Income Tax Appellate Tribunal - Chandigarh
Indira Motors (P) Ltd. vs Deputy Commissioner Of Income Tax on 20 October, 2004
Equivalent citations: (2005)93TTJ(CHD)783
ORDER
D.R. Singh, J.M.
1. The assessee has filed this appeal against the order of the CIT(A) in Appeal No. 621/1998-99 dt. 29th March, 2000, sustaining the penalty of Rs 14,300 under Section 271(1)(c) on as many as four grounds of appeal, mainly raising the issue that no penalty was imposable under Section 271(1)(c) by resorting to the provisions of Section 68 of the IT Act.
2. The relevant and material facts for the disposal of this ground of appeal are that the assessee received a deposit of Rs. 20,000 from Smt Surjit Kaur in the year under reference. Since Smt. Surjit Kaur failed to explain the source of the deposit, the credit was held to be ingenuine and an addition of Rs. 20,000 was made as unexplained cash credit under Section 68 of the Act. Consequently, the interest of Rs. 2,000 accrued and paid to Smt. Surjit Kaur on the above deposit was added back to the income of the assessee. Far the concealment of income, the AO initiated penalty proceedings under Section 271(1)(c) against the assessee. No compliance was made before the AO, so he held the assessee to be guilty of concealing the particulars of its income and imposed a penalty of Rs. 14,300, which was equivalent to 100 per cent of the tax sought to be evaded on the concealed income.
3. The assessee challenged this order of the AO in appeal before the CIT(A) and contended that the AO has not established that the disputed amount was the concealed income of the assessee. It was further contended that the credit of Rs. 20,000 in the name of Smt. Surjit Kaur was genuine because she was produced before the AO and who admitted that she had advanced this amount to the assessee and, therefore, it cannot be held that the credit was not genuine. Thus, the learned Authorized Representative for the assessee concluded that the AO has imposed the penalty merely on presumption and surmises and so the same needs to be deleted.
4. After considering the submissions, while passing a detailed order, the CIT(A) held that after allowing proper opportunity to the assessee, the AO has rightly imposed the impugned penalty amount because the appeal filed by the assessee against the quantum addition has been dismissed by the CIT(A) as well as the Tribunal and though the identity of the creditor, Smt. Surjit Kaur, had been established but the source of the deposit of Rs. 20,000 was not explained and, hence, the credit represented the undisclosed income of the assessee under Section 68 and hence the assessee was guilty of concealing the particulars of its income.
5. Before us, learned Authorized Representative for the assessee reiterated the submissions which were made before the CIT(A) and contended that since in this case the identity, capacity and genuineness of the transaction has been proved by the assessee, no action under Section 271(1)(c) was called for and consequently no penalty was exigible, hence the order of the CIT(A) sustaining the penalty should be quashed. The learned Authorized Representative for the assessee further contended that in the alternative, if the assessee is not able to prove the genuineness of the credit, it was only to the extent of Rs. 6,000 stated to be withdrawn from the bank account of Smt. Surjit Kaur but the source of the balance amount of Rs. 14,000 to have been received from her son stands proved by Smt. Surjit Kaur, so penalty could only be imposed for the unexplained credit of Rs. 6,000.
6. On the other hand, learned Departmental Representative for the Revenue, referring to the reasons given in the order of the CIT(A) and the assessment order framed by the AO, submitted that in the instant case the finding regarding unexplained cash credit in the assessment order clearly establishes the satisfaction of the AO regarding the concealment of particulars of income by the assessee and that the contradictory stand taken by Smt. Surjit Kaur regarding the source of credit of Rs. 20,000 establishes the falsity and ingenuineness of the credit and, hence, the AO rightly imposed the impugned penalty and the same was rightly sustained by the CIT(A) in a well reasoned and well discussed order. Further, in support of the impugned penalty amount being rightly imposed/sustained in the facts and circumstances of the case, the learned Departmental Representative placed reliance on the ratio of the following decisions :
(i) CIT v. K.R. Sadayappan (1990) 185 ITR 49 (SC); and
(ii) K.P. Madhusudhanan v. CIT (2001) 251 ITR 99 (SC).
In (1990) 185 ITR 49 (SC) (supra), it was held as under :
"Held, allowing the appeal, that the moment it was found that the income returned was less than 80 per cent of the income assessed, the onus to prove that it was not the failure of the assessee that caused the difference shifted to the assessee. But the onus was rebuttable : the presumption of concealment was rebuttable by cogent, reliable and relevant material. Since, however, no such material was indicated either by the Tribunal or by the High Court, the High Court was in error in not correctly applying the principle of law laid down by the Supreme Court in CIT v. Mussadilal Ram Bharose (1987) 165 ITR 14 (SC). Therefore, the Mowing question of law arose out of the . order of the Tribunal and had to be referred to the High Court. In the facts and circumstances of this case and in the light of the law as it stood at the relevant time, has the assessee been able to discharge his onus to prove the question which arose in view of Explanation introduced by the Finance Act, 1964, to Section 271 of the Act."
In (2001) 251 ITR 99 (SC) (supra), it was held as under:
"Held, affirming the decision of the High Court, that the penalty was validly levied.
The Explanation to Section 271(1)(c) is a part of Section 271. When the AO or the AAC issues a notice under Section 271, he makes the assessee aware that the provisions thereof are to be used against him. These provisions include the Explanation. By virtue of the notice under Section 271, the assessee is put to notice that, if he does not prove, in the circumstances stated in the Explanation, that his failure to return his correct income was not due to fraud or neglect, he shall be deemed to have concealed the particulars of his income or furnished inaccurate particulars thereof, and, consequently be liable to the penalty under the section. No express invocation of the Explanation to Section 271 in the notice under Section 271 is necessary before the provisions of the Explanation are applied."
7. We have considered the rival submissions of both the parties, perused the record and carefully gone through the orders of the tax authorities as well as the case law cited by the learned Departmental Representative. In the instant case, it is not disputed before us by the learned Authorized Representative for the assessee that the quantum addition of Rs. 20,000 made by the AO represent unexplained cash credit under Section 68 and the interest of Rs. 2,000 accrued and paid to Smt. Surjit Kaur by the assessee was sustained in appeal by the CIT(A) as well as by the Tribunal. It is not a case where the cash credit stands unexplained and the same being held to be ingenuine by the AO because the assessee failed to produce the creditor but it is a simple case where the cash credit is held to be unexplained and ingenuine, though the identity of ' the creditor was established because the source of the credit is held to be not proved because of the falsity of the statement of the cash creditor. In the instant case, when the creditor, Smt. Surjit Kaur was asked to explain the source of Rs. 20,000 deposited with the assessee, she stated that she had received a sum of Rs. 6,000 from M/s Bala Financiers and the balance amount of Rs. 14,000 had been received in two instalments of Rs. 8,000 and Rs. 6,000 each, from her son.
8. From the copy of the deposit account filed by the assessee, it was also found that this amount of Rs. 6,000 was deposited on 1st Aug., 1978, whereas the creditor received the amount, from M/s Bala Financiers on 7th Aug., 1978. It clearly establishes the falsity of her statement that the amount of Rs. 6,000 deposited by her on 1st Aug., 1978, was received by her from M/s Bala Financiers, when, in fact, the same was received by her on 7th Aug., 1978, which means that this amount of Rs. 6,000 at the time of deposit was, in fact, not available with Smt. Surjit Kaur. In order to cover up the falsity of the claim of Smt. Surjit Kaur, her son, Dr. Rajinder Singh in an affidavit stated that he had given a amount of Rs. 20,000 to his mother, whereas the recipient/creditor Smt. Surjit Kaur said that she received only a sum of Rs. 14,000 in two instalments and Rs. 6,000 was received from M/s Bala Financiers. The question arises whether the source of credit of Rs. 20,000 stands explained because the creditor deposited this amount with the assessee after having received the same from her son, Dr. Rajinder Singh, as claimed in his affidavit should be believed as a correct statement or is it to be rejected as an afterthought because of the specific stand already taken by the creditor, Smt. Surjit Kaur, wherein explaining the source of the credit, she had stated before the AO that she received a sum of Rs. 14,000 from her son and a sum of Rs. 6,000 from M/s Bala Financiers and in this manner deposited a total amount of Rs. 20,000 with the assessee, which proved to be false. In whatever manner, we may analyse but the fact remains that while explaining the source of deposit of Rs. 20,000 with the assessee, Smt. Surjit Kaur made a false statement. So, her statement as a whole in this regard is to be rejected and it is held that on the basis of the false statement, she tried to explain the source of deposit with the assessee. Hence, in these circumstances that once on the basis of false statement, the creditor tries to explain the source of the deposit which is unearthed by the AO on examining the creditor, the same has rightly been treated as ingenuine credit representing undisclosed income of the assessee under Section 68 and hence the assessee is guilty of concealing the particulars of its income to the extent of Rs. 20,000 and so the action of the AO in initiating the penalty proceedings and imposition of the impugned penalty amount has been rightly confirmed by the CIT(A).
9. Our conclusion in the exiting facts and circumstances of the case, of the assessee as discussed hereinabove, further finds support from the ratio of the decision supra cited by the learned Departmental Representative for the Revenue. Accordingly, the order of the CIT(A) confirming the impugned penalty amount levied by the AO is upheld and the grounds of the appeal taken by the assessee are rejected.
10. In the result, the appeal filed by the assessee is dismissed.