Income Tax Appellate Tribunal - Chennai
D.Vijayagandhi, Coimbatore vs Assessee on 8 August, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
'D' BENCH, CHENNAI
BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER
AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER
I.T.A. No. 1588/Mds/2011
Assessment Year : 2005-06
Smt. D. Vijayagandhi, The Assistant Commissioner
57, N.G. Ramasamy Street, of Income Tax,
P.N. Palayam, v. Circle III,
Coimbatore - 641 023. Coimbatore.
PAN : ABRPV7125P
(Appellant) (Respondent)
Appellant by : Shri A. Arjunaraj, CA
Respondent by : Shri K.E.B. Rengarajan,
Junior Standing Counsel
Date of Hearing : 08.08.2012
Date of Pronouncement : 08.08.2012
O R D E R
PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :
In this appeal filed by the assessee, its grievance is that CIT(Appeals) upheld the order of the A.O. levying penalty under Section 271(1)(c) of Income-tax Act, 1961 (in short 'the Act').
2. Short facts apropos are that assessee, proprietor of a concern manufacturing rough castings and also doing fabrication of steel angles, 2 I.T.A. No. 1588/Mds/11 had filed her return of income, for impugned assessment year, declaring an income of ` 6,68,730/-. During the course of assessment proceedings, the Assessing Officer pointed out to the assessee that she had deposited a sum of ` 11,60,407/- in a Savings Bank Account with M/s Indus Ind Bank Ltd., which was not reflected in the balance sheet attached to the return filed. Reply of the assessee was that she was having two accounts, one of which was Current Account in Canara Bank, which alone was disclosed in the balance sheet. According to assessee, Savings Bank Account in Indus Ind Bank Ltd. was not disclosed since deposits did not consist of any income earned, nor it had anything to do with her business. According to assessee, the deposits in the Savings Bank Account were gifts received from one Shri D. Damodharasamy and Shri D. Sabriraj. Shri D. Damodharasamy was the husband of the assessee and he was also assessed in the same circle. However, the Assessing Officer noted that the books of accounts produced by the assessee did not show the S.B. Account, nor the deposits made in such account. Assessee thereupon produced a cash flow statement and proof for having received ` 11 lakhs as gift from her husband, and an agreement for sale dated 17.5.2004 entered by Shri D. Damodharasamy for having received ` 5.5 lakhs each on 17.5.2004 and 7.10.2004. However, Assessing Officer was not impressed. According 3 I.T.A. No. 1588/Mds/11 to him, the gifts alleged to have been received from her husband were not reflected in the books of either of the parties. Explanations given were only an afterthought when the bank statement of S.B. Account was shown to the assessee. Further, as per the A.O., the deposits were made in piecemeal in the bank account, whereas, her husband had received ` 11 lakhs in two instalments on 17.5.2004 and 7.10.2004. He thus came to a conclusion that assessee was unable to explain a direct nexus between gifts received and deposits made in the bank account. He also noted that even interests received from deposits were not shown. He thus made an addition of ` 11,60,000/- as unexplained cash credit under Section 68 of the Act.
3. Thereafter proceedings for levy of penalty under Section 271(1)(c) of the Act were initiated. Explanation of the assessee was that there was no deliberate non-compliance with any of the provisions of the Act. According to assessee, she had not concealed any income and whatever income earned was shown in the return of income filed. However, the A.O. was not impressed. According to him, assessee had deliberately concealed her income by not disclosing the bank account with Indus Ind Bank Ltd. at the time of filing return and also at the time of assessment. As per the A.O., explanations given by the assessee were not believable, nor could she give a satisfactory explanation regarding 4 I.T.A. No. 1588/Mds/11 the source of deposits. Thus, according to him, assessee had conducted in a manner which was in conscious disregard of her obligation towards provisions of law. He thus, relying on the decision of Hon'ble Apex Court in the case of Union of India v. Dharmendra Textile Processors (306 ITR 277), held that a levy of penalty was required under Section 271(1)(c) of the Act. Such levy was 100% of tax sought to be evaded, which came to ` 4,14,720/-.
4. In her appeal before CIT(Appeals), contention of the assessee was that she had submitted detailed explanations for the deposits in Indus Ind Bank Ltd. by furnishing cash flow statement, declaration of gift by her husband and a copy of sale agreement entered by her husband on 17.5.2004. As per the assessee, she had also filed confirmation from the buyers, namely, Shri P.S. Muthusamy and Smt. M. Manimegalai in respect of the property. Despite such credible evidences, source was not accepted and credits in bank account were taxed. As per the assessee, she had discharged her onus for proving the source of credits in the bank account with Indus Ind Bank Ltd., which was purely of personal nature and the deposits were gifts given by her husband. Books of accounts produced pertained to her proprietory business and, therefore, the personal bank account was not included therein. Her husband was also assessed to tax and the details of gifts made by her 5 I.T.A. No. 1588/Mds/11 husband were very much available before the Assessing Officer. Assessing Officer had ignored various evidence produced by the assessee and made the addition. Levy of penalty was made by rejecting the explanation offered.
5. CIT(Appeals) was not impressed by the contentions of assessee. According to him, plea of the assessee that amounts received were gifts from her husband was only an afterthought. The books produced by the assessee did not reveal any Savings Bank Account. Gifts received from her husband had not been shown, nor had he shown any advance received from sale of immovable property. Thus, according to him, intention of the assessee was to conceal income with regard to Savings Bank Account. He thus confirmed the levy of penalty.
6. Now before us, learned A.R., strongly assailing the orders of authorities below, submitted that assessee had produced sufficient evidences for justifying the deposits in the bank account and the penalty was levied simply based on the addition done in the assessment. According to him, on preponderance of probability, an assessment of income could be justified, but, for levy of penalty, strict evidence had to be adduced by the Revenue. According to him, lower authorities were unable to show any malafide intention on the part of the assessee. Further according to him, penalty was unjustifiably levied. 6 I.T.A. No. 1588/Mds/11
7. Per contra, learned D.R. submitted that but for AIR information, which came to the notice of Assessing Officer, assessee would have never disclosed her bank account. According to him, the claim of gifts from her husband was only an afterthought. When the deposits were all made in piecemeal basis, gifts had been received in two instalments of 5.5 lakhs each. So, the explanation offered by the assessee was not a bonafide one and it was unbelievable. Therefore, assessee had furnished inaccurate particulars with regard to her income and levy of penalty was justified.
8. We have perused the orders and heard the rival submissions. There is no dispute that assessee was running a business and which was manufacturing of rough castings and fabrication of steel angles. There is also no dispute that assessee had filed return of income for impugned assessment year along with balance sheet and computation of income. It is also an admitted position that Savings Bank Account of the assessee with Indus Ind Bank Ltd. in which deposits were made, which was considered for an addition under Section 68 of the Act, leading to levy of penalty, was not disclosed in such balance sheet filed along with the return. Nevertheless, assessee had in such balance sheet duly shown her Current Account with regard to her business. The question to be answered is whether every assessee, who is having a 7 I.T.A. No. 1588/Mds/11 Savings Bank Account, which has no relevance whatsoever with her or his business, is obliged to show such Account in the balance sheet of his/her business. In our opinion, the answer is a 'no'. All along, the assessee had maintained that the Savings Bank Account was a personal one and not linked to her business operations. Assessee, who was running a business and who prepared balance sheet of such business, was not obliged to show those bank accounts, which were not related to her business and which reflected therein her personal savings or deposits from source other than business income. Here, assessee had explained that the deposits in bank account were coming out of gifts given by her husband. It is also noted that gifts stated to have been received from her husband, had been confirmed by her husband Shri D. Damodharasamy. Explanation was also given by Shri D. Damodharasamy that the amounts had come out of advances received against a sale of property. Confirmation from the concerned buyers were also produced by the assessee. No doubt, the deposits in the bank account might have been in piecemeal. However, in our opinion, assessee had reasonably proved the source of ` 11 lakhs, especially since cash-flow statement was also furnished. No flaw in such cash flow statement has been pointed out. In a transaction between husband and wife, rules of strict evidence cannot be applied when conjugal rights are in place. Especially so, when husband is also an assessee. In such 8 I.T.A. No. 1588/Mds/11 circumstances, we are of the opinion that assessee had produced reasonable documentation to show the source of deposits in her personal bank account. We cannot say that assessee had failed in her duty to disclose any information relevant to assessment of her income. We also cannot say that there was any intention to conceal the income. Evidence adduced by the assessee might not have met the standards of qualitative determinants applied by the A.O. resulting in an addition under Section 68 of the Act. However, in our opinion, such evidence was good enough to absolve the assessee from a levy of penalty. Hon'ble jurisdictional High Court in the case of CIT v. Dr. R. Gopalakrishnan in T.C. (Appeal) No.520 of 2010 dated 5.7.2010, after considering the decision of Hon'ble Apex Court in the case of Dharmendra Textile Processors (supra), has held as under:-
"Judgment in Union of India v. Dharmendra Textile Processors (306 ITR 277) was clarified in subsequent judgment in Union of India v. Rajasthan Spinning and Weaving Mills (23 DTR 158) wherein it has been held that there has to be a specific finding that the non- disclosure of income is willful and deliberate. This judgment has been followed in CCE Pune v. SKF India Ltd. (239 ELT 385)"
Thus, in view of the observations of Hon'ble jurisdictional High Court as also facts of the case, we are of the opinion that levy of penalty was not warranted. Such levy is deleted.
9 I.T.A. No. 1588/Mds/11
9. In the result, appeal filed by the assessee is allowed. The order was pronounced in the Court on Wednesday, the 8th of August, 2012, at Chennai.
sd/- sd/-
(Challa Nagendra Prasad) (Abraham P. George)
Judicial Member Accountant Member
Chennai,
Dated the 8th August, 2012.
Kri.
Copy to: (1) Appellant
(2) Respondent
(3) CIT(A)-I, Coimbatore
(4) CIT-I, Coimbatore
(5) D.R.
(6) Guard file