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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI V.DURGA RAO & SHRI G.MANJUNATHA
PER G.MANJUNATHA, AM: This appeal filed by the assessee is directed against the
order of learned CIT(A) -3, Coimbatore dated 18.08.2016 and
pertains to assessment year 2012-13.
The assessee has raised the following grounds of
appeal:-
“Against order of CIT (A)-IlI, passed under sec 271(1) (c) of the Act (stated as order under sec. 143(3)) Coimbatore. in I.TA. No. 268/15-l6(A)1 dated 18.8.16.
The order of the Commissioner or Income Tax (Appeals) in as much as he has held against the Appellant by upholding the levy of penalty under sec 271(1)(c) of the act is opposed to law and to principles of natural justice and the liable to be cancelled.
ITA No.3240/Chny/2017
The Commissioner of Income Tax (Appeals) erred in not considering the grounds of appeal in proper perspective. The submissions of appellant has not been brought out and considered in detailed manner.
The Commissioner of Income Tax (Appeals) erred in confirming the penalty r levied by the Assessing authority and failed to taken into consideration that Assessing Officer has not recorded the requisite satisfaction in the body of assessment order for levying penalty under sec 271(l) (c) of the act.
The Commissioner of Income Tax (Appeals) ought to have appreciated that the Assessing authority having failed to. comply with the provisions of sec 271(1) (c) of the act with regard to initiation of penalty proceedings, the proceedings are vitiated and consequently the penalty order passed was invalid.
The Commissioner of Income Tax (Appeals) failed to appreciate the fact that penalty proceedings art independent from that of the Assessment proceedings and ought to have considered submissions of appellant on merits of the mailer based on the facts and circumstances of the case.
The Commissioner of Income Tax (Appeals) has erred in not noting that the appellant had neither concealed any income nor furnished inaccurate particulars of income to warrant levy of penalty under the act. The penalty levied ought to be cancelled.
The Commissioner of Income Tax (Appeals) ought to have appreciated the fact that mere additions or disallowance made in the assessment proceeding would not automatically result in levy of penalty under sec 271(1) (c) of the act when there was no proof with regard to concealment of income of the appellant or furnishing of inaccurate particulars by the appellant and penalty is liable to be cancelled.
The Commissioner of Income Tax (Appeals) was not justified in ignoring the fact the Assessing authority has issued notice without proper application of mind under sec 271(1) (c) rws 274 of act without specifying the reasons for initiation of penalty as
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to whether it relates to concealment of income or for furnishing of inaccurate particulars of income. Consequently Order of penalty passed on the basis of invalid notice is void and deserves to be deleted. This stand of the appellant is supported by various judicial pronouncements.
The Commissioner of Income Tax (Appeals) failed to note that the appellant had not contested the Assessment proceedings and mere admission of addition to avoid further litigation and payment of tax does amount to concealment of income or furnishing of inaccurate particulars of income as held by in various judicial pronouncements.
The levy of penalty is excessive, arbitrary and liable to be deleted in toto.
The Appellant contests all the findings of fact and law made by the Commissioner of Income Tax (Appeals) against the appellant.
The Appellant craves leave to file Additional grounds of appeal at or before the time of hearing.
Any other ground that may be raised at the lime of personal hearing.”
At the time of hearing, learned AR for the assessee
submitted that there is a delay in filing of appeal for which
necessary petition for condonation of delay along with affidavit
has been filed explaining the reasons for the delay in filing
appeal. According to the learned AR for the assessee, the
assessee has filed appeal within the specified time limit allowed
under the Act, but the Tribunal has considered delay on the
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basis of challan for payment of appeal fee on 20.04.2017
which resulted in delay of 164 days from expiry of time limit
prescribed for filing appeal. But, fact remains that the assessee
after receipt of defect notice from the Tribunal on 17.11.2016,
had remitted appeal fees on 22.11.2016, however, the same
was communicated to Tribunal on 20.04.217. If the date of
filing appeal is considered, there is no delay in filing the appeal
and if the date of payment of appeal fee is considered, then
there is a delay of 10 days in filing the appeal. He further
submitted that, be that as it may, but fact remains that there is
inadvertent error in not paying appeal fees before filing the
appeal due to mistake of a person, who was handling papers,
but there is no willful negligence on the part of the assessee
not to file appeal within the time allowed under the Act.
Therefore, considering the fact that the assessee has shown
interest in filing appeal within the due date specified under the
Act, marginal delay of ten days may be condoned in the interest
of advancement of substantial justice .
The learned DR, on the other hand, fairly agreed that
delay may be condoned in the interest of justice.
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We have heard both the parties and considered petition
filed by the assessee for condonation of delay along with
reasons given for not filing appeal within due date specified
under the Act . Admittedly, the assessee has filed appeal on
08.11.2016, which is well within the due date specified under
the Act, but, the Tribunal has not considered appeal filed by
assessee on 08.11.2016 for the reason that appeal papers did
not have challan for payment of appeal fee and hence,
considered the date of filing of appeal when the assessee has
communicated challan for payment of appeal fee on
20.04.2017. If the date of communication of challan for
payment of appeal fee is considered i.e 20.04.2017, then there
is a delay of 164 days in filing appeal. If the date of filing the
appeal without challan for payment of fees is considered, there
is no delay. The assessee explained the reasons for not
attaching challan for payment of appeal fee and further,
immediately after receipt of defect memo, payment of fees has
been remitted on 22.11.2016. If the date of payment of appeal
fee is considered, then there is a marginal delay of ten days in
filing appeal. Therefore, considering the fact that the assessee
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has explained his bonafide in filing appeal within due date and considering the facts and circumstances of the case and also fact that assessee has paid appeal fees immediately on receipt of defect memo, we deem it appropriate to condone the delay in filing appeal in the interest of advancement of substantial justice. Hence, the delay in filing the appeal is condoned and admit the appeal for hearing. 6. Brief facts of the case are that the assessee company is engaged in the business of project consultant and rendering map drawing works in engineering field filed its return of income for the assessment year 2012-13 on 24.05.2013 declaring total income of ` 29,88,480/-. The assessment for impugned
assessment year has been completed u/s.143(3) of the Income Tax Act, 1961, on 31.03.2015 determining total income at `80,04,299/- after making additions towards unproved
liabilities / cessation of liability and unexplained cash credit u/s. 68 of the Act for the reason that the assessee has failed to prove liability shown under the head map drawing charges and has also failed to prove unsecured loan taken from Mr.Karur Ramasamy amounting to `13,00,000/-.
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Thereafter, penalty proceedings u/s.271(1)(c) of the Act
was initiated by issue of notice u/s.274 r.w.s 271(1)(c) of the
Act. In response, the assessee submitted that it has neither
concealed particulars of income nor furnished inaccurate
particulars of income, in respect of additions made towards
unproved liability, because, the assessee has furnished
necessary evidences to prove liability and also persons, who
received payment from the company has admitted the fact that
they have rendered services in connection map drawing work
and has also received payment in full. But, the Assessing
Officer has disregarded all evidences filed by the assessee and
has made additions only on the basis of field report received
from Inspector of Income Tax, where he has stated that
persons have stated that they do not have any outstanding as
on 31.3.2012. Similarly, in respect of unsecured loan received
from Mr.Karur Ramasamy, the assessee has filed confirmation
from parties, but the Assessing Officer has made addition only
on the ground that no proper explanation was furnished to
explain unsecured loan shown in the name of Mr.Karur
Ramasamy. Therefore, when the assessee has furnished
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necessary evidences in respect of certain payments, merely for
the reason that said payment has not been substantiated to the
satisfaction of the Assessing Officer, the same cannot be
considered as willful attempt made for concealment of
particulars of income to evade payment of taxes which
warrants penalty u/s. 271(1)(c) of the Act.
The Assessing Officer however, was not convinced with
the explanation furnished by the assessee and according to
him, the assessee has failed to explain outstanding liability
shown under the head map drawing charges with necessary
evidences. The Assessing Officer further observed that even in
respect of unsecured loan, the assessee company has not filed
any evidences to explain loan taken from the party. Therefore,
he opined that mere payment of amount by cheque is not
sufficient enough to prove liability and filing confirmation letter
is not enough to prove onus cast upon the assessee u/s.68 of
the Act. Accordingly, he opined that the assessee has
furnished inaccurate particulars of income in respect of
unproved liability and unexplained cash credits and hence, by
following the decision of Hon'ble Supreme Court in the case of
9 ITA No.3240/Chny/2017
UOI Vs. Dharmendra Textile Processors (2008) 116 Taxman 65(SC) levied penalty of `15,49,889/- which is equivalent to
100% of tax on the concealed income.
Being aggrieved by the penalty order, the assessee preferred an appeal before learned CIT(A). Before the learned CIT(A), the assessee has reiterated its submissions made
before the Assessing Officer to argue that it has furnished necessary evidences in respect of liability shown under the head map drawing charges and further recipient of payment
has been confirmed before the Inspector that they have received payment for rendering services. Therefore, merely for the reason that parties have not confirmed date of payment of money, no adverse inference can be drawn against the assessee that liability is unproved so as to impose penalty u/s.271(1)(c) of the Act. As regards unexplained cash credit
being loan taken from Mr. Karur Ramasamy, the assessee has discharged its onus by filing confirmation letters, therefore, the same cannot be considered as unproved creditors so as to levy penalty u/s.271(1)(c) of the Act. The learned CIT(A), after
considering relevant submissions of the assessee held that the
10 ITA No.3240/Chny/2017
facts brought by the Assessing Officer clearly indicate that the
assessee had concealed income in respect of unproved liability
reflected as sundry creditors and has also agreed for addition
during the assessment proceedings. Therefore, he opined that
it is a clear case of concealment of income falling within the
ambit of section 271(1)(c) of the Act, accordingly, rejected
arguments taken by the assessee and confirmed penalty levied
u/s.271(1)(c) of the Act. Aggrieved by the learned CIT(A) order,
the assessee is in appeal before us.
The learned AR for the assessee submitted that the
learned CIT(A) has erred in not appreciating the fact in light of
provisions of section 271(1)(c) of the Act before confirming the
penalty levied by the Assessing Officer in respect of additions
towards unproved liabilities and unexplained cash credit u/s.68
of the Act, because any claim of expenditure which was not
substantiated before the Assessing Officer cannot
automatically lead to conclusion that assessee has concealed
particulars of income or furnished inaccurate particulars of
income. The learned AR further submitted that the assessee
has filed all evidences in respect of unproved liability towards
11 ITA No.3240/Chny/2017
map drawing charges and further parties to whom payment
was made were also confirmed receipt of payment, but only
point which was considered by the Assessing Officer is
statement of parties regarding date of payment of liability,
otherwise all the parties have accepted the fact that they have
rendered services to the company and has also received
payment in cash. Therefore, when the assessee has filed all
those evidences, the Assessing Officer has erred in coming to
the conclusion that liability is unproved. Further, when a claim is
made towards expenditure with necessary evidence, but the
same could not be substantiated to the satisfaction of the
Assessing Officer cannot be considered as willful furnishing of
inaccurate particulars income so as to evade payment of taxes.
The learned AR further submitted that insofar as unsecured
loan received from Karur Ramasamy, it was not the case of the
Assessing Officer that identity of party was not proved. In fact,
the assessee has filed confirmation letters from the parties.
Therefore, the Assessing Officer has erred in coming to the
conclusion that unsecured loan taken from party become
unexplained credit is liable to be taxed u/s.68 of the Act and
12 ITA No.3240/Chny/2017
further, which amounts to willful concealment of particulars of
income within the meaning of section 271(1)(c) of the Act. In
this regard, he has relied upon the decision of co-ordinate
Bench of Tribunal in the case of Lata Hospitals Pvt.Ltd.
Vs.DCIT, Visakhapatnam in ITA No. 649/Vizag/2014 vide order
dated 09.09.2016 and also the decision of Hon'ble Supreme
Court in the case of CIT Vs.Reliance Petro Products Pvt.Ltd.
322 ITR 150.
The learned DR, on the other hand, supporting the order
of learned CIT(A) submitted that it is a fact on record that the
assessee has failed to prove unpaid expenses and
unexplained cash credit in respect of loan taken from Karur
Ramasamy, which is evident from the fact that the Assessing
Officer has brought out clear facts in respect of both the
additions, where no evidence has been filed to prove unpaid
liability. Further, the report of Inspector of income tax clearly
proves that there was no outstanding payment as on 31.3.2012
in respect of unpaid liability. Therefore, it is incorrect on the part
of the learned AR for the assessee to argue that it has
furnished all the details in respect of unpaid liability and
13 ITA No.3240/Chny/2017
unexplained cash credit. The Assessing Officer as well as
learned CIT(A) has rightly held that assessee has concealed
particulars of income, which attracts penalty u/s.271(1)(c) of
the Act.
We have heard both the parties, perused materials
available on record and gone through the orders of authorities
below along with case laws cited by the learned counsel for the
assessee. The Assessing Officer has levied penalty in respect
of two additions i.e, i)unproved liability in respect of map
drawing charges, & ii) unexplained cash credit in respect of
unsecured loan taken from Mr. Karur Ramasamy u/s.68 of the
Act. As regards unproved liability, the only reason given by the
Assessing Officer to make addition is that recipient of payment
has stated that there is no outstanding as on 31.3.2012, except
this, the Assessing Officer has not doubted the fact of
rendering services by the parties and payment received against
such services. Under these facts, on examining the reasons
given by the Assessing Officer for levy of penalty u/s.271(1)(c)
of the Act, we find that the reasons given for levy of penalty is
not on sound footing, because the sole basis for making
14 ITA No.3240/Chny/2017
addition is report of Inspector of income tax, which was taken
during the course of assessment proceedings, which was in
the year 2015, whereas, payment against services has been
made in the year 2011 and 2012. Therefore, obviously it is very
difficult for the recipient of payment to confirm exact date of
receipt of money. Therefore, for that reason alone, it cannot be
inferred that liability shown in the books of account is
unexplained. Moreover, the Assessing Officer has not disputed
the fact that the assessee has furnished all evidences in
respect of unproved liability. In fact, recipient of payment has
confirmed rendering of services as well as receipt of money.
Therefore, at best, the case can be considered as claim of
expenditure with necessary evidence, but unsubstantiated to
the satisfaction of the Assessing Officer. It is a well settled
principle of law by the decision of the Hon'ble Supreme Court
in the case of CIT Vs.Reliance Petro Products Pvt.Ltd (supra)
that mere making of claim which is not sustainable in law by
itself would not amount to furnishing inaccurate particulars
regarding income of the assessee. Therefore, we are of the
15 ITA No.3240/Chny/2017
considered view that on this addition, penalty u/s.271(1)(c)
cannot be levied.
As regards, additions made towards unexplained cash credit being unsecured loan taken from Mr. Karur Ramasamy amounting to `13,00,000/-, it was the explanation of the
assessee before the Assessing Officer that party has confirmed
loan given to the assessee. Once the assessee has furnished confirmation letters to prove identity of the parties, then initial burden cast upon the assessee was successfully discharged.
No doubt, the Assessing Officer may not accept the explanation furnished by the assessee with regard to source and nature of credit, but that by itself would not be a ground to reject explanation furnished by the assesse, when the assessee genuinely explains the credits found in books of account disclosing all necessary facts. Therefore, merely for the reason
that the Assessing Officer has not satisfied with the explanation furnished by the assesse, it cannot be said that the assessee has furnished inaccurate particulars of income. Therefore, on this count also, penalty levied by the Assessing Officer
u/s.271(1)(c) of the Act is incorrect. Therefore, considering the
16 ITA No.3240/Chny/2017
facts and circumstances of the case, we are of the considered
view that the Assessing Officer has erred in levying penalty
u/s.271(1)(c) of the Act in respect of the two additions. The
learned CIT(A), without appreciating the facts has simply
confirmed penalty levied by the Assessing Officer, hence, we
set aside the order passed by the learned CIT(A) and direct the
Assessing Officer to delete penalty levied u/s.271(1)(c) of the
Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 19th March, 2021 Sd/- Sd/- ( वी.दुगा� राव) (जी.मंजुनाथ) (V.Durga Rao) (G.Manjunatha) "या�यक सद%य /Judicial Member लेखा सद%य / Accountant Member चे"नई/Chennai, (दनांक/Dated 19th March, 2021 DS आदेश क� ��त*ल+प अ,े+षत/Copy to: 1. Appellant 2. Respondent 3. आयकर आयु-त (अपील)/CIT(A) 4. आयकर आयु-त/CIT 5. +वभागीय ��त�न1ध/DR 6. गाड� फाईल/GF.