Case Law Details
Balkrishna Purshottamdas Patel Vs JCIT (ITAT Ahmedabad)
ITAT Ahmedabad held that as all the particulars duly furnished by the assessee relating to source of investment, mere rejection of the claim of the assessee cannot invite levy of penalty under section 271(1)(c) of the Income Tax Act. Accordingly, penalty deleted.
Facts- Penalty for concealing/ furnishing inaccurate particulars of income as per provisions of section 271(1)(c) of the Act in the present case has been levied on an addition made to the income of the assessee and confirmed by the ld.CIT(A) and the ITAT, relating to the investment in property amounting to Rs.22,85,528/-source of which remained unexplained. The impugned addition was made as per provision of section 69A of the Act.
Conclusion- Held that all particulars relating to the source of investment were furnished by the assessee which were not found to be inaccurate or even incorrect by the Revenue. Even the explanation of the source of investment was not found to be false by the Revenue. It was merely found to be unacceptable since advance was given by assessee to co-owner in preceding year. It is settled law that mere rejection of a claim of the assessee will not invite levy of penalty u/s 271(1)(c) of the Act. The assessee, in such circumstances, we hold, cannot be charged with having furnished any inaccurate particulars of income or concealed any particulars of income so as to attract levy of penalty u/s 271(1)(c) of the Act.
FULL TEXT OF THE ORDER OF ITAT AHMEDABAD
Present appeal has been filed by the assessee against order of the ld.Commissioner of Income-Tax (Appeals)-5, Ahmedabad [hereinafter referred to as “the ld.CIT(A)”] dated 18.07.2019 passed under section 250(6) confirming the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 [hereinafter referred to as “the Act” for short] pertained to the Asst.Year 2010-11.
2. The grounds raised in the appeal are as under:
“1. The penalty order passed un/s.271(1)(c) of the IT At by the AO and confirmed by the first appellate authority is bad in law and deserved to be uncalled for.
2. The AO has erred in law and on facts and the first appellate authority in confirming the same on levying penalty of Rs.7,06,246/- under section 271(1)(c). Same deserves to be deleted.”
3. As transpires from orders of the authority below, penalty for concealing/ furnishing inaccurate particulars of income as per provisions of section 271(1)(c) of the Act in the present case has been levied on an addition made to the income of the assessee and confirmed by the ld.CIT(A) and the ITAT, relating to the investment in property amounting to Rs.22,85,528/-source of which remained unexplained. The impugned addition was made as per provision of section 69A of the Act.
4. The argument of the ld.counsel for the assessee before us against the levy of penalty in the present case is that, he had duly explained source of investment and the same was not found to be false/untrue, and therefore, there was no case for levy of penalty.
The ld.counsel for the assessee pointed out that during quantum appellate proceedings, details had been furnished to the ld.CIT(A) reproduced at para-12 of his ordershowing that during the impugned year, an amount of Rs.32,82,538/- had been invested in the impugned property, which comprised of Rs.10 lakhs paid by the assessee directly and Rs.22,85,528/- paid by Smt. Chandrikaben R. Patel . He pointed out that the ld.CIT(A) had found truth in the fact that Rs.32,82,538/- had been invested in property during the impugned year. But attributing the investment of Rs.22,85,528/- as pertaining to assesses share in the land, the same though being demonstrated as paid by Smt. Chandrika R Patel ,was treated as unexplained investment in the hands of the assessee. That penalty has been imposed on this unexplained investment.
5. The ld.counsel for the assessee contended that the investment made during the year of Rs.32,82,538/- was explained and substantiated as having been made out of bank account of two co-owners of the property, including the assessee. Evidences to this effect, reflecting the payment of the amounts from the bank accounts of the co-owners was also filed. That investment of Rs.10 lakhs , stated to be out of the assessee’s bank account, was confirmed and accepted by the Revenue; that with respect to the payment of Rs.22,85,528/- the fact that payment was made by other co-owners through banking channels as evidenced by the assessee was not disputed; that the only reason for making the addition in the hands of the assessee was that the explanation of the assessee that the co-owner had made payment out of amount advanced by the assessee of Rs.24 lacs was found unacceptable on the ground that the said amount was advanced in the preceding year.
6. The contention of the ld.counsel for the assessee was that as long as entire source of investment in the property stood explained, and no infirmity was found in the same, though, the addition might have been confirmed in the quantum proceedings, there was no case for levy of penalty at all for concealing or furnishing of inaccurate particulars of income, since the particulars relating to the source of investment were not found to be false.
7. The ld.DR on the other hand relied on the order of the ld.CIT(A) at para 4.2 of his order as under:
“4.2 I have considered the facts of the case, penalty order and submissions made by the appellant. It is noted that the AO has imposed the penalty on the additions confirmed by the CIT(A). The appellant has contended that when all the facts were disclosed before authorities in quantum proceedings penalty should not be levied on. However the contention of the appellant is not tenable as in quantum appeal proceedings the CIT(A) has given specific finding that after verifying additional evidence and remand report the appellant could not explained the source of investment in the property of Rs.22,85,528/-. During the present appellate proceeding also the same could not be explained. Thus in view of this fact, it is held that appellant has furnished inaccurate particulars to this extent and the penalty levied by the AO on this amount is confirmed.”
8. We have heard rival contentions. The entire facts and background relating to the addition on account of unexplained investments of Rs.22,85,528/- in the hands of the assessee ,on which penalty u/s 271(1)(c) of the Act has been levied, needs to be appreciated to adjudicate the issue of levy of penalty.
The assessee was noted to have made investment during the impugned year in immoveable property of an amount of Rs.1,08,85,528/- jointly with Sh.Rashmikant C. Patel and Chandrikaben R. Patel. The assessee’s purported share in the property was 50%i.e Rs.54 lacs. The AO was satisfied with the source of Rs. 10 lacs invested b y the assessee. The balance of Rs.44 lacs was added to the income of the assessee as unexplained investment in the absence of any explanation of the source thereof. Before the ld.CIT(A) in quantum proceedings, the assessee furnished source of entire investment of Rs.1.08 crores in the said property as being invested by both the co-owners with Shri Rashmikant C. Patel investing an amount of Rs.98,85,528/- out of his bank account in Union Bank of India, C.G. Road, Ahmedabad while the assessee investing Rs.10 lakhs out of bank account in State Bank of India. The details also revealed that out of total investment of Rs.1,08,85,528/- only Rs.32,82,538/- was made in the impugned year, while the balance had all being made in earlieryears; that out of Rs.32,82,538/- invested during the year, Rs.10 lakhs had been invested by the assessee from his bank account in State Bank of India and the balance Rs.22,82,528/- had been invested by other co-owner, Rashmikant C. Patel. It was explained by the assessee to the appellate authorities that this investment of Rashmikant C. Patel had been made by issuing cheque from bank account of his wife Chandrikaben R. Patel and was out of advance of Rs.24 lacs given by the assessee to Rashmikant C. Patel. The Ld.CIT(A) accepted that addition with respect to investment made during the year only could be made, i.e Rs.,32,82,538/- and held that source of Rs. 10 lacs only stood explained vis a vis the assessee. The explanation of the balance investment of Rs.22,82,528/- , as out of advance given to Rashmikant C. Patel was rejected as unacceptable for the reason that the advance was given in the pre ceding year. The findings of the Ld.CIT(A) in the order passed in quantum proceedings dated23-03-2016, placed before us in P.B 1-70 ,at para 3.10.2 is as under:
“3.10.2. The facts of the case, submissions of the appellant and remand reports from the A.O. are considered. The appellant has mainly contended that source of the investment is explained and recorded in the books of accounts. It is also the contention of the appellant that out of total investment an amount of Rs.76 lakhs was made in earlier years and representing opening investment , therefore, cannot be considered for the purpose of invoking provisions of Section 69 of the Act. The AO has considered investment of Rs. 10 lakhs as explained and made addition of balance amount of Rs.44 lakhs on the ground that the assessee has failed to explain the source of that income. From the details furnished by the appellant, it is found that the appellant has paid Rs.24 laksh to the other co-owner Shri Rashmikant C, Patel in earlier year and paid Rs.10 lakhs to the seller during the year. It is further found that during the year only investment was made of an amount of Rs.32,85,528/-. The contention of the appellant that out of ‘his Rs.22,85,5287- were invested by Shri Rashmikant C. Patel to whom appellant had advanced a sum of Rs.24 lakhs in earlier, year cannot be accepted as the assessee has advanced the amount of Rs.24 lakhs in earner years and not during the year. Therefore, the assessee has failed to explain the source of investment of Rs.22,85.528/- made during the year by the appellant, hence addition of Rs.22,85,528/- is confirmed and balance is deleted. Thus, the ground No.3 is partly allowed.”
The ITAT confirmed the addition in its order passed in ITA No.985/Ahd/2016 dated 07-10-2020 at para 10 of its order holding as under:
“10. We have heard the rival contention and perused the material on record. During the course of assessment, the Assessing Officer noticed that assessee has made investment in immoveable property at an amount Rs. 1,08,85,528/- jointly with Sh. Rashmikant C. Patel and Smt. Chandrikaben Rashikant Patel. The share of the assessee in the property was 50% and accordingly, the Assessing Officer has computed the share of investment to the amount of Rs. 54 lacs. During the course of assessment, the assessee could not substantiate with supporting evidences the source of investment of Rs. 54 lacs made in the said immoveable property. The assessee could only explain the payment of Rs. 10 lacs made on 27th October, 2009. Therefore, the Assessing Officer has added Rs. 44 lacs to the total income of the assesse as unexplained investment made by the assessee in the immovable property. At the time of appellate proceedings before the ld. CIT(A), the assessee claimed that he had paid Rs. 24 lacs by cheque dated 7th October, 2008 to one of the co-owner Shri Rashmikant C. Patel who had made further payment to the land owner from his bank account. The assessee has also submitted that out of total investment of Rs. 1,08,85,528/- payment of Rs. 76 lacs was made in earlier years and the remaining amount of Rs. 32,82,528/- was only paid during the year under consideration. Therefore, it was contended that Rs. 76 lacs was opening investment made in the earlier years which cannot be added u/s.69 of the Act during the year under consideration. In the light of the above facts and circumstances, we observe that assessee had tried to explain the part investment made out of Rs. 76 lacs in the earlier years which had already been deleted by the ld. CIT(A). However, in respect of payment made during the previous year relevant to the year under consideration, the assessee had only explained the source of payment of Rs. 10 lacs out of the total amount of payment of Rs. 32,82,528/-. In view of the above facts, we consider no error in the decision of ld. CIT(A) in restricting the addition to the extent of Rs. 22,85,528/- since the assessee had failed to substantiate the source of this investment during the year under consideration. Accordingly, this ground of appeal of the assessee is dismissed.
9. What derives from the above is that all particulars relating to the source of investment of Rs.22,85,528/- made in immoveable property was furnished by the assessee ,as invested by Sh.Rashmikant C. Patel. The same has not been found to be false or untrue by the Revenue.Even particulars pertaining to the explanation of the assessee as to why payment was made by the other coowner has not been found to be false by the Revenue. The assesses explanation of the payment made by the other co-owner on account of advance given by the assessee, we find, is not disputed by the Revenue with respect to the factum of advance given by the assessee. The only reason for rejecting the explanation is that it was found unacceptable since advance was given in preceding year.
Therefore clearly all particulars relating to the source of investment were furnished by the assessee which were not found to be inaccurate or even incorrect by the Revenue. Even the explanation of the source of investment was not found to be false by the Revenue. It was merely found to be unacceptable since advance was given by assessee to co-owner in preceding year. It is settled law that mere rejection of a claim of the assessee will not invite levy of penalty u/s 271(1)(c) of the Act. The assessee , in such circumstances, we hold, cannot be charged with having furnished any inaccurate particulars of income or concealed any particulars of income so as to attract levy of penalty u/s 271(1)(c) of the Act.
The penalty so levied of Rs. 7,10,597/-is directed to be deleted.
10. In the result, appeal of the assessee is allowed.
Order pronounced in the Court on 13th February, 2023 at Ahmedabad.
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