Income Tax Appellate Tribunal - Delhi
Rahul Swarup, Muzaffarnagar vs Department Of Income Tax on 26 March, 2010
ITA NO. 2436/DEL/2010
A.Y. 2006-07
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH "F" NEW DELHI
BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER
AND
SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER
I.T.A. No. 2436/Del/2010
A.Y. : 2006-07
DCIT, vs. Shri Rahul Swarup,
CIRCLE-2, S/o Shri Arun Kumar Swarup,
MUZAFFARNAGAR Ram Bagh,
Distt. - Muzaffarnagar (UP)
(PAN: AHNPS9491D)
(Appellant ) (Respondent )
Asseessee by : SH. M.P. RASTOGI, ADV.
Department by : SMT. BANITA DEVI NAOREM, D.R.
ORDER
PER SHAMIM YAHYA: AM This appeal by the assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals) dated 26.3.2010 pertaining to assessment year 2006-07.
2. The issue raised is that Ld. Commissioner of Income Tax (Appeals) erred in deleting the penalty u/s 271(1)(c) of the IT Act.
3. In this case assessee filed a return showing income of 5,50,941/- During the scrutiny assessment, following additions were made:-
(i) Addition on account of working ` 8,78,984/-
out of capital gain
(ii) Excess amount of deposit in bank ` 1,05,000/-
a/c
(iii) Addition on account of deemed ` 4,86,218/-
1ITA NO. 2436/DEL/2010 A.Y. 2006-07 Dividend.
(iv) Addition on account of low ` 1,39,358/-
Withdrawals
4. Upon assessee's appeal Ld. Commissioner of Income Tax (Appeals) deleted the addition on account of capital gain at ` 6 lacs; bank deposits of ` 1,05,000/- and the withdrawals of ` 139358/-. Rest of the addition was capital gain ` 278984/- and additions towards deemed dividend of ` 486218/- were affirmed by the Ld. Commissioner of Income Tax (Appeals). Accordingly, penalty proceedings were also initiated on this account of an addition of ` 278984/- on account of capital gain and deemed dividend of ` 486218/-, penalty was imposed amounting to ` 2,50,000/-.
4.1 Upon assessee's appeal Ld. Commissioner of Income Tax (Appeals) elaborately considered the submissions, as regards the penalty on account of addition of capital gains as under:-
"Regarding addition made by working of long term capital gain which was confirmed by my predecessor in appeal, I find that the appellant had taken estimated cost of acquisition as on 31.3.1981 at ` 338/- being 1/5th (20% of sale deeds as the impugned property was not purchased but willed by grandfather and grandmother. Further, the Assessing Officer made addition estimate basis adopting cost of acquisition at the rate of ` 200/- per sq.yds. The appellant had also filed list of circle rates issued by the District Magistrate, Muzaffarnagar in which the rate was near about the rates applied by the appellant but the same 2 ITA NO. 2436/DEL/2010 A.Y. 2006-07 was not considered by the Assessing Officer at the time of assessment and same was also submitted at the time of hearing of quantum appeal before the Ld. Commissioner of Income Tax (Appeals), Muzaffarnagar.
My predecessor while confirming the aforesaid addition observed that the Assessing Officer had indulged into a process of estimation but estimation made by the Assessing Officer was held as much more logical. Thus it was a case of estimated addition."
4.2 Thus, Ld. Commissioner of Income Tax (Appeals) held that the factum of concealment of particulars or furnishing of inaccurate particulars is not proved. Hence, penalty on this aspect of working out of capital gain was deleted by the Ld. Commissioner of Income Tax (Appeals). Further Ld. Commissioner of Income Tax (Appeals) held that:-
"Regarding addition made at ` 486218/- by the Assessing Officer and confirmed by my predecessor, I find that the appellant's contention was that he had taken loan from the aforesaid company to pay his income tax liabilities. The appellant had also shown the same as liability in the balance sheet for A.Y. 2006-07 which had already been filed along with the return of income and hence there was no concealment of particulars on the part of the appellant.
The Assessing Officer rejected the contention of the appellant and found the impugned sum coverable u/s 22(2)(e) of the Act.3
ITA NO. 2436/DEL/2010 A.Y. 2006-07 My predecessor while confirming the impugned addition held that the such addition was made on proper analysis and the Assessing Officer had discussed the facts cogently.
I find that from the penalty order passed by the AO, it does not contain any finding to the effect that in the given facts and circumstances, concealment was proved independently. The Assessing Officer has also not been able to prove that there was an element of concealment with a guilty mind to evade or avoid tax.
In order that a penalty for concealment may be imposed, the factum of concealment must be proved beyond the shadow of doubt. Before making an order imposing penalty it is incumbent on the Assessing Officer to examine the facts and circumstances of the case and then come to a finding whether concealment has been proved independently and he should refrain himself form the mere rejection of the assessee's explanation regarding the items suspected to have been concealed. Unless the concealment is so proved, penalty cannot be imposed. Concealment for the purpose of section 271(1)(c) must be conscious which is not accidental or unintentional but concealment with a guilty mind to evade or avoid tax. Thus, for the purposes of brining a case within the said sub- section, the state of mind of the assessee becomes relevant.4
ITA NO. 2436/DEL/2010 A.Y. 2006-07 The Assessing Officer was required to arrive at a finding that the explanation offered by the appellant was false. He must be found to have failed to prove that such explanation is not only not bonafide but all the facts relating to the same and material to the income were not disclosed by him.
Further, it has been also decided in the case of C.I.T. vs. Haryana Warehousing Corporation (P&H) P. 215 (ITA No. 871 of 2008), Dated 1.7.2009 (Punjab & Haryana) that levy of penalty under section 271(1)(c) for non-disclosure of deemed dividend income on account of ignorance of law the penalty under section 271(1)(c) is not imposable upon assessee.
In view of the above facts, it cannot be said that the appellant has concealed his income or furnished inaccurate particulars of income. The explanation of the appellant submitted during the penalty proceedings, in my view, has not been considered by the Assessing Officer properly. The Assessing Officer has simply relied on the findings recorded in the quantum appeal order of the Ld. Commissioner of Income Tax (Appeals) and no where rebutted the appellant's explanation in declaring the impugned sum as loan. The Assessing Officer is relying solely on the observations of the Ld. Commissioner of Income Tax (Appeals).
I am satisfied that appellant has submitted necessary evidence to substantiate the explanations submitted by him 5 ITA NO. 2436/DEL/2010 A.Y. 2006-07 and has duly discharged the onus laid on him. The explanations submitted by the appellant could not be treated as false.
Hence, on merits in my opinion, no case is made out by the Assessing Officer for sustaining the penalty."
4.3 We have heard both the counsel and perused the records.
4.4 We find that section 271(1(c) of the Act postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. In the present case penalty has been levied on account of addition to capital gain which was as a result of difference in estimate made by the assessee and Assessing Officer. Hence, this was not the case of concealment of income or furnishing of inaccurate particulars of income.
4.5 Further, as regards the deemed dividend on account of loan taken from M/s Hari Cold Storage & General Mills, assessee's submission before the Assessing Officer was that assessee has taken ` 1792500/- from the said company to pay the tax liability and loan taken was clearly shown in the liability side of the balancesheet. Assessing Officer held that as per the balance sheet of M/s Hari Cold Storage and General Mills, there was surplus to the extent of ` 486218/- as on 31.3.2006. Further, Assessing Officer referred to tribunal's decision and held that in this particular case the loan/ advance has been made in the month of March, 2006 when it can be safely presumed that the assessee was having surplus to the extent of ` 486218.76. Hence, a sum of ` 486218/- is treated deemed dividend u/s 2(22)(e) of the IT Act.
6ITA NO. 2436/DEL/2010 A.Y. 2006-07 4.6 From the above it is quite clear that assessee has not made any concealment or furnishing of inaccurate particulars, the loan taken was duly disclosed in the balance sheet. Moreover, the Assessing Officer while making the addition has not made out any case that assessee has furnished inaccurate particulars or concealed the income. Hence, in our considered opinion, the action of the Ld. Commissioner of Income Tax (Appeals) in deleting the penalty on this accounts is justified.
4.7 In this regard, we would like to refer to the Hon'ble Apex Court decision in the case of CIT vs. Reliance Petro Products Ltd. in Civil Appeal No. 2463 of 2010. In this case vide order dated 17.3.2010 it has been held that the law laid down in the Dilip Sheroff case 291 ITR 519 (SC) as to the meaning of word 'concealment' and 'inaccurate' continues to be a good law because what was overruled in the Dharmender Textile case was only that part in Dilip Sheroff case where it was held that mensrea was a essential requirement of penalty u/s 271(1)(c). The Hon'ble Apex Court also observed that if the contention of the revenue is accepted then in case of every return where the claim is not accepted by the AO for any reason, the assessee will invite the penalty u/s 271(1)(c). This is clearly not the intendment of legislature.
4.8 In this regard we also place reliance from the Apex Court decision rendered by a larger Bench comprising of three of their Lordships in the case of Hindustan Steel vs. State of Orissa in 83 ITR 26 wherein it was held that "An order imposing penalty for failure to carry out a statutory obligation is the result of a quasi-criminal proceedings, and penalty will not ordinarily be imposed unless the party obliged either acted deliberately in defiance of law or was guilty of conduct 7 ITA NO. 2436/DEL/2010 A.Y. 2006-07 contumacious or dishonest, or acted in conscious disregard of its obligation. Penalty will not also be imposed merely because it is lawful to do so. Whether penalty should be imposed for failure to perform a statutory obligation is a matter of discretion of the authority to be exercised judicially and on a consideration of all the relevant circumstances. Even if a minimum penalty is prescribed, the authority competent to impose the penalty will be justified in refusing to impose penalty, when there is a technical or venial breach of the provisions of the Act, or where the breach flows from a bonafide belief that the offender is not liable to act in the manner prescribed by the statute."
5. In the background of the aforesaid discussion and precedents, we uphold the order of the Ld. Commissioner of Income Tax (Appeals).
6. In the result, the appeal filed by the revenue is dismissed.
Order pronounced in the open court on 26/10/2010 upon conclusion of hearing.
Sd/- Sd/-
[C.L. SETHI] [SHAMIM YAHYA]
JUDICIAL MEMBER ACCOUNTANT MEMBER
Date 26/10/2010
SRB
Copy forwarded to: -
1. Appellant 2. Respondent 3. CIT 4. CIT (A)
5. DR, ITAT
TRUE COPY
By Order,
Deputy Registrar,
ITAT, Delhi Benches
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