M/S COMPETENT AUTOMOBILES CO. LTD.,NEW DELHI vs. DCIT, NEW DELHI

Briefly the facts of the case are that an addition of Rs.91,475/- was made to the income of the assessee on account of unmoved sundry creditors. The assessee did not challenge the addition in appeal. The assessee submitted that there was neither any furnishing of inaccurate particulars of income nor concealment of income. The learned CIT (Appeals), however, following the decision of Hon’ble Delhi High Court in the case of CIT Vs. Zoom Communication Pvt. Ltd. (2010) 191 Taxman 179 noted that in case the assessment of the assessee would not have been taken up for scrutiny, the addition to the income made by the Assessing Officer would have escaped assessment. The learned CIT (Appeals) accordingly confirmed the levy of penalty.

After considering the rival submissions, we are of the view that penalty is not leviable in the matter. The Assessing Officer noted sundry creditors for assessment year under appeal 2011-12 in a sum of Rs.91,475/- in respect of 44 persons in para 3 of assessment order. The same amount is coming up from preceding assessment years 2010-11 and 2009-10. Thus, there is no fresh sundry creditor in assessment year under appeal. The Assessing Officer did not take any action in earlier year, but made the addition in assessment year in appeal in respect of opening balances coming from the earlier years. On such facts the 3 I. T. Appeal No. 142/Del/2016 Assessment Year : 2011–12. addition on merit would not be justified. Therefore, there is no question of levy of penalty under section 271(1)(c) of the I. T. Act in respect of opening balances of earlier years. Further the Assessing Officer in the assessment order noted that he is satisfied that assessee company concealed the income / filed inaccurate particulars. Therefore, for which limb of section 271(1)(c) of the Income Tax Act, the Assessing Officer initiated penalty proceedings, was not explained. Thus, in the facts and circumstances of the case penalty is not leviable in the matter. We accordingly set aside the orders of the authorities below and cancel the penalty under section 271(1)(c) of the Income Tax Act. We may clarify that findings in this order shall have no bearing on the quantum addition already accepted by the assessee.

In the result, the appeal of the assessee, is allowed.

The order is pronounced in the Open Court.