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D.K. Bhatia, 20/6, Mathur Road, Faridabad. Vs. ACIT, Central Circle-1, Faridabad.
September, 10th 2014
           IN THE INCOME TAX APPELLATE TRIBUNAL
                DELHI BENCHES : D : NEW DELHI

      BEFORE SHRI R.S. SYAL, AM AND SHRI A.T. VARKEY, JM

                       ITA No.5120/Del/2013
                     Assessment Year : 2007-08


D.K. Bhatia,                      Vs.   ACIT,
20/6, Mathur Road,                      Central Circle-1,
Faridabad.                              Faridabad.

PAN : AABPS4706A

     (Appellant)                           (Respondent)


              Assessee By     :    Shri Vinay Bhatia, CA
              Department By   :    Dr. B.R.R. Kumar, Sr.DR

                                  ORDER

PER R.S. SYAL, AM:

       This appeal by the assessee is directed against the order

passed by the CIT (A) on 26.06.2013 upholding the penalty of `

45,900/- imposed by the AO u/s 271(1)(c) of the Income-tax Act,

1961 (hereinafter also called `the Act') in relation to the

assessment year 2007-08.


2.     Briefly stated, the facts of the case are that during the

course of search and seizure operation conducted on the
                                                         ITA No.5120/Del/2013


assessee, cash to the tune of ` 2,28,500/- was found. Apart from

others, the assessee stated that a sum of ` 1,50,000/- was

contributed by his wife which she had withdrawn from her bank

account in Kanpur about 2 ½ years ago.             During the course of

assessment proceedings, it was also explained that the amount

was kept for emergency requirement which belonged to his wife

and the amount, in turn, was given to her by her father from

Kanpur. Affidavit of the parents of the assessee's wife was also

filed to support the contention. As the AO was not agreeing with

the genuineness of the source of cash, the assessee agreed for

surrender of this amount for taxation subject to no penalty. The

AO not only made addition, but also imposed penalty without

verifying the correctness of the assessee's stand taken in support

of the genuineness of the transaction of receipt of cash by his

wife from her parents. Penalty so imposed came to be upheld in

the first appeal.





3.   We have heard the rival submissions and perused the

relevant   material   on   record.       Before   embarking   upon      the

sustainability or otherwise of the instant penalty, it is relevant to

note that the mere fact about the making or confirmation of such
                                     2
                                                   ITA No.5120/Del/2013


addition in quantum proceedings does not automatically justify

the imposition of penalty.   The criteria for sustenance of an

addition and imposition of penalty is not necessarily the same.

That is the reason for which the legislature has kept the

assessment proceedings distinct from penalty proceedings. The

reason is obvious that if the assessee fails to persuade the

authorities in quantum proceedings about the genuineness of its

claim from the angle of taxability in quantum proceedings, which

forms the foundation for the imposition of penalty, the assessee

gets another opportunity of explaining his point of view for non-

imposition of penalty by demonstrating that there was no

concealment of income or furnishing of inaccurate particulars. If

the assessee succeeds in making out a case in penalty

proceedings that either addition was wrongly made or even if it

was rightly made, but the same cannot give rise to penalty, then,

there can be no hindrance on the authorities in deleting such

penalty. The Hon'ble Bombay High Court in CIT vs. Balraj Sahni

[(1979) 119 ITR 36 (Bom)] has upheld the deletion of penalty

when the addition was confirmed in quantum proceedings. Similar

view has been taken in CIT vs. Devi Dayal Aluminium Industries

                                3
                                                     ITA No.5120/Del/2013


Pvt. Ltd. [(1988) 171 ITR 663 (All)].      In view of the above

discussion, we feel no hesitation in holding that the mere fact

about the sustenance of disallowance in quantum proceedings

cannot be a ground for automatic confirmation of penalty u/s

271(1)(c).


4.   Adverting to the facts of the instant case, it is observed that

the assessee gave a specific explanation to support his contention

about the source of cash of ` 1,50,000/-. It was stated during the

course of search proceedings itself that this amount belonged to

his wife which she had withdrawn from her bank account at

Kanpur about 2 ½ years ago and this amount was given to her by

her parents.    Not only that, the assessee also furnished an

affidavit from her parents in support of this contention during the

course of assessment proceedings. The AO did not carry out any

investigation to falsify the assessee's stand about the source of

amount. No case has been made out by the AO that though the

amount of ` 1,50,000/- was received by the assessee's wife which

was kept in bank, but the same was spent elsewhere. In view of

the prevailing factual scenario, we do not find that the AO has

made a successful case for imposition of penalty. At the most, it
                                 4
                                                      ITA No.5120/Del/2013





can be treated as a case of unproved explanation but certainly

not a disproved explanation given by the assessee. The Hon'ble

Gujarat High Court in the case of National Textiles vs. CIT [(2001)

249 ITR 125 (Guj)] has held that if the assessee gives some

explanation which remains unproved, but, is not disproved, no

penalty is imposable. Similar view has been taken by the Hon'ble

Bombay High Court in CIT vs. Upendra V. Mithani [ITA (L) No.1860

of 2009] dated 05.08.2009.             In view of the above cited

precedents, which are fully applicable to the facts of the case

under consideration, we hold that the ld. CIT(A) was not justified

in sustaining the penalty. We, therefore, order for its deletion.


5.    In the result, the appeal is allowed.


      The order pronounced in the open court on 09.09.2014.

/-           Sd/-                                      Sd/-
       [A.T. VARKEY]                              [R.S. SYAL]
     JUDICIAL MEMBER                          ACCOUNTANT MEMBER

Dated, 9th September, 2014.

dk




                                   5
                               ITA No.5120/Del/2013


Copy forwarded to:

  1.   Appellant
  2.   Respondent
  3.   CIT
  4.   CIT (A)
  5.   DR, ITAT

                         AR, ITAT, NEW DELHI.




                     6

 
 
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