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Income Tax Appellate Tribunal, DELHI BENCH: ‘SMC’ NEW DELHI
Before: SH. BHAVNESH SAINI
PER BHAVNESH SAINI, JUDICIAL MEMBER
This appeal by the assessee has been directed against the order of Ld.CIT(A)-34, New Delhi dated 28.09.2016 for A.Y. 2009-10, challenging the levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 (in short “Act”).
I have heard Ld. representatives of both the parties and perused the material on record.
In this case, the assessment was completed u/s 143(3) of the Act at the total income of Rs.27,05,056/- against the returned income of Rs.24,81,648/-. During the course of assessment proceedings, additions were made u/s 2(22)(e) of the Act amounting to Rs.3,33,408/- on account of loans obtained by the assessee from two different closely held companies, amounting to Rs.2,90,000/- and Rs.43,408/- respectively.
The AO imposed penalty u/s 271(1)(c) of the Act on these additions.
The assessee submitted before the Ld.CIT(A) that the assessee has received a sum of Rs.2,90,000/- from M/s Maa Sharda Garment Pvt.Ltd. and Rs.44,60,000/- from M/s Brijmon Pumps Pvt.Ltd. The assessee had 26.22% share holding in M/s Maa Sharda Garment Pvt. Ltd. and 50% share holding in M/s Brijmon Pumps Pvt. Ltd. The assessee explained that both the sums were received as ‘imprest’ however, the money so received, was not put to any use for the purposes of business. The AO made additions of the above amount and levied the penalty. The assessee thus, explained the issue before the authorities below. However, the Ld.CIT(A) noted that the explanation filed by the assessee is not substantiated and explanation is not acceptable. Since the assessee has failed to establish his case that the additions made by the AO do justify, therefore, levy of penalty is upheld.
After considering the rival submissions, I do not find any reason to confirm the levy of penalty. Ld. Counsel for the assessee referred to Paper Book I which is show cause notice issued for levy of penalty in which the AO has put a remark of right on “have concealed the particulars of your income or furnished inaccurate particulars of such income in terms of explanation 1, 2, 3, 4 and 5.”. Ld. Counsel for the assessee submitted that the AO was not sure as to for which offence the penalty has been levied whether for concealment or filing inaccurate particulars. He has relied upon the decision of Karnatka High Court in the case of CIT & Anr. vs M/s. SSA’s Emerald Meadows dated 23.11.2015 in in which Hon’ble High Court dismissing the department appeal, confirmed the order of the Tribunal in which the Tribunal allowed the appeal of the assessee by holding that “the notice issued by the AO u/s 274 r.w.s.
271(1)(c) of the Act to be bad in law as it did not specify which limb of section 271(1)(c) of the Act, the penalty proceedings had been initiated i.e whether for concealment of particulars of income or furnishing of inaccurate particulars of income.” This judgement is confirmed by the Hon’ble Supreme Court by dismissing the SLP of the department vide order dated 05.08.2016, copies of the same are placed on record. Ld. Counsel for the assessee submitted that the assessee in the reply before the AO submitted that the amounts have been received on account of ‘imprest’ which have been shown in the books of accounts of both the parties and full particulars have been disclosed in the audited accounts and relied upon the order of Delhi Bench of the Tribunal in the cases of Sunil Sethi vs DCIT 26 SOT 95 (ITAT-Del-2010) & Sunil Chopra vs DCIT 26 SOT 95 DEL, on the proposition that for ‘imprest’ account, addition need not be made. He has, therefore, submitted that the assessee offered explanation, therefore, penalty is not leviable. He has also relied upon the order of the ITAT, Chandigarh Bench in the case of ITO vs Quixotic Healthcare in dated 06.08.2015 in which on account of deemed dividend, full facts have been disclosed to the Revenue. It was, therefore, held that the assessee has not concealed the particulars. It was further held that addition made applying deeming provisions would not disclose it be a case of filing inaccurate particulars of income. On the other hand, Ld.DR relied upon the authorities below and submitted that the assessee accepted the quantum order, the penalty was correctly levied.
5.1. In view of the submissions of the parties and facts of the case, it is clear that the assessee disclose all the facts of receipt of ‘imprest’ amount from both the companies and all the facts were completely disclosed in the books of the accounts of both the companies. The assessee offered explanation that amount was received as ‘imprest’ which have been properly recorded in the books of accounts. Therefore, merely because explanation of assessee was not acceptable to the Revenue would not say that penalty should be levied in the facts and circumstances. Further, the AO has not mentioned in the notice as to for which limb of section 271(1)(c) of the Act, penalty has been initiated i.e whether the concealment of particulars of income or furnishing of inaccurate particulars of income. In the case of M/s Quixotic Healthcare (supra), order of the Ld.CIT(A) was confirmed for cancelling the penalty because all the facts were disclosed to the Revenue and addition made applying deeming provision would not disclose it to be a case of filing inaccurate particulars of income. Considering the above discussion, I do not find it to be a fit case of levy of penalty. I accordingly, set aside the orders of the authorities below and cancel the penalty.
In the result, the appeal of the assessee is allowed.
The order is pronounced in the open court.