Radha Nutirents Limited, Ambala vs Assessee

Radha Nutirents Limited Vs. The A.C.I.T., Near Saha Chowk, Ambala. Village Tela, Distt. Ambala. PAN: AAACR7985A (Appellant) (Respondent)

Appellant by : Shri R. Bansal Respondent by : Shri Manjit Singh, DR

Date of hearing : 21.05.2015 Date of Pronouncement : 05.06.2015

PER T.R. SOOD, A.M.:

In this appeal, the assessee raised following ground of

appeal :

"1. That the Ld.ACIT has erred in law and on f acts in impos ing the penal ty of Rs.115640/- under section 2 7 1 ( 1 ) ( c ) a n d t h e L d . C o m m i s s i o n e r o f i n c o me t a x (Appeals) has erred in law and on f acts in conf irming t h e o r d e r o f t h e L d . A C IT . "

2. During the assessment proceedings, it was noted that the

assessee has raised various unsecured loans to the tune of

Rs.1,11,94,359/- and on further enquiry, it was found that no

confirmation was received regarding the loan from Shri 2

Kathirase Kumar from whom a sum of Rs.1,72,550/- and

Rs.1,71,000/- was received on 29.3.2007 and 30.3.2007

respectively. The assessee could not file confirmation, etc.

from this person. Therefore, unsecured loan amounting to

Rs.3,43,550/- from Shri Kathirase Kumar was added to the

income of the assessee under section 68 of the Income Tax

Act. The penalty proceedings under section 271(1)(c) of the

Act were also initiated.

3. In response to the show cause notice, the assessee

submitted the following reply vide letter dated 13.5.2011,

which is as under :

"T he proceeding h as been in iti ated on the b as is th at the assessee could not prove beyond doubt the cash credit of Mr. Kathirash Kumar amounting to Rs.3,43,550/-. In this respect it is submitted that during the assessment proceeding the assessee has produced the evidence that the payment has been received from the depositor who is residing at USA. The payments has been received through NEFT and banking channel and was received on 29-03-2007 for Rs.1,72,550/- and on 30-03-2007 for Rs.1,71,000/-. The copy of the Bank statement in which the payment has been received is attached. It is clearly stated that the amount has been received through NEFT ICICS. During the assessment proceeding and thereafter the assessee is continually trying to contact the depositor wh o is an ol d f riend of the son of the M an ag ing Direc tor of the Company. Due to economic meltdown during that period, the depositor shif ted f rom USA to so me other country. No w we came to kno w that he is in Austral ia. We still trying to connect f or f ir getting his conformation but is unable to do so jar.

Due to these f acts the assessee in order to co-o perate wi th the department and avoid the litigation has surrender (his amount subject to no penalty.

3 On the poin t of l aw i t is res pectf ull y sub mitted th at the assessee neither concealed any particulars of its income nor furnished inaccurate particulars of its income. The assessee has declared this Cash Credit in the Tax Audit report. He has shown this amount as appearing in the books of accounts. The amount has been received through banking channel and a certificate from the HDFC Bank where the amount has been received confirming that the payment has been in the current account of the Radha Nutrients Ltd., in their bank from Mr. Kathirash Kumar on the 29- 03-2007 and on 31-03-2007 is attached.

From this facts f it clear that the assessee has received the payment from the depositor and thorough the Banking channel. We have tried our level best to contact the depositor for his confirmation which still we are unable to collect as the depositor could not he contacted. We are still trying to contact him.

Considering the facts of the case that the assessee has surrendered the income subject to penalty, the more of payments and the proof, i.e., certificate and copy of the Bank statement that payment has been received through N.E.F.T. it is prayed that the proceedings may kindly be dropped or some more time be allo wed to contact the depositor in order enable us to collect the confirmation."

4. The Assessing Officer after examining the above

reply concluded that since the assessee had not produced any

evidence regarding the loan and has further not given any

explanation, therefore, penal action was attracted.

Accordingly, he levied minimum penalty @ 100% under section

271(1)(c) of the Act amounting to Rs.1,15,640/-.

5. On appeal, it was submitted that the assessee had

furnished the explanation how the loan has come through

NEFT remittance in the bank. Further the assessee tried his

best to contact the depositor, who had later on shifted from 4

U.S. to Australia. It was further submitted that the assessee

has furnished bonafide explanation and, therefore, penalty

could not be levied and in this regard he relied upon various

decisions. The learned CIT (Appeals) did not find any force in

the submissions of the assessee and confirmed the levy of

penalty vide para 5 to 5.5 of his order.

6. Before us, the learned counsel for assessee

submitted that the Assessing Officer has not recorded

satisfaction for initiating penalty proceedings. Further he

reiterated explanation given during the penalty proceedings

before the Assessing Officer and the learned CIT (Appeals). It

was emphasized that the assessee has given bonafide

explanation and, therefore, penalty could not have been

levied. He also relied upon the decision of the Hon'ble

Calcutta High Court in the case of CIT Vs. Amalendu Paul,

145 ITR 439 and CIT Vs. Reliance Petroproducts Pvt. Ltd., 322

ITR 158.

7. On the other hand, the learned D.R for the Revenue

strongly supported the order of the learned CIT (Appeals).

8. We have considered the rival submissions carefully.

It was explained before us that the assessee has taken loan

from Shri Kathirase Kumar. It was further explained that he

was personal friend of the assessee and he was residing

abroad and the amount had been remitted through NEFT

ICICIS, which was duly reflected in the bank account. In our

opinion, this cannot be called explanation. This is only a 5

fact regarding the receipt of loan. If the depositor was

personal friend, then the assessee was supposed to know his

address. Assuming for the sake of arguments that such

address was not available during the assessment proceedings

which was completed on 20.12.2009, the assessee could have

obtained the address by May, 2014 when the impugned order

was passed by the learned CIT (Appeals). Therefore, the

assessee basically has not given any explanation why the

confirmation, etc. has not been filed in respect of the said

loan. We find no force in the submission that the Assessing

Officer has not recorded satisfaction. In this regard, we

would like to point out that sub-section (1B) was introduced

under section 271 vide Finance Act, 2008 with retrospective

effect from 1.4.1989. This sub-section reads as under :

"(IB) Where any amount is added or d i s a l l o we d in c o m p u t i n g t h e t o t a l i n c o me o r l o s s o f a n a s s e s s e e i n a n y o r d e r o f a s s e s s m e n t o r r e a s s e s s me n t a n d t h e s a i d o r d e r contains a direction f or initiation of penalty proceedings under clause (c) of sub-section (1), such an order of a s s e s s me n t o r r e a s s e s s me n t s h a l l b e d e e me d t o c o n s t i t u t e satisf action of the Assessing Of f icer f or in itiation of the penalty proceedings under the said clause (c).

8.1 A plain reading of the provision clearly shows that

once the penalty proceedings have been initiated in such

direction as contained in the assessment order, then it shall

be deemed satisfaction of the Assessing Officer for initiation

of penalty proceedings. Further the Assessing Officer has

clearly mentioned at the end of para 3 that the penalty

proceedings under section 271(1)(c) of the Act are being 6

initiated with reference to unsecured loans of

Rs.3,43,550/- from Shri Kathirase Kumar. Therefore, this

would itself constitute satisfaction over initiation of penalty

and no further satisfaction was required to be recorded.

9. Non-furnishing of any explanation itself would lead

to penal consequences. In the present set of fact the principle

laid down by the Hon'ble Supreme Court in the case of

Reliance Petroproducts Pvt. Ltd. (supra) is not applicable

because merely disclosure of loan is not sufficient. The

assessee has the burden of furnishing identity of the party,

genuineness of the loan and capacity of the party from whom

such loan was obtained, which has not been done in this case.

As far as the decision of Hon'ble Calcutta High Court is

concerned, that was rendered for assessment year 1963-64

i.e. before the introduction of Expenditure-1 to section

271(1)(c) of the Act. The conseqnences of Explanation-1 to

section 271(1)(c) of the Act have been explained by the

Hon'ble Supreme Court in the case of K.P.Madhusudhanan

Vs. CIT, 251 ITR 99, where it is clearly observed that after

introduction of Explanation-1 to section 271(1)(c) of the Act,

there is no burden on the Revenue to prove that the assessee

has concealed the particulars of income. It is further

observed that this part would be covered by the Explanation

and the burden lies on the assessee to give explanation

regarding the particulars entry. Therefore, in our opinion, in

this case, penalty has been rightly levied and confirmed by 7

the learned CIT (Appeals) because the assessee has failed to

give any explanation regarding the said loan.

10. In the result, the appeal of the assessee is

dismissed.

Order pronounced in the open court on this 5th day

of May, 2015.

Sd/- Sd/- (BHAVNESH SAINI) (T.R.SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER

Dated : 5 t h May, 2015 *Rati*

Copy to: The Appellant/The Respondent/The CIT(A)/The CIT/The DR.

Assistant Registrar, ITAT, Chandigarh