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Income Tax Appellate Tribunal, “SMC-I” Bench, Mumbai
This is an appeal by the assessee against the order of Learned Commissioner of Income Tax (Appeals) [in short learned CIT(A)] dated 16.01.2019 pertains to A.Y. 2010-11.
The grounds of appeal read as under :- 1) The learned CIT(A) has erred in fact and in law in confirming the penalty of Rs. 1,32,239/- levied u/s. 68 by the Assessing Officer. 2) The Hon'ble CIT(A)has erred in fact and in law and has misconceived the provision of section 271(1)(c) and has not considered carefully the charge on the assessee whether it is for concealment of income or for filing of inaccurate particulars of income. 3) The CIT(A) has erred in fact and in law in considering an amount of Rs. 4,25,420/- claimed under the head Sundry Creditors which is the architect bills is pending and this amount is Rs. 3,75,000/- and not Rs. 4,25,420/-.
Brief facts of the case are that the assessee is a partnership firm engaged in business of construction. During the year, in the balance sheet interest free loans/advances of Rs 27,50,000/-, to various persons/entities
2 M/s. Stone House Developers were shown. The AO observed that these loans were advanced to parties where there was no business relationship and the same were not advanced wholly and exclusively for the purpose of business of the assessee. The assessee could not substantiate the loan of Rs 11,50,000/- advanced on 01.09.2009 to Smt Sabeerabegam Qureshi (wife of senior partner and mother of other partners), with credible documentary evidence. The AO held that there appeared to be no business relationship between assessee and Smt Sabeerabegam and the funds had been clearly used for non-business purpose, therefore, provisions of Section 36(1)(iii) of the Act are clearly attracted. The AO, therefore, disallowed proportionate interest @ 12% per annum and added Rs 80,500/- to the income of assessee u/s. 36(1)(iii) of the Act. The AO also initiated penalty proceedings u/s. 271(1)(c) of the Act for failure to make true and correct return of income and filing inaccurate particulars of income. Likewise in the balance sheet the assessee had claimed liability of Rs. 4,25,420/- in the name of Shri Dilip Tambday. During the course of enquiries conducted u/s. 133(6) of the Act, the AO learnt that Shri Dilip Tambday had any receivables from the firm. On being confronted, it was stated that since Shri Dilip Tambday followed cash system of accounting, no receivables are reflected in his balance sheet. The AO, did not accept the contention of the assessee as Shri Dilip Tambday had stated in his confirmation that "I am not receivable any fees amount or any outstanding balance from M/s. Stone House." The AO, therefore, treated this amount as unexplained cash credit u/s. 68 of the Act and added to the total income of assessee and also initiated penalty proceedings for failure to make true and correct return of income and filing inaccurate particulars of income.
In penalty proceedings, a show-cause notice u/s 274 r.w.s. 271(1)(c) of the Act was issued. In compliance to various notices issued by the AO from time to time, the assessee failed to attend and also failed to furnish any explanation in this regard. The AO, therefore, held that the assessee had concealed its particulars of income by furnishing inaccurate particulars of 3 M/s. Stone House Developers income and levied minimum penalty of, Rs 1,56,3297-, being 100% tax sought to be evaded, u/s. 271(1)(c) of the Act.
Upon assessee’s appeal learned CIT(A) deleted the penalty qua deemed interest addition, but sustained the penalty for creditor addition.
Against this order the assessee is in appeal before the ITAT. I have heard learned Departmental Representative and perused the record. None appeared on behalf of the assessee. I note that addition u/s. 68 has simply been made on a vague statement obtained from the concerned person that "I am not receivable any fees amount or any outstanding balance from M/s. Stone House." The above statement does not state that he has never done any work for the assessee. It only prima facie means that there is no outstanding. Hence, assessee’s plea that the said party was following cash system deserves an examination. Without doing that the addition has been done and penalty also levied. I find that assessee’s explanation is cogent. In this view of the matter there is no question of levying any penalty for concealment or submitting inaccurate particulars of income. Hence, I set aside the orders of the authorities below and direct that the penalty be deleted.
In the result, the appeal of the assessee is allowed. Order pronounced under Rule 34(4) of the ITAT Rules on 15.10.2020.