Deepak Petrochem Ltd. Vs DCIT (ITAT Ahmedabad)
Brief facts of the case are that the assessee has filed its return of income on 30.10.2002 declaring total loss at Rs.29,31,379/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee’s authorized share capital has been increased to Rs.3.00 crores as against Rs.1.00 crore. On further scrutiny, it revealed that the assessee has taken share application money from 273 applicants, out of that from 272 parties share application money was taken in cash. The AO has directed the assessee to furnish identity of the creditors, their credit-worthiness and genuineness of the transaction. The assessee has given half details. The AO has issued notice under section 133(6)of the Act, but they were returned un-served. He made addition of Rs.1,46,98,600/-. He determined taxable income of the assessee at Rs. 8,44,667/- vide assessment order dated 28.1.2005. This figure was determined after setting off of business loss/unabsorbed depreciation of earlier years at Rs. 1,13,22,553/-. Dispute travelled to the Tribunal, and the Tribunal has confirmed the addition vide ITA No.739/Ahd/2011 decided on 2.3.2017. The ld.AO has initiated penalty proceedings and issued notice under section 274 r.w. section 271(1)(c) of the Act. In response to the notice, the assessee has filed reply on 15.2.2012. After considering the reply of the assessee, the ld.AO has imposed penalty of Rs.52,48,000/- for furnishing inaccurate particulars of income. Appeal to the CIT(A) did not bring any relief to the assessee.
A bare perusal of this section would reveal that for visiting any assessee with the penalty, the Assessing Officer or the Learned CIT(Appeals) during the course of any proceedings before them should be satisfied that the assessee has; (i) concealed his income or furnished inaccurate particulars of income. As far as the quantification of the penalty is concerned, the penalty imposed under this section can range in between 100% to 300% of the tax sought to be evaded by the assessee, as a result of such concealment of income or furnishing inaccurate particulars. The other most important features of this section is deeming provisions regarding concealment of income. The section not only covered the situation in which the assessee has concealed the income or furnished inaccurate particulars, in certain situation, even without there being anything to indicate so, statutory deeming fiction for concealment of income comes into play. This deeming fiction, by way of Explanation I to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bonafide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in respect of any fact material to the computation of total income and in addition to this the assessee is not able to prove that such explanation was given bona fide and all the facts relating to the same and material to the computation of the total income have been disclosed by the assessee. These two situations provided in Explanation 1 appended to section 271(1)(c) makes it clear that that when this deeming fiction comes into play in the above two situations then the related addition or disallowance in computing the total income of the assessee for the purpose of section 271(1)(c) would be deemed to be representing the income in respect of which inaccurate particulars have been furnished.
The assessee has not given any explanation. It has just submitted that it has received share application money from 272 parties. It has given their names. But the addresses given by the assessee were found to be incorrect because notices were returned. Apart from that the assessee has not given any details. Monies have been taken in cash and not through banking channel. Therefore, neither it has proved the genuineness of the transaction nor credit-worthiness of the alleged applicants; rather to say their identities also doubtful. In such circumstances, it has to be construed that the explanation offered by the assessee has been proved as false by the AO and Penalty Levied U/s. 271(1)(c) is justified.
FULL TEXT OF THE ITAT JUDGEMENT
Assessee is in appeal before the Tribunal against order of the ld.CIT(A)-I, Baroda dated 9.7.2013 passed for the Asstt. Year 2002-03.
2. The assessee has taken six grounds of appeal, but its grievance revolves around a single issue viz. the ld. CIT(A) has erred in confirmation the penalty amounting to Rs.52,48,000/- imposed by the AO under section 271(1)(c) of the Act.
3. Brief facts of the case are that the assessee has filed its return of income on 30.10.2002 declaring total loss at Rs.29,31,379/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee’s authorized share capital has been increased to Rs.3.00 crores as against Rs.1.00 crore. On further scrutiny, it revealed that the assessee has taken share application money from 273 applicants, out of that from 272 parties share application money was taken in cash. The AO has directed the assessee to furnish identity of the creditors, their credit-worthiness and genuineness of the transaction. The assessee has given half details. The AO has issued notice under section 133(6)of the Act, but they were returned un-served. He made addition of Rs.1,46,98,600/-. He determined taxable income of the assessee at Rs. 8,44,667/- vide assessment order dated 28.1.2005. This figure was determined after setting off of business loss/unabsorbed depreciation of earlier years at Rs. 1,13,22,553/-. Dispute travelled to the Tribunal, and the Tribunal has confirmed the addition vide ITA No.739/Ahd/2011 decided on 2.3.2017. The ld.AO has initiated penalty proceedings and issued notice under section 274 r.w. section 271(1)(c) of the Act. In response to the notice, the assessee has filed reply on 15.2.2012. After considering the reply of the assessee, the ld.AO has imposed penalty of Rs.52,48,000/- for furnishing inaccurate particulars of income. Appeal to the CIT(A) did not bring any relief to the assessee.
4. The ld.counsel for the assessee while impugning orders of the Revenue authorities contended that the assessee has given address and details of share applicants. It was for the AO to verify those details. He failed to prove that explanation put-forth by the assessee that it has received share application, was false. In support of her contentions, he relied upon the following decisions:
