MR. RAVINDRA NATH CHATTERJEE,NEW DELHI vs. ITO, NEW DELHI

ORDER PER H.S. SIDHU, JM

This appeal by the Assessee is directed against the order of the Ld. Commissioner of Income Tax (Appeals)-XXIII, New Delhi dated 24.2.2014 pertaining to assessment year 2009-10 on the following grounds:-

1. That the Ld. CIT(A) has erred in law and on facts in confirming the action of AO in levying the penalty of Rs. 5,16,894/- relying upon the impugned penalty order is liable to be quashed.

2. That the Ld. CIT(A) erred in law and on facts in confirming the levy of penalty just because the appellant did not contest addition made in assessment order passed u/s. 143(3) of the Act.

3. That the Ld. CIT(A) has erred in law and on facts in confirming the action of AO in imposing penalty on the basis of the additions made in the assessment order under section 143(3) of the Act dated 21.11.2011 ignoring the fact that the addition made in the assessment order by wrongly invoking the provisions of Section 41(1)(a) of the Act only on the basis of personal judgement of the AO and the same are debatable additions.

4. That the Ld. CIT(A) erred in law and on facts in wrongly applying decision of Hon’ble Supreme Court in the case of Mak Data P. Ltd. vs. CIT, 358 ITR 593.

before or at the time of hearing of appeal.

6. That above grounds of appeal is without prejudice to each other.

2. The brief facts of the case are that assessment in this case was completed u/s 143(3) of the I.T. Act, 1961 at an income of Rs.20,98,820/- as against the returned income of Rs.6,04,235/- thereby making addition of Rs.14,94,5 86/-. While completing the assessment, Assessing Officer tried to verify the genuineness of claim of current liabilities of Rs.87,88,220/-, for which Assessing Officer asked the assessee to furnish documentary confirmations/evidence in this regard. Assessing Officer also issued notices u/s 133(6) of the Act to M/s Deekay Studios, M/s International Merchandise Corporation And M/s Nimbus Communication Limited, which remained un-served, as same were received back from the postal authority having "left" remark. Further, in response to notice issued u/s 133(6) to Doordarshan, it was submitted that no payment has been made to the assessee and does not pertain to them. Assessing Officer asked the assessee to explain the response of his creditors to notices u/s. 133(6).

2.1 Since notices issued u/s 133(6) of the Act were received un- served from postal authority in respect of M/s Deekay Studios, Mis International Merchandise Corporation And M/s Nimbus Communication ltd., assessing officer asked the assessee to show cause why liabilities in respect of these parties be not treated as ceased in view of provisions of section 41(1)(a) of the Act, as he failed to file supporting confirmations from these parties. In response to this, it was submitted by the assessee that submissions have been filed by him in respect of M/s International Merchandise Corporation vide letter dated 10.10.2011 and submissions in respect of remaining two parties were made through letter dated 21.10.2011. The submissions made by the assessee have been made part of the penalty order (para 3), which were considered by the Assessing Officer. After going through the submissions of the assessee, it was observed by the Assessing Officer that in respect of all the above parties that claim of liabilities was quite old (ranging from 10 years to 18 years) in respect of which assessee failed to furnish any confirmation despite being given ample opportunities. Therefore, Assessing Officer observed that it proves that assessee has nothing to say in the matter and had obtained benefit by way of remission/cessation as per the provisions of section 41(1)(a) of the it Act. Considering these facts of the case, it was held by the Assessing Officer that assessee has concealed the true particulars of income. Therefore, Assessing Officer issued show cause notice u/s 274 r.w.s. 271(1)(c) of the act on 21.11.2011 and assessee was required to file reply by 09.12.2011. Assessee filed his reply on the due date, which was examined and considered by the Assessing Officer and has been made part of the penalty order (in para 6 & 7). However, 4 considering the facts of the case, it was held by the Assessing Officer that assessee has failed to furnish the confirmation from the above parties despite ample opportunities provided at the assessment stage and during penalty proceedings. Considering the same, it was held by the Assessing Officer that claim of the assessee is bogus in nature and liabilities are ceases to be existed. Therefore, it was held by the Assessing Officer that assessee has concealed the particulars of income to the extent of Rs.14,94,586/- on which tax sought to be evaded was calculated at Rs.5,16,894/- and minimum penalty @ 100% of tax sought to be evaded was calculated at Rs.5,16,894/- and imposed vide penalty order dated 22.5.2012 passed u/s. 271(1)© of the I.T. Act, 1961.

5. Ld. A.R. of the assessee has stated that the Ld. CIT(A) was erred in confirming the action of the AO in levying the penalty of Rs. 5,16,894/- relying upon the impugned penalty order which needs to be 5 quashed. She further stated asseessee did not contest the addition made in the assessment order passed u/s. 143(3) of the I.T. Act and AO on the basis of the additions made levied the penalty u/s. 271(1)(c) of the I.T. Act by wrongly invoking the provisions of section 41(1)(a) of the I.T. Act and Ld. CIT(A) also wrongly applied the case law. In view of the above, she requested that the penalty in dispute may be deleted because the issue in dispute is squarely covered by the ITAT, Delhi decision dated 31.3.2013 in the case of Asstt. I.T. vs. Sh.

Shailesh Mital (ITA No. 2556/Del/2012).

In this case penalty proceedings were initiated for furnishing inaccurate particulars of income. The assessee did not prefer appeal against the assessment order. In this case the assessee submitted that in respect of sundry creditors, the liability did not cease to exist but the outstanding amount was surrendered to avoid litigation and no penalty was leviable. We further note that the Ld. CIT(A) in this case concluded that “the penalty could not be levied on the amount surrendered by the assessee, unless there was material on the record to show that the surrendered item was his income. There was no case of furnishing of inaccurate particulars of income so as to make the assessee liable for penal consequences” which was later been confirmed by the ITAT, Delhi, as aforesaid.

7.1 Keeping in view of the facts of the case, we are of the considered opinion that it become evident that the income assessed by the AO was agreed upon by the assessee as a measure of cooperation and with a view to escape penal consequences. However, we further note that assessment order also do not indicate any concealment of income at all. In our view, the income was merely estimated without finding any concealment as such, hence the penalty is not attracted. We also find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty.

Order pronounced in the open court on 18/04/2017.