Gulab Devi Mutha , Jaipur vs Assessee

1 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR

(BEFORE SHRI R.P. TOLANI AND SHRI T.R. MEENA)

ITA No. 717/JP/2012 Assessment year: 2006-07 PAN : ABWPN 9880 H

Smt. Gulab Devi Mutha vs. The ITO W/o Shri Mohan Lal Mutha Ward- 6 (1) C-11,Raja Park, Jaipur Jaipur (Appellant) (Respondent)

Assessee by : Shri Siddharth Ranka, Advocate Department by: Shri Ajay Malik, Addl. CIT

Date of Hearing: 26-11-2014 Date of Pronouncement: 09 -01-2015

ORDER PER R.P. TOLANI, JM

This is an appeal filed by the assessee against the order of the ld.

CIT(A)-II, Jaipur dated 2-05-2012 for the assessment year 2006-07

challenging the imposition of penalty of Rs. 2,58,970/- imposed u/s

271(1)(c) of the Act.

2.1 Brief facts of the case are that the assessee is engaged in the business

of commodity trading of Guwar and Sarson in the name of M/s. Achal

Finance & Investments. During the course of assessment proceedings, the

AO found that the assessee in her balance sheet has shown unsecured loans 2 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

of Rs. 1,71,25,616/-, explanation for the same was called. The assessee filed

all the relevant confirmations except the following two confirmations.

1. Shri Bhattu Singh Rs. 3.50 lacs

2. Smt.Rupa Devi Rs. 3.50 lacs

Besides qua the following unsecured loans, there were differences in the

closing balances for which also explanation was called:

1. Shri Hasti Mal Samar Rs. 2,70,308/-

2. Smt. Manju Samar Rs. 3,85,777/-

3. Smt. Vimla Devi Jain Rs. 1,90,205/-

Rs. 8,46,290/-

Vide reply filed dated 11-07-2008 the assessee furnished copies of

confirmations of these persons, reflecting following closing balances:

1. Shri Hasti Mal Samar Rs. 2,25,000/-

2. Smt. Manju Samar Rs. 3,25,000/-

3. Smt. Vimla Devi Jain Rs. 1,50,000/-

Rs.7,00,000/-

Thus there was a difference of Rs. 1,46,290/- in respect of confirmations of

these three creditors. As the assessee could not furnish the confirmations in

respect of above three creditors and could not justify the difference of Rs.

1,46,290/- in respect of three creditors. The AO asked the assessee to 3 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

furnish the explanation in this behalf, since the assessment was getting time

barred and the assessee was not able to procure further evidence as was

directed by the AO, the assessee expressed her inability to produce them and

offered to surrender these amounts as her income to avoid further

proceedings.

2.2 Penalty proceedings were initiated, assesse filed her reply. The same

did not find favour with the AO imposed penalty by following observations.

''As stated supra the assessee has failed to furnish confirmations in cases of Shri Bhattu Singh and Smt. Rupa Devi and further the confirmations in cases of Shri Hasti Mal Samar, Smt. Manju Samar and Smt. Vimla Devi Jain were not complete. The assessee has surrendered the amount at the time of assessment proceedings. No confirmations in these cases are furnished during penalty proceedings also. Thus it is proved that after providing many opportunities at the time of assessment proceedings as well as penalty proceedings, the assessee failed to confirm the loan of Rs. 8,46,290/-. The assessee has not filed appeal against assessment order. This clarify that assessee has committed the mistake for furnishing inaccurate particulars of income. Therefore, it is a fit case to impose penalty u/s 271(1)(c ).''

2.3 Aggrieved, the assessee appealed before ld. CIT(A) where the action

of the AO imposing penalty u/s 271(1)(c ) of the Act was assailed on the

basis of various pleadings, evidence and summary of case laws whereof is as

under:-

4 ITA No. 717/JP/2012

Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

1. In respect of Bhattu Singh - Bank certificate from Vijaya

Bank bearing S.B. A/c No.11524 certifying that cheque of Rs.

1.00 lac was debited to his account and credited to the account

of Achal Finsac & Investments on 4-07-2005. The copy of

account from the books of account of the assessee showing

closing balance of Rs. 3.50 lacs with PAN was confirmed by

the said bank.

2. In respect of Smt. Rupi Devi - Bank certificate from

Corporation Bank bearing S.B. A/c No.01001840 certifying

that cheque of Rs. 1.00 lac was debited to her account and

credited to the account of Achal Finsac & Investments on 20-

06-2005, Bank Certificate from Vijaya Bank, Jaipur bearing

S.B. A/c No. 700200300002192 certifying cheque of Rs. 1.50

lacs was debited to her account and credited to the account of

Achal Finsac & Investments on 25-06-2005, Bank Certificate

from State Bank of India, Jaipur bearing S.B. A/c

No.56229002695 certifying that the cheque of Rs. 1.00 lac was

debited to her account and credited to the account of Achal

Finsac & Investments on 20-06-2005. Smt. Rupa Devi gave an

declaration that she had advanced an amount of Rs. 3.50 lacs 5 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

2.4 As regards the other 3 creditors whose a/cs could not be reconciled i.e.

Shri Hasti Mal Samar, Smt. Manju Devi Samar and Smt. Vimla Devi Jain,

the expenses and genuineness of the cash credits were not doubted. Only the

difference was surrendered by the assessee. The same mainly consisted of

difference on account of interest as the assessee has credited interest to their

account and the parties did not credit it in their account. All the three persons

are assessed to tax. The TDS was deducted from the interest paid to them.

2.5 It was pleaded that levy of penalty is not automatic and merely

because an addition has been offered for surrender, it does not lead to

automatic penalty. The penalty being distinct and separate, the assessee can

file fresh evidence and explanation to defend the penalty proceedings. The

assessee has given valid explanation. Shri Bhattu Singh and Smt. Rupi Devi

were income tax assessee. Their PAN accounts were supplied to the AO. In

the penalty proceedings, the AO did not get cross verified from the

departmental record whether these persons had advanced these amounts or

not. Since the AO has failed to controvert assessee's explanation in the

penalty proceedings by cross-verifying from the departmental records, the

penalty imposed is arbitrary and unjustified.

2.6 Apropos the issue of three cash creditors there was difference due to

the accounting of interest. The AO ought to have verified whether those 6 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

assessees had offered interest income and claimed TDS credit or not. Thus

the AO failed to carry out even minimum of the cross-verification in order to

be fair in inquiries and to protect the interest of the Revenue. Thus ignoring

the copious submissions and evidences furnished by assesse in penalty

proceedings and merely relying on the surrender AO has held the assessee

liable for penalty. The ld. CIT(A) though reproduced the explanation of the

assesse however confirmed the order of the AO.

2.7 Aggrieved, the assessee is before us.

2.8 The ld. Counsel for the assessee reiterated the facts and drew our

attention to arguments as made before the ld. CIT(A) and contends that ld.

Ld. CIT(A) failed to appreciate the fact that penalty proceedings are distinct

than assessment proceedings. The assesse has right to furnish evidence old

as well as new and raise pleas in the penalty proceedings. During the course

of assessment proceedings, the above amount was surrendered as it was not

possible for assesse to furnish the evidence as required by the AO and

offered the amount for taxation, it does not mean that assesse filed

inaccurate particulars for penalty proceedings. It is trite law that penalty

proceedings are distinct and separate and the assessee can raise fresh

evidence in the penalty proceedings. Accordingly, the assessee furnished

detailed explanation and evidence to demonstrate that they were genuine 7 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

cash creditors and her case was not liable to be visited with penalty. It is also

a trite law that merely because some amount is surrendered during

assessment that by itself does lead to automatic levy of penalty as long as the

assessee is able to give proper explanation. To this effect assessee has

furnished proper explanation and has been mentioned in detail by the ld.

CIT(A). The pertinent explanation furnished during the penalty proceedings

has been ignored and penalty has been imposed merely relying on surrender.

When all the creditors are assessed to income tax, their PAN, confirmations

are filed, it was obligatory on the part of the AO to rebut the explanation

filed by the assessee by cross-verifying the departmental record and to give a

finding based on the explanation itself. Thus as the record stands assesses

explanation remains rebutted, in that eventuality penalty has no justification.

2.9 The ld. DR supported the orders of the lower authorities and relied on

the judgement of Hon'ble Supreme Court in the case of Mak Data (P) Ltd.

vs. CIT ,358 ITR 593 (SC).

2.10 The ld. Counsel for the assessee in reply contends that Mak Data (P)

Ltd. vs. CIT (supra) case is not applicable in assessee's case as the assessee

during penalty proceedings filed all the details desired by the AO alongwith

proper explanation. In Mak Data case assessee's explanation was found to 8 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

be totally unsatisfactory whereas in this case proper evidence and

explanation is filed.

2.11 We have heard the rival contentions and perused the materials

available on record. We find merit in the arguments of the ld. Counsel for

the assessee that penalty proceedings are separate and distinct than

assessment proceedings. Looking from this aspect, in penalty proceedings

the assessee submitted relevant evidence with proper explanation before the

lower authorities. The pleadings demonstrate that all the cash creditors were

having income tax nos. and in cases of difference in accounts the same was

due to accounting of interest, there is no worthwhile rebuttal of assessee's

explanation during the penalty proceedings. We are inclined to agree with

the submissions of the ld. AR that none rebuttal of explanation or cross

verification from the departmental record cannot be used as a tool to

penalize the assessee. Thus in the entirety of the facts and circumstances, we

find that the assesse furnished a proper explanation supported by evidence in

penalty proceedings. In our considered view the same is reasonable, the case

law as cited by the ld. DR during the course of hearing i.e. Mak Data (P)

Ltd. vs. CIT ,(supra) is not applicable to the facts of the assessee's case more

particularly when the same remains unrebutted . Thus in view of the facts 9 ITA No. 717/JP/2012 Smt. Gulab Devi Mutha vs. ITO , Ward- 6 (1), Jaipur

and circumstances of this case, we are of the view that the assessee's case

does not deserve to be penalized u/s 271(1) (c) of the Act which is deleted.

3.0 In the result, the appeal of the assessee is allowed.

The order is pronounced in the open Court on 09-01-2015

Sd/- Sd/- (T.R. MEENA) (R.P. TOLANI) ACCOUNTANT MEMBER JUDICIAL MEMBER

Jaipur Dated: 9th JAN 2015 *Mishra Copy forwarded to:- 1.Smt Gulab Devi Mutha, Jaipur 2. The ITO, Ward- 6 (1), Jaipur 3. The ld. CIT(A) 4. The ld. CIT By Order 5..The ld. DR 6.The Guard File (IT No. 717/JP/2012)

AR ITAT, Jaipur