C.S.PROJECTS (I) PVT LTD.,ERODE vs. ITO WARD 1(1), ERODE

The assessee has raised the following grounds of appeal:-

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 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.

The learned DR, on the other hand, fairly agreed that delay may be condoned in the interest of justice.

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 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.

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/-.

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 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 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 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 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.

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 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.

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.

In the result, the appeal filed by the assessee is allowed.