ITA No. 41/Rjt/2019

Assessment Year: 2012-2013

Decided On: 04.01.2023

Appellants: Fortune Developers
Respondent: ITO, Ward-2(1)(1)

Hon'ble Judges/Coram:
Waseem Ahmed, Member (A) and T.R. Senthil Kumar


Waseem Ahmed, Member (A)

1. The captioned appeal has been filed at the instance of the assessee against the order of the Ld. Commissioner of Income Tax (Appeals)-2 (in short the Ld. CIT(A)), Rajkot dated 28/11/2018 arising in the matter of penalty order passed under Section 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as "the Act") relevant to the Assessment Year 2012-13.

2. When the matter was called for hearing, nobody appeared from the side of the assessee. The appeal was filed by the assessee in the year 2019 and thereafter the same was listed for hearing on various occasions. But it was found that none of the time anyone appeared from the side of the assessee. Thus, in the absence of any cooperation from the side of the assessee, we decided to proceed with the hearing ex parte to the assessee and after hearing the Revenue.

3. The only effective issue raised by the assessee is that the learned CIT(A) erred in confirming the levy of penalty under section 271(1)(c) of the Act for Rs. 3,46,390/- only.

4. The facts in brief are that the assessee is a partnership firm and engaged in the business of real estate development. The Assessee for the year under consideration declared income at NIL. However, the AO in the assessment order passed under section 143(3) of the Act made addition of Rs. 11,21,000/- on account unexplained cash credit under section 68 of the Act. The AO also initiated penalty proceeding under section 271(1)(c) of the Act.

5. It was, during the penalty proceeding, was submitted that due to non-cooperation from the credit or parties, the assessee was not able to furnish necessary documents in support of genuineness of loan credit. Now it has gathered all the documentary evidences such as copy of confirmation, bank statement, PAN and ITR in respect of identity, genuineness and creditworthiness of the loan credit.

6. However, the AO found that the assessee not furnished any primary evidence required under section 68 of the Act, at the time of assessment proceeding and appellate proceeding before the learned CIT(A). Furthermore, the evidences furnished for the first time during penalty proceedings have certain deficiencies which are as under:

i. Confirmation letter in case of both the creditors is identical, having no mentioned of date and place.

ii. Signature on confirmation letter is fabricated.

iii. Bank stamen of creditor was not furnished

iv. ITR of only one party was furnished and that too belongs to different assessment year.

6.1. In view of the above, the AO held that the assessee failed to prove the genuineness of credit entries in the books of accounts. The AO accordingly held that the assessee furnished inaccurate particulars of income and thus the assessee is liable to the levy of penalty under section 271(1)(c) read with explanation. Thus, the AO levied penalty of Rs. 3,46,390/- being 100% of the amount of tax being sought to be evaded.

6.2. The learned CIT(A) on appeal by the assessee, also confirmed the levy of penalty by observing as under:

"Having considered facts and circumstances the case, I find that impugned penalty has been levied with respect to the addition of Rs. 1121000/- made under section 68 in respect of un-explained cash credits. The relevant facts are that the assessee during assessment proceedings had failed to prove the identity of the creditors, their creditworthiness and the genuineness of the credits by adducing necessary and sufficient evidences during assessment proceedings. The said addition was confirmed by the CIT(A) in quantum appeal for the above stated reasons. The impugned penalty has been levied after finalization of first appeal of assessee wherein the impugned addition has been confirmed. The assessee during appellate proceeding has contended that the assessee did not have the necessary confirmations and evidences at the time of assessment but the same were produced during penalty proceedings.

In my considering opinion, the assessment is based on whatever evidences the assessee could produce during assessment proceedings and it attained finality after decision of the CIT(A). It is not the case of assessee that he was not provided enough opportunity during assessment. Therefore, the merits of evidences and their veracity and genuineness cannot be gone into the penalty proceedings as it would tantamount to a re-assessment. The contention of assessee is therefore not tenable and the penalty levied in respect of the confirmed additions calls for no interference. The grounds of appeal are rejected."

7. Being aggrieved by the order of the learned CIT(A), the assessee is in appeal before us.

8. The learned DR before us vehemently supported the order of the authorities below.

9. We have heard the learned DR and perused the materials available on record. Admittedly, the assessee has shown receipt of unsecured loan which was treated as unexplained cash credit under section 68 of the Act and same was also confirmed by the learned CIT(A). The AO also initiated the penalty proceeding under section 271(1)(c) of the Act and levied penalty for furnishing inaccurate particular of income.

10. It is trite of law that the penalty proceedings are different from assessment proceeding. Any addition made under the assessment proceeding will not automatically lead to concealment of income or furnishing inaccurate particular of income. As such, the AO has to reach at independent finding that the assessee has concealed income or furnished inaccurate particular of income. In holding so we find support and guidance from the judgment of Hon'ble supreme court in case of T. Ashok Pai vs CIT reported in MANU/SC/7720/2007 : 292 ITR 11 where it was held as under:

"Since burden of proof in penalty proceedings varies from that in the assessment proceeding, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitute good evidence in the penalty proceeding. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle."

11. Coming to the case on hand, the AO doubted the genuineness of credit of unsecured loan in absence of primary evidences and made addition under section 68 of the Act. However, the assessee during the penalty proceedings furnished documentary evidences in support of identity, genuineness and credit worthiness of parties by stating that same were not furnished earlier due non-cooperation from the parties. The above explanation of the assessee was not found to be incorrect by the AO. The AO neither made any independent inquiry with regard to fact whether the loan credit indeed represent income of the assessee and the consciously furnished inaccurate particulars of income. As such, the entire basis of the AO treating such credit as unexplained was based on the doubt and human probabilities. There was no cogent material brought on record by the AO that assessee furnished inaccurate particular of income and the explanation furnished by the assessee is not true. Therefore, merely an addition made during the quantum proceeding will not attract penalty under section 271(1)(c) of the Act. In this regard we find support and guidance from the judgment of Hon'ble supreme court in case of CIT v. Reliance Petroproducts MANU/SC/0182/2010 : [2010] 189 Taxman 322/322 ITR 158, in which the Apex Court in regard to the penalty proceedings held as under:--

"We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every Return where the claim made is not accepted by Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature."

12. Thus in view of the above and after considering the facts in totality, we are of the opinion that the Revenue authorities failed to bring cogent materials on record to establish that the assessee has furnished inaccurate particular of income. Therefore, we hereby set aside the order of the learned CIT(A) and direct the AO to delete the penalty imposed under section 271(1)(c) of the Act. Hence, the ground of appeal of the assessee is hereby allowed.

13. In the result, the appeal of the assessee is hereby allowed.

Order pronounced in the Court on 04/01/2023 at Ahmedabad.

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