TMI Blog2022 (4) TMI 673X X X X Extracts X X X X X X X X Extracts X X X X ..... ities. As such the revenue authorities cannot rely the basis enumerating from the quantum proceedings for levying the penalty. Thus order of the authorities below for levying the penalty under the provisions of section 271(1)(c) of the Act on account of concealment of income with respect to unexplained cash credit under section 68 rejected. Addition of short-term capital gain and disallowance of long-term capital loss and treating the long-term capital gain as income from other sources - Documents filed by the assessee during the penalty proceedings cannot be brushed aside for levying the penalty on the reasoning that such documents were not filed during the quantum proceedings. In the given case, the assessee has disclosed the capital gain income but failed to file the necessary documents during the assessment proceedings which were admittedly filed during the penalty proceedings in support of his transactions for the transfer of lands. As long-term capital loss declared by the assessee for ₹58,000 against the sale of properties. The property was sold at a price of ₹3 Lacs and the capital loss was calculated after claiming the index cost of acquisition of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Ahmedabad, arising in the matter of penalty order passed under s. 271(1)(c) of the Income Tax Act, 1961 (here-in-after referred to as the Act ) relevant to the Assessment Year 2009-10. 2. The assessee has raised the following grounds of appeal: That the Ld. CIT(A) erred in law and in the facts of the case in confirming the order of the AO in levying penalty of ₹ 11,50,000/- u/s. 271(1)(c) of the Act. 3. The only effective issue raised by the assessee is that the learned CIT-A erred in confirming the penalty levied by the AO for ₹ 11,50,000.00 on account of concealment of income under the provisions of section 271(1)(c) of the Act. 4. In the present case, the assessment was framed under section 143(3) of the Act by the AO vide order dated 20 December 2011 after making certain additions to the total income of the assessee as detailed under: 1. Unexplained unsecured loans ₹ 15,01,195/- 2. Addition on account of short term capital Gain ₹ 13,50,000/- 3. Addition on a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submission of the assessee before the learned CIT-A stands as under: Due to some problem your appellant could not furnished the documents relating to purchase and sales of the said land. 6.2 But, according to the assessee, the gross value of the sale consideration cannot be treated as income under the head capital gain after ignoring the cost of acquisition. 6.3 The assessee also submitted before the learned CIT-A that he has furnished the relevant papers relating to the purchase of the properties during the assessment proceedings. The relevant submission of the assessee before the learned CIT-A reads as under: During the course of the assessment proceedings, we have submitted papers relating to the purchase of the properties in the name of late Mr. Mehmudkhan Usmankhan Pathan and also affidavits of his son of Mr. Mutakim Mehmudkhan Pathan regarding the genuineness of the transaction. 6.4 The assessee without prejudice to the above also submitted that the entire amount of gross value of sale consideration has been treated as income under the head capital gain without giving the benefit of cost of acquisition. As such the value of the cost of acquisiti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roceedings, the ld.CIT(A) in his order dated 28.06.2012 has very held that only the identity of the creditors has been established by the appellant and the genuineness of the transactions and creditworthiness of these depositors remain unexplained. Similarly, with respect to the addition made on account of capital gains, I find that the appellant has furnished only affidavits which are self-serving documents and do not bear any evidentiary value. Again, the source of credit of ₹ 3,00,000/- in his books of accounts remain unexplained by the appellant. 7. Being aggrieved by the order of the learned CIT-A, the assessee is in appeal before us. 8. The learned AR before us filed a paper book running from pages 1 to 197 and contended that the assessee has neither concealed nor furnished inaccurate particulars of income. According to the learned AR, there were, all the necessary details, furnished with respect to the cash credit entries which are available in the paper book. 8.1 The learned AR also submitted that there is no question of treating the entire gross amount of sale consideration as capital gain without allowing the benefit of the cost of acquisition. The n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1,195.00 have been deemed as income. It is a trite law that the penalty is not automatic meaning thereby any addition made during the quantum proceedings does not become subject to penalty under the provisions of law. To levy the penalty, the revenue authorities have to establish that the assessee has concealed or furnished the inaccurate particulars of income. Merely, any addition made during the quantum proceedings does not authorise the revenue authorities to levy the penalty. What is to be seen is this that whether the assessee has concealed the particulars of income in the given facts and circumstances. Admittedly, all the credit entries shown by the assessee for duly reflected in the financial statements which was supported by the confirmation from all the parties except one M/s Hariom Auto Electric Rep. Works. This fact can be verified from the submission of the assessee before the learned CIT-A which is reproduced as under: It is humbly submitted to your honor that In respect of all the above loans necessary papers such as confirmations and ID proof of the depositor etc has been furnished to the A.O. from time to time. Further, in respect of, the unsecured loan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the assessee. Therefore, the provision in section 68 is confined to assessment proceedings and could not be extended to penalty proceedings as well. 10.3 Moving ahead, we also note that the penalty proceedings are distinct and independent to the quantum proceedings. Therefore, any addition made during the quantum proceedings cannot lead to the penalty until and unless the independent verification carried out by the authorities below during the penalty proceedings. For example, if any addition has been made under the provisions of section 68 of the Act in the absence of non-reply from the loan party during the quantum proceedings. Now, during the penalty proceedings the same exercise has also to be carried out by the revenue authorities. As such the revenue authorities cannot rely the basis enumerating from the quantum proceedings for levying the penalty. In holding so we draw support and guidance from the judgment of national textiles reported in 249 ITR 125 wherein it was held that the assessee in the quantum proceedings failed to produce the accountant but the department also in penalty proceedings made no effort to summon him. 10.4 In view of the above, we are n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d thereafter reached to the conclusion and independent finding whether the assessee has concealed the particulars of income or furnished inaccurate particulars of income. In other words, merely any addition made during the assessment proceedings does not authorise the revenue authorities to levy the penalty under the provisions of section 271(1)(c) of the Act. The Revenue authorities are under the obligation to carry out independent verification and consider the documents filed by the assessee for arriving to the satisfaction that the assessee has concealed the particulars of income. In other words, the documents filed by the assessee during the penalty proceedings cannot be brushed aside for levying the penalty on the reasoning that such documents were not filed during the quantum proceedings. In the given case, the assessee has disclosed the capital gain income but failed to file the necessary documents during the assessment proceedings which were admittedly filed during the penalty proceedings in support of his transactions for the transfer of lands. 10.6 Likewise, we note that the long-term capital loss declared by the assessee for ₹58,000 against the sale of propert ..... X X X X Extracts X X X X X X X X Extracts X X X X
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