the Act relating to asst. yr. 2002-03.
2. Briefly stated, the facts of the case are that assessee is a doctor and is deriving income from profession. In this case, assessment was completed under Section 143(3) of the Act on a total income of Rs. 8,80,280 as against returned income of Rs. 1,95,010. Aggrieved by the order of the AO, assessee carried the matter in appeal before the learned CIT(A), Bareilly who reduced assessee's income to Rs. 8,39,955 which included the amount of Rs. 6.50 lakhs added by the AO being gifts surrendered by the assessee during the course of assessment proceedings. The assessee failed to produce donors to prove identity and creditworthiness of the donors before the AO, but the assessee surrendered the amount of Rs. 6.50 lakhs as additional income to be added to his total income for income-tax purposes. The assessee could neither produce donors nor furnish any explanation about nature and source of alleged gifts. Hence, assessment was completed treating the amount to the tune of Rs. 6.50 lakhs as unexplained cash credit under Section 68 of the Act. The AO also initiated proceedings under Section 271(1)(c) of the Act in this case. In response to show-cause notice, assessee vide his reply dt. 10th Aug., 2005 requested that penalty proceedings initiated under Section 271(1)(c) of the Act may be dropped in view of the following facts:
A sum of Rs. 6.50 lakhs was voluntarily surrendered during assessment proceedings just to purchase peace with a condition that no penalty proceedings will be initiated because the humble practitioner had all documentary evidences of gifts but was unable to produce the donor and as such this harsh step was taken. Interest and tax on this surrendered amount itself is so heavy that it is like penalty and further imposition of penalty will ruin the humble petitioner because practically there was no concealment except a compromise to avoid litigation.
3. The AO observed that during the course of assessment proceedings, the scrutiny of assessee's saving bank account No. 13568 with Bhagirath Gramin Bank, Sitapur, revealed that assessee deposited alleged gift of Rs. 6.50 lakhs in the said bank account during the period under consideration. The AO has also observed that in this case, assessee had not shown income of Rs. 6.50 lakhs in the return filed on 9th Oct., 2003 though he readily agreed its inclusion in his income. According to the AO, this is a case where device was created by the assessee by crediting his savings bank account with Rs. 6.50 lakhs on account of bogus gifts for the purposes of concealing his income. The AO further observed that during penalty proceedings, assessee had submitted that gifts of Rs. 6.50 lakhs were voluntarily surrendered to purchase peace with the Department and it was a compromise to avoid litigation. The AO did not agree with the explanation of the assessee, as it was open for the assessee during the course of assessment proceedings as well as in the course of penalty proceedings to adduce evidence to establish that gifts of Rs. 6.50 lakhs were received from genuine donors. According to the AO, assessee failed to do so. The AO also stated that assessee has not submitted in his explanation that concealment or furnishing of inaccurate particulars was not deliberate on his part, but the mistake was bona fide. He, therefore, took the view that assessee has concealed income and also furnished inaccurate particulars in respect of his income to the extent of Rs. 6.50 lakhs. Consequently, the AO levied a penalty of Rs. 2.20 lakhs under Section 271(1)(c) of the Act.
4. Aggrieved by the order of the AO, assessee carried the matter in appeal before the learned CIT(A). Before the learned CIT(A), it was submitted by the assessee that gifts were duly supported by documents. It was also stated that the AO has not doubted genuineness of bank accounts of donors, their identity and capability to make gifts. It was also submitted by the assessee that surrender was made due to the fact that at that point of time, it was not possible to produce donors, therefore, to purchase peace of mind, amounts of gifts were surrendered. The voluntary surrender of gifts cannot be termed as concealment as also held by various Courts. The assessee also relied on the decision of Tribunal, Lucknow Bench, in the case of Smt. Brij Bala Chaudhary v. ITO (2004) 82 TTJ (Lucknow) 355. Further, assessee also cited decision of the I Hon'ble Supreme Court of India in the case of CIT v. Suresh Chandra Mittal .
5. The learned CIT(A) cancelled the penalty, observing as under:
I have carefully considered the submission of Authorised Representative, perused the assessment order and penalty order. It is a fact that the amount of gifts was duly shown in the return of income. Details of gifts were also produced during the course of assessment proceedings as has been mentioned in the assessment order by the AO himself. The word 'conceal' is derived from the Latin word 'concolare' that implies to hide'. Webster's New International Dictionary equates its meaning to 'hide or withdraw from observation; to cover or keep from sight; to prevent the discovery of; to withhold knowledge of. The offence of concealment is thus a direct attempt to hide an item of income or a portion thereof from the knowledge of IT authorities. In the present appeal it is not the case of the AO that the appellant has concealed the amounts of gifts. The case is that the appellant in his return of income had shown amounts of gifts and details of these were also filed during the course of assessment proceedings but that the gift was not proved and only surrendered after the assessee had been asked to substantiate it. Regarding the levy of a penalty for concealment the Hon'ble Gujarat High Court in their decision reported in National Textiles v. CIT (2000) 164 CTR (Guj) 209: (2001) 249JTR 125 (Guj) has observed:
In order to justify the levy of penalty, two factors must co-exist, (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee's income. It is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee.
When the above case is viewed in the context of the above tests, it is clear that this is not a fit case for levy of penalty under Section 271(1)(c) of the Act. Therefore, the penalty levied by the AO is cancelled.
6. Before us, Sri. A.K. Singh, learned Departmental Representative, vehemently argued that the learned CIT(A) was not justified in cancelling penalty. According to him, assessee has introduced undisclosed income and once assessee surrendered income, the onus of the Department stood discharged. He further submitted that it was open for the assessee during the course of assessment proceedings as well as in the course of penalty proceedings to adduce evidence to establish that gifts of Rs. 6.50 lakhs were received from genuine donors. The assessee has also not submitted in his explanation that concealment of income or furnishing of inaccurate particulars was deliberate on his part, but the mistake was bonajide. He, therefore, submitted that in the facts and circumstances of the present case, the AO was fully justified in imposing penalty of Rs. 2.20 lakhs under Section 271(1)(c) of the Act. The learned Departmental Representative submitted that the order of the learned CIT(A) may be set aside and restored that of the AO.
7. On the other hand, Sri. K.R. Rastogi, learned Authorized Representative, of the assessee strongly supported the order of the learned CIT(A). He further submitted that during the course of assessment proceedings a sum of Rs. 6.50 lakhs was surrendered by the assessee being gifts and loan received from parties by bank drafts which were duly credited in his savings bank account No. 13568 with Bhagirath Gramin Bank, Sitapur. In support of this claim, assessee submitted gift deed, income-tax assessment records, PAN and other relevant records of the concerned donors and creditors. All these details are available at pp. 8 to 13 of assessee's paper book. The learned Authorized Representative of the assessee submitted that donors refused to co-operate in assessment proceedings at later stage. Inspite of the fact that all the evidences were filed, assessee submitted an application and requested that he is surrendering Rs. 6.50 lakhs voluntarily just to buy peace with a condition that no penalty proceedings will be initiated. The assessee had already submitted all evidences with regard to gifts but unable to produce donors. The learned Authorized Representative of the assessee submitted that the AO imposed impugned penalty without bringing out any contrary material or evidence. According to the learned Authorized Representative of the assessee, the AO simply relied on the submissions and surrender application of the assessee and made addition. Thus, the AO failed to prove that assessee had concealed his income or had furnished inaccurate particulars of income, as the evidences submitted by the assessee were not found to be false.
8. The assessee also relied on the following decisions:
1. Lucknow Bench of Tribunal in the case of Smt. Sunita Tuli v. ITO ITA No. 112/Luck/2006 relating to asst. yr. 2000-01, order dt. 9th June, 2006.
2. Lucknow 'B' Bench of Tribunal in the case of Hari Kishan v. Dy. CIT 2006 (7) MTC 890.
3. Lucknow Bench of Tribunal in the case of Smt. Brij Bala Choudhary v. ITO (supra).
4. Mumbai Bench of Tribunal in the case of Kumar Agencies (India) v. Asstt CIT (2003) 80 TTJ (Mumbai)(TM) 868 : (2003) 87 ITD 69 (Mumbai) (TM).
5. Hon'ble Madras High Court in the case of CIT v. M.P. Narayanan .
9. We have carefully considered the submissions of the learned Representatives of both the parties and have also perused the orders of the authorities below. The decisions cited by the parties were also considered. On perusal of the assessment order, it is apparent that assessee filed an affidavit that actual gift received was of Rs. 6.50 lakhs. The amount so received was credited in savings bank account No. 13568 in Bhagirath Gramin Bank, Sitapur. It is stated that credit in the bank account on 21st Aug., 2001 of Rs. 1.50 lakhs represented Rs. 1 lakh as a gift and balance amount of Rs. 50,000 represented loan received from Sri. Irfanur Rehman Kidwai r/o G. 8, Sarita Vihar, New Delhi, received through bank draft of OBC, Faridabad. This bank draft was purchased after making withdrawal from S.B. account No. P-282 OBC (NIT Chowk), Faridabad. Further, assessee also obtained a loan of Rs. 1.30 lakhs from his father-in-law, Dr. S.S. Agarwal r/o 4/41, Meerpur Cantt. Kanpur through two bank drafts. It is apparent from the record that details of these drafts have also been furnished during the course of assessment proceedings. The assessee had furnished copy of confirmation of loan, copy of IT return, letter of Dr. S.S. Agarwal, copy of gift deed, affidavit, income-tax details of Sri Amit Agarwal during the course of assessment proceedings. Copies of these documents are available in assessce's paper book at pp. 8 to 13. It is seen that Sri Irfanur Rehman Kidwai confirmed having given a loan of Rs. 50,000 to the assessee. Sri Irfanur Rehman Kidwai has also given his PAN. A photocopy of return of Sri Irfanur Rehman Kidwai relating to asst. yr. 2002-03 is available at p. 9 of assessee's paper book. Further, a copy of confirmation letter of Dr. S.S. Agarwal is available at p. 11 of assessee's paper book. Dr. Agarwal confirmed having given a loan of Rs. 1.30 lakhs to the assessee. It is seen that Sri Amit Agarwal s/o Sri Madan Murari Agarwal has gifted a sum of Rs. 2.50 lakhs to the assessee vide D.D. No. 021819 dt. 4th Oct., 2001 drawn on SBI, Delhi. A copy of gift deed is available at p. 12 of assessee's paper book. Sri Amit Agarwal is assessed to income-tax and copy of return filed for asst. yr. 2001-02 is available at p. 14 of assessee's paper book. A copy of wealth-tax assessment order dt. 27th March, 2001 of Sri Amit Agarwal relating to asst. yr. 1999-2000 is available at p. 15 of assessee's paper book. The assessee vide his application dt. 9th March, 2005 during the course of assessment proceedings surrendered amount of Rs. 6.50 lakhs on the plea that details of gift could not be supported by documentary evidences. It is an admitted fact that the amount of gifts was duly shown in return of income. The details of gifts were also produced during the course of assessment proceedings as has been mentioned in the assessment order by the AO himself. In the case of Suit Brij Bala Choudhary v. ITO (supra), this Bench of the Tribunal has in similar circumstances observed that "if the assessee had given explanation and on non-acceptance of such explanation, the assessee had agreed for addition just to satisfy the IT authorities or agreed for addition under compelling circumstances, merely to buy peace, then only on the basis of such agreed addition or surrender of income, it cannot be held that the assessee had concealed income. Under such circumstances, it is further obligatory on the part of the Department to show by some other material that the assessee had concealed particulars of his/her income". In the instant case, assessee had made surrender only to buy peace with the Department. It is pertinent to state that the AO has failed to prove by independent material that assessee has concealed his income or has furnished inaccurate particulars of income.
10. This Bench of Tribunal in the case of Smt. Brij Bala Chaudhary v. ITO (supra) made following important observations:
The assessee surrendered the income during assessment proceedings only when she could not adduce documentary evidence to explain the source on account of sale of assets and realization of debts. Thus, the assessee had explained the source, but since the Department was not satisfied and, further, since it was not possible for the assessee to adduce documentary evidence, she surrendered the amount of Rs. 35,000 only to purchase peace with the Department. If the assessee had given explanation and on non-acceptance of such explanation, the assessee had agreed for addition just to satisfy the IT authorities or agreed for addition under compelling circumstances, merely to buy peace, then only on the basis of such agreed addition or surrender of income, it cannot be held that the assessee had concealed income. Under such circumstances, it is further obligatory on the part of the Department to show by some other material that the assessee had concealed particulars of his/her income. The assessee had made surrender only to purchase peace with the Department and after being compelled by the ITO as appears from the circumstances of this. Hence, it is not a fit case for imposition of penalty, because the concealment of income or particulars of income, is not found to be established from the material on record and the Department has also failed to prove by independent material that the assessee had concealed her income or particulars thereof. So far as the addition of Rs. 5,000 is concerned, although about this addition, no explanation was submitted by the assessee during the proceedings of penalty, but from the assessment order, it is found that this addition has also been made just on estimate basis and it cannot be said that it represents or discloses concealed income; hence, penalty is not leviable on the basis of this agreed addition of Rs. 5,000. In view of the above, the view taken by the CIT(A) cannot be upheld. Thus, the penalty is cancelled.
11. In view of the above decision, it can be safely held that assessee could not be said to have concealed his income merely because he surrendered certain amount to buy peace with the Department, as he could not prove genuineness of the gifts.
12. In the case of Kumar Agencies (India) v. Asstt. CIT (supra), the Tribunal following the decision of Hon'ble Supreme Court of India in the ease of CIT v. Suresh Chandra Mittal (supra) held as under:
In the instant ease, the addition was made purely on the basis of declaration made by the assessee. There was no clinching evidence as regards the concealment. Principles of natural justice require that confessional statement should be made available to the assessee and it should be provided with an opportunity to cross-examine the witness. The loan transactions were made through brokers. After lapse of period of over a decade, the assessee expressed its inability to produce the parties for cross-examination and that the parties were not directly known to the assessee. In the context of the Section 68, one has to keep in mind the legal maxim Lex non cogit ad impossibilia (which means that the law does not compel a man to do which he cannot possibly perform). Experiencing those difficulties, the assessee surrendered the amount for taxation. As said in the petition, the purpose was to buy peace and avoid litigation. Indisputably, the loans were deposited and repaid by account payee cheques. Confirmations were filed and these confirmations bore the PANs of the creditors. The AO did not record any finding that the explanation offered by the assessee was false and the bona fide was not proved. As such, the conditions precedent for invoking Expln. 1 to Section 271(1)(c) did not exist in the facts and circumstances of the instance case. Once it is held that the case of the assessee falls beyond the ken of Expln. 1 to Section 271(1)(c), the conclusion is irresistible that the case does not come within the sweep of the ratio laid down by the apex Court in the case of K.P. Madhusudhanan v. CIT . It comes within the ambit of the decision laid down in the case of CIT v. Suresh Chandra Mittal .
13. In the above case, the addition was made merely on the basis of declaration made by the assessee. There was no clinching evidence as regards to the concealment. In the instant case, the AO has not recorded any finding that explanation offered by the assessee was false and bona fide was not proved.
14. In view of the above decision also no penalty can be levied in this case.
15. In the case of CIT v. M.K. Narayanan (supra), the Hon'ble Madras High Court held that in the penalty proceedings under Section 271(1)(c) of the Act, it is the duty of the ITO to establish by evidence that there was concealment of income and the amount added represented assessee's income. The Ilon'ble High Court further held that it is well-settled that a mere fact that assessee agreed to inclusion of cash credits and other amounts in the total income on account of inability to prove source or to avoid protracted litigation, would not justify Department in levying penalty. The Ilon'ble Madras High Court categorically held that it is for the Department to prove that there was conscious and deliberate concealment on the part of the assessee and the amount added represented assessee's income. It was also held by the Ilon'ble High Court that proceedings for waiver of penalty are entirely different proceedings and it is not open to the ITO to rely upon the statement made by the assessee for the purpose of waiver of penalty to come to the conclusion that there was concealment of income.
16 In view of the above discussion, it is clear that assessee could not be said to have concealed his income merely because he surrendered certain amount to buy peace with Department, as he could not prove genuineness of gifts or on the basis of agreed addition. The Ilon'ble Supreme Court of India in the case of CIT v. Suresh Chandra Mittal (supra) held that if the assessee had offered additional income to buy peace of mind and to avoid litigation, penalty under Section 271(1)(c) of the Act could not be levied.
17. In view of the, above, we do not find any merit in the appeal filed by the Revenue. Accordingly, we dismiss the appeal.
18. In the result, appeal of the Revenue is dismissed.