Income Tax Appellate Tribunal - Chennai
K.Palani, Cuddalore vs Assessee on 24 November, 2004
IN THE INCOME TAX APPELLATE TRIBUNAL
BENCH "B" CHENNAI
(Before Shri Abraham P. George, Accountant Member
and Shri George Mathan, Judicial Member)
.....
I.T.A. Nos. 351, 352, 353, 354 & 355/Mds/2010
Assessment Years : 1997-98 to 2001-02
Dr. K. Palani,
No.54A, II Cross Street, The Income Tax Officer,
Subbarayalu Nagar, v. Ward - I(1),
Cuddalore - 607 002. Cuddalore.
PAN : AAHPP5447R
(Appellant) (Respondent)
Appellant by : Shri T. Banusekar
Respondent by : Shri P.B. Sekaran
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
These are appeals filed by the assessee assailing the levy of penalty under Section 271(1)(c) of the Income-tax Act, 1961 (hereinafter called "the Act") for the respective assessment years. Penalty levied for assessment year 1997-98 was Rs. 14,212/-, for assessment year 1998-99 was Rs. 43,237/-, for assessment year 1999-2000 was Rs. 89,489/-, for assessment year 2000-01 was Rs. 2 I.T.A. Nos. 351 to 355/Mds/10 2,54,288/- and for assessment year 2001-02 was Rs. 21,615/- respectively.
2. Short facts which culminated in the levies of penalty are that assessee, a Government Doctor employed in Government of Tamil Nadu, had filed returns for the impugned assessment years and income returned were Rs.1,36,140, Rs. 95,530/-, Rs. 1,28,390/-, Rs. 97,725/- and Rs. 1,14,115/- for the assessment years 1997-98, 1998- 99, 1999-2000, 2000-01 and 2001-02 respectively. There was a survey under Section 133A of the Act conduced in the premises of the assessee on 14.9.2000 and it seems during the survey, it was noted by the Revenue that assessee had made certain investments in one M/s Sanmac Motors Finance Ltd. and also deposits in a Savings Bank account. Reopening under Section 148 of the Act was resorted to for assessment years1997-98 to 1999-2000. Assessee filed returns for these years once again, wherein the same income as returned earlier was shown. For other assessment years, i.e. 2000- 01 and 2001-02, A.O. proceeded with regular assessments. For assessment year 1997-98, assessment was completed with an addition of Rs. 1 lakh being deposits in S.B. Account which was taken 3 I.T.A. Nos. 351 to 355/Mds/10 by the A.O. as not explained. For assessment year 1998-99, assessment was completed considering the source for purchase of a car with Rs. 3,30,000/-, and deposit in S.B. account Rs.1,72,266/- as unexplained, in addition to accrued interest of Rs.35,000/- from M/s Sanmac Motors Finance Ltd. For assessment year 1999-2000, assessment was completed considering deposit in S.B. A/c Rs. 3,33,500/- as unexplained. A disallowance of Rs. 15,000/- was also made on the claim of the assessee under Section 80DDB of the Act. For assessment year 2000-01, a sum of Rs. 7,11,050/- was considered as unexplained deposit in the S.B. account and a further addition of Rs.2 lakhs was made for educational expenses of sons which the A.O. considered unexplained. Once again, a disallowance of claim Rs. 60,000/- made under Section 80DDB of the Act was also done. For assessment year 2001-02, there was an addition of Rs. 24,000/- on account of estimated professional income and disallowance of Rs. 24,000/- claimed by the assessee under Section 80DDB of the Act. Assessee carried all these additions and disallowances in appeal to the CIT(Appeals), who in his order gave certain relief to the assessee. For assessment year 1997-98, Rs. 4 I.T.A. Nos. 351 to 355/Mds/10 78,000/- out of total addition of Rs. 1 lakh taken as unexplained deposit in S.B. Account was deleted. For assessment year 1998-99, addition made for purchase of car to the tune of Rs. 3,30,000/- and accrued interest from M/s Sanmac Motors Finance Ltd. Rs. 35,000/- were deleted. A sum of Rs. 24,990/- out of unexplained deposits of Rs. 1,72,266/- in S.B. account considered by the A.O. was also deleted. For assessment year 1999-2000, out of the total unexplained deposit of Rs. 3,33,500/- considered by the A.O., Rs. 43,000/- was taken as explained, by the CIT(Appeals) and relief was given to that extent. For assessment year 2000-01, out of unexplained deposit of Rs.7,11,050/- considered by the A.O., an amount of Rs.1,06,000/- was taken as explained by the CIT(Appeals) and relief was given. For assessment year 2001-02, no relief whatsoever was given. To the extent, the additions and disallowances were confirmed by the CIT(Appeals), assessee moved in appeal before this Tribunal and this Tribunal vide its order dated 24th November, 2004 in I.T.A. Nos.496 to 499/Mds/03 and I.T.A. Nos.1443 to 1447/Mds/04 remitted the issues back to the file of the A.O. with the following directions:
5 I.T.A. Nos. 351 to 355/Mds/10"2. In the quantum appeals the common issue is with regard to estimation of income from profession and the other common issue is with regard to unexplained loans. With regard to the unexplained income from profession, the Assessing Officer noted that the assessee is a doctor in the Govt. Hospital that allowed him to carry on private practice. It is with regard to the income from his private practice that the Assessing Officer has assessed such income for the various assessment years. The addition of professional income is based on estimation which, in our opinion, is not justified. We accordingly delete the same.
3. In regard to the additions that were made as unexplained investments, this being a case of a Doctor, who is in the Govt. service, the explanation offered normally should be accepted. However, to be fair to both the parties, we set aside the additions made on account of unexplained investments and remit this issue to the file of the Assessing Officer for fresh consideration. The A.O. shall afford sufficient opportunity of being heard to the assessee in this connection.
4. One other issue is with regard to the claim of deduction u/s 80-DDB of the Act. This claim is based on the fact that the mother is dependent on the assessee. This matter is also remitted back to the A.O. who should verify the rules governing the employment of the officer. The rules apparently provide a limit of income of the person who is claimed to be dependent on the assessee. If the income received by the person, namely mother in the instant case is more than the income mentioned in the relevant rules, then the mother is not dependent on the son. The A.O. shall allow sufficient opportunity of being heard.
5. So far as the penalty appeals are concerned, they are the outcome of the quantum appeals. The quantum assessments have been set aside in the earlier paras and the matter has been remitted to the file of the A.O. for fresh adjudication. 6 I.T.A. Nos. 351 to 355/Mds/10
Therefore, the present penalties imposed cannot survive and they are hereby quashed. The A.O. may consider reinitiating penalty proceedings if it is found that there is concealment of income."
3. As clear from the order of the Tribunal, there were penalties levied based on the outcome of the quantum appeals, which was also remitted back to A.O. vide para 5 of its order. Based on the above order of this Tribunal, fresh assessments were made for the impugned assessment years. In the fresh assessments, for assessment year 1997-98, an addition of Rs. 22,000/- on account of unexplained deposit in Savings Bank Account and a sum of Rs. 11,250/- as interest on matured deposits alone were made. For assessment year 1998-99, an addition of Rs. 1,47,276/- was made for unexplained deposits in S.B. Account and a disallowance of the claim of Rs. 15,000/- made by the assessee under Section 80DDB of the Act was also made. For assessment year 1999-2000, an addition of Rs.2,90,500/- was made for unexplained deposit in S.B. Account and again a disallowance of Rs. 15,000/- was made on the claim under Section 80DDB of the Act. For assessment year 1999-2000, an addition of Rs. 2,90,500/- and again Rs. 15,000/- respectively was 7 I.T.A. Nos. 351 to 355/Mds/10 made. For assessment year 2000-01, addition was made for unexplained deposit in S.B. Account Rs. 6,05,050/- and there was further addition of Rs. 2 lakhs for educational expenses of sons which the A.O. considered as not properly explained. Again a disallowance of the claim of Rs. 60,000/- under Section 80DDB was also made. For assessment year 2001-02, there was an addition for estimated professional income of Rs. 24,000/- and again a disallowance of Rs. 60,000/- on the claim under Section 80DDB of the Act. Net result of these were that for assessment year 1997-98, against the returned income of Rs.1,36,140/- and finally assessed income came to Rs. 1,69,390/-; for assessment year 1998-99 against Rs. 95,530/- originally returned income, the finally assessed income came to Rs. 2,57,806/-; for assessment year 1999-2000, the figures were Rs. 1,28,390/- and Rs. 4,33,890/- respectively; for assessment year 2000-01, the figures were Rs. 97,725/- and Rs. 9,62,775/- respectively and finally for assessment year 2000-01, the figures were Rs. 1,14,115/- and Rs.1,62,115/- respectively. In other words, the additions finally sustained were only Rs. 33,250/- for assessment year 1997-98; Rs.1,62,276/- for assessment year 1998-99; Rs. 8 I.T.A. Nos. 351 to 355/Mds/10 3,05,500/- for assessment year 1999-2000; Rs. 8,65,050/- for assessment year 2000-01 and Rs. 84,000/- for assessment year 2001-02. Penalty proceedings were initiated again and penalties were levied for all the above years considering that the assessee had intentionally concealed the particulars of income and furnished inaccurate particulars of his income. The reasons cited by the A.O. while levying the penalties were as under:-
(i) Assessee had, during the fresh assessment proceedings done after the assessments were set aside by the Tribunal, agreed for the additions to the extent they were sustained by the CIT(Appeals) in the earlier round of proceedings but, nevertheless had filed appeals against such assessments after so aggrieved.
(ii) There were certificates issued by the assessee for claiming deduction under Section 80DDB of the Act but no income was admitted by him on these.
(iii) Smt. Ammamuthu Ammal, mother of assessee, had in her sworn statement denied any money given by her out of agriculture income, to the assessee.
(iv) Assessee had not disclosed his bank deposits in the return of income nor the interest accrued thereon.
(v) Additions made were confirmed by the CIT(Appeals).
4. Assessee filed appeals against penalties levied, before the CIT(Appeals), who confirmed the levy for a reason that the levy was 9 I.T.A. Nos. 351 to 355/Mds/10 rightly made by the A.O., since assessee had furnished inaccurate particulars of income.
5. Now before us, the learned A.R. strongly assailing the penalty orders, submitted that the Tribunal had given a clear finding when the assessee moved in appeal before it, that additions of professional income based on estimate was not justified. Further the learned A.R. pointed out that investments explained by an assessee, who was a Government doctor, was considered as acceptable by the Tribunal. In so far as claim of deduction under Section 80DDB was concerned, the learned A.R. submitted that such a claim was disallowed for a reason that mother of the assessee had income more than the limit mentioned and therefore, not dependent on the assessee. According to him, the sustained additions were not significant amounts and in so far as additions for educational expenses of the sons were concerned, it was purely on estimation. Again, according to him, assessee had sufficient sources for his deposits in Bank account and considerable portions were taken as explained, by the lower authorities in the fresh proceedings. Learned A.R. further submitted that just for a reason that there was a denial by assessee's mother, 10 I.T.A. Nos. 351 to 355/Mds/10 explanations given could not have been considered as inaccurate or leading to any concealment.
6. Per contra, the learned D.R. strongly supported the orders of the lower authorities.
7. We have perused the orders and heard the rival contentions. The sustained additions have been mentioned in para 3 above. In so far as deposits in S.B. Account which were considered as unexplained, assessee had given his explanation but it was only found acceptable to a certain extent. There is no case for the Revenue that explanation offered by the assessee was not bonafide. Assessee had shown source and being a doctor employed in Government service, he was in receipt of salary since very many years. Therefore, there was every possibility that deposits in bank account would have been out of savings from the salary in the earlier years. Though the explanation given by the assessee was not accepted in toto, it means that part of amounts were considered as explained in the fresh assessment proceedings. Even additions made on account of educational expenses for the assessment year 11 I.T.A. Nos. 351 to 355/Mds/10 2000-01 were merely on estimation. In so far as the addition made for professional income is concerned, the Tribunal in its earlier proceedings clearly held that such estimation was not justified. As mentioned by the Tribunal in para 3 of its earlier order, assessee being a Government doctor and in receipt of salaries, his explanations had to be given proper weightage. The amounts deposited were not substantial. In so far as disallowance under Section 80DDB of the Act was concerned, no doubt the claim might have been disallowed for a reason that assessee's mother, for whom assessee had made the claim was not dependent on the assessee. But, as held by the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts 322 ITR 158 (SC) for attracting provisions of Section 271(1)(c) of the Act, there has to be concealment of income or furnishing of inaccurate particulars of income by the assessee. Just because a claim made by the assessee was not allowed, it would not tantamount to furnishing of inaccurate particulars. If we look at the reasons given by the A.O. for levy of penalty, the first one is that assessee after agreeing for additions had filed an appeal. But, assessee had clearly mentioned in his letter dated 6.2.2006 that he 12 I.T.A. Nos. 351 to 355/Mds/10 was tired of tax proceedings and requested to complete the assessment based on the additions to the extent sustained by the CIT(Appeals) in the first round. In our opinion this was not a valid reason to levy penalty. In so far as the certificates issued to claim deduction under Section 80DDB was concerned, which is a reason No.(ii) cited by the A.O., the fact remains that the estimation on professional income was made only for the assessment year 2001-02 and hence there was no question any income being admitted by the assessee for this. In so far as sworn statement from assessee's mother, wherein she denied for having given any money to the assessee, there was an affidavit filed by her and also letter written by her explaining the position. Finally in so far as reason cited by the A.O. that the assessee had not disclosed bank deposits and accrued interest, assessee was obliged only to show his income in the return and was not under any obligation to show his balances in bank account since assessee was not a business man and was not required to file any balance sheet. In so far as interest accrual on deposits for assessment year 1997-98 was concerned, this was admittedly done on accrual basis, whereas assessee might have 13 I.T.A. Nos. 351 to 355/Mds/10 been under a bonafide belief that accrual basis need not be followed by him for interest income. Thus, in our opinion, an assessee could not be fastened with a penalty under Section 271(1)(c) for filing any inaccurate particulars of income nor for concealment of income. This was not a case fit for levy of penalty under Section 271(1)(c) of the Act. Levy of penalty for all the years stand deleted.
8. In the result, all the five appeals filed by the assessee stand allowed.
Order pronounced in the open court after conclusion of hearing on the Ninth Day of March, 2011.
sd/- sd/-
(George Mathan) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 9th March, 2011.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-XII, Chennai-34
(4) CIT, Pondicherry Charge, Pondicherry
(5) D.R.
(6) Guard file