KAVITA RANI,DELHI vs. ITO, WARD- 34(1), NEW DELHI

This appeal by the assessee has been directed against the order of Ld. CIT(A)12, New Delhi dated 13th October, 2017 for assessment year 2012-13, challenging the levy of penalty u/s 271(1)(c) of the IT Act.

I have heard Ld. Representatives of both the parties and perused the material on record.

During the year under consideration, the assessee was running her proprietory concerns namely M/s. Ganga Ram Har Prasad which were involved in Trading in Food grains and commission agent. Assessee has shown creditors of Rs. 3,45,78,818/- in the name of M/s. Hoti Lal Chunni Lal. But as per confirmation submitted by the creditors wherein the credit balance of the assessee was Rs. 3,40,78,818/- and amount of difference was of Rs. 5 lacs which was excess shown by the assessee. The explanation of the assessee was called for as to why addition of Rs. 5 lac be not made to which assessee agreed. The AO accordingly made addition of Rs. 5 lacs. The AO vide separate order levied the penalty on this addition u/s 271(1)(c) of the IT Act. The assessee challenged the penalty order before the Ld. CIT(A) and written submission of the assessee is reproduced in the appellant order in which the assessee explained that the difference of Rs. 5 lacs has occurred due to clerical error by the accountant. He credited a sum of Rs. 5 lacs in the account of M/s. Hoti Lal Chunni Lal on 31st March, 2012 and debited Ganesh International by Rs. 5 lac which is wronged entry. The said entry was rectified in the next year. The assessee filed confirmation and material on record and also filed copy of the account of both the parties to explain the difference. The assessee explained the same position before the AO but the ITO did not agree and asked the assessee to surrender the above amount otherwise he would levy the penalty. It is not a fit case of levy of penalty because the assessee did not conceal the particulars of income or furnished

The Ld. CIT(A) however did not accept contention of the assessee and noted that no explanation was offered by the assessee for the said difference and accepted the addition before AO. The assessee has inflated the liability by Rs. 5 lacs. The explanation given now is an after thought. The appeal of the assessee was accordingly dismissed.

After considering rival submission, I am of the view penalty is not leviable in the facts and circumstances of the case. The Ld. Counsel for the assessee reiterated the submissions made before authorities below and filed copy of the ledger account of all the above concerned parties at pages 44 to 49 of the paper book. P B 68 is schedule of current liabilities filed with the balance sheet to explain the above position. On the other hand Ld. DR relied upon orders of the authorities below. In the instant case the AO made addition of Rs. 5 lacs on agreed basis, however, later on assessee explained the difference of Rs. 5 lacs was on account of clerical error committed by the accountant which is rectified above. There were entries made in the A/c of Ganesh International which is explained through copies of various ledger account filed in the paper book from pages 44 to 49 as above. It is well settled law that quantum and penalty proceedings are distinct and different proceedings. Even if the assessee did not challenge the addition on merit, the assessee is entitled to explain that penalty is not leviable in the facts and circumstances of the case. I am satisfied with the explanation of the assessee that it was a clerical error committed for making an entry of Rs. 5 lac. Therefore it is not a case of filing inaccurate particulars of income or concealing any particulars of income. It is well settled law the levy of penalty is not automatic in each and every case because it would taken upon the facts and material brought on record. However the facts of the above case clearly shows that it is not a fit case of levy of penalty. I accordingly set aside the orders of authorities below and cancel the penalty u/s 271(1)(c) of the Act.

In the result, appeal of assessee is allowed.