Itta/236/2015 Of The Commissioner Of Income-Tax-7 v. Sri. M. Balanarasimha Reddy

THE HON’BLE SRI JUSTICE RAMESH RANGANATHAN And THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY I.T.T.A.No.236 of 2015 JUDGMENT:(per Hon’ble Sri Justice Ramesh Ranganathan) This appeal, under Section 260-A of the Income Tax Act, 1961 (forshort “the Act”), is preferred against the order passed by the IncomeTax Appellate Tribunal, Hyderabad in I.T.A.No.1770/Hyd/2013 dated28.08.2014 for the assessment year 2007-08. The respondent-assessee derived income from consultancy andremuneration from the partnership firm M/s. Vishnu Priya Finance.During the survey operations conducted in the case of SriG.Sanjeeva Reddy, partner of M/s.S.V.Constructions, it was foundthat the assessee had entered into a sale agreement, along withthree other members, for purchase of land against which partpayment of Rs.4.90 crores was admitted to have been made by thedate of the survey. Out of the assessee’s admitted share ofRs.1,22,50,000/-, Rs.1,17,50,000/- was treated as unexplainedinvestment and added to the returned income. Further, a sum ofRs.25,00,000/- was also brought to tax, treating it as undisclosedadditional investment, in the land by the assessee since receipt ofRs.1.00 crore, found during the survey, was not admitted by theassessee. In appeal the Tribunal, by its order dated 25.01.2012, confirmed boththe additions made in the assessment order. Penalty proceedingswere initiated thereafter. The Assessing Authority held that theassessee had failed to prove the creditworthiness of the creditors andsource for further investment of Rs.25,00,000/- and imposed penaltyof Rs.47,96,550/- under Section 271(1)(c) of the Act. The assessee questioned the penalty order before the Commissionerof Income Tax (Appeals), both on the ground of limitation and withrespect to the additions. The Commissioner of Income Tax (Appeals)held that there was no infirmity in the order of the Assessing Officerwith regards limitation. On the issue of addition of Rs.1,17,50,000/-,the assessee contended that the contributions were received fromseven members, who had come together, and had invested throughthe assessee; a strong reason, to disbelieve such contributions, wason account of the fact that the entire transactions were in cash, andthe contributing parties could not explain their contributions with the The assessee questioned the penalty order before the Commissionerof Income Tax (Appeals), both on the ground of limitation and withrespect to the additions. The Commissioner of Income Tax (Appeals)held that there was no infirmity in the order of the Assessing Officerwith regards limitation. On the issue of addition of Rs.1,17,50,000/-,the assessee contended that the contributions were received fromseven members, who had come together, and had invested throughthe assessee; a strong reason, to disbelieve such contributions, wason account of the fact that the entire transactions were in cash, andthe contributing parties could not explain their contributions with the help of verifiable sources; their main sources were agriculturalincome and sale of agricultural lands which were again in cash; theAssessing Officer recorded the statements from majority of suchparties (5 out of 7), but such statements were not taken intoconsideration by the Assessing Officer for want of verifiableevidence/information; the assessee had explained, on the spot, theinvestment by producing creditors; the creditors had substantiatedwith respect to advancing sums; it was only the Assessing Officerwho disbelieved that they had no creditworthiness, and this could notbe treated as concealment. The Commissioner of Income Tax(Appeals) held that two creditors, one among whom was shown to bea Software Engineer, and another was shown to have agriculturalincome, were neither called nor examined by the Assessing Officer tojudge their creditworthiness; additions made in quantum proceedingswere different from penal proceedings, and the angle of concealmentwas not fully established on the issue of investments which weretreated as unexplained to attract penalty under Section 271(1)(c) ofthe Act; and no penalty was leviable on Rs.1,17,50,000/-representing the contributions for investment by the assessee whichwere treated as unexplained income without proving the angle ofconcealment. To this extent, the Commissioner of Income Tax(Appeals) gave relief to the assessee. With regards addition ofRs.25,00,000/-, the Commissioner of Income tax held that penaltywas leviable thereon representing the unexplained investments,where concealment was established by the facts of the case. TheCIT (A) held that penalty was not leviable on the addition ofRs.1,17,50,000/- which also represented explained investment in thehands of the assessee, since no concealment was shown to havebeen established, and the submission of the assessee was merelydisbelieved. The appeal was partly allowed. In appeal by the Revenue, the Tribunal held that the additions madein the quantum proceedings were different from penalty proceedings;merely by disbelieving the explanation of the assessee, the Revenuecould not come to the conclusion that the assessee had concealedthe income, and had furnished inaccurate particulars; the assesseehad filed confirmatory letters, and the Assessing Officer hadexamined the persons all of whom had confirmed advancing theamounts; assessment proceedings and penalty proceedings wereseparate and distinct; once the assessee was able to furnish a bonafide and plausible explanation in respect of the material facts, theburden cast by Explanation 1 of Section 271(1) (c) of the Act wasdischarged; merely because the explanation furnished by theassesee was considered unsatisfactory and unreasonable, it wouldnot justify invocation of Clause (a) to levy penalty under Section271(1)(c) of the Act; and there was no infirmity in the order of theCommissioner of Income Tax (Appeals). Penalty under Section 271(1)(c) of the Income Tax can be levied onlyin cases where the Assessing Officer, or the Commissioner ofIncome Tax (Appeals), are satisfied that any person has concealedthe particulars of his income, or has furnished inaccurate particularsof such income. The penalty proceedings initiated against therespondent-assessee was on the ground that he had concealed theparticulars of his income. Both the Commissioner (Appeals) and theTribunal have recorded a finding that the assessee had notconcealed the income, and the Assessing Officer had merelydisbelieved his version. The Tribunal is a final court on fact and, savea perverse finding or a finding based on no evidence, no substantialquestion of law can be said to have arisen necessitating interferenceunder Section 260-A of the Act. Both the Commissioner of IncomeTax (Appeals) and the Tribunal have assigned reasons for arriving atthe satisfaction that there was no concealment of income on the partof the assessee and, based on such findings, held that no penaltycould be levied on the additions made of Rs.1,17,50,000/-. We findno error in the order, much less a substantial question of law,necessitating interference in appeal. The appeal fails and is, accordingly, dismissed. MiscellaneousPetitions pending, if any, shall also stand dismissed. There shall beno order as to costs. ______________________________ RAMESH RANGANATHAN, J 04[th] November 2015. __________________________________ M.SATYANARAYANA MURTHY, J JSU THE HON’BLE SRI JUSTICE RAMESH RANGANATHANAnd THE HON’BLE SRI JUSTICE M.SATYANARAYANA MURTHY JSU I.T.T.A.No.236 of 2015 Date: 04.11.2015