WRITER BUSINESS SERVICES PVT. LTD.,MUMBAI vs. DCIT, CIRCLE-8(3)(1), MUMBAI

The assessee challenged the penalty order by filing an appeal before Ld. CIT(A). It was submitted that the impugned purchases made from Shri Krishan Lal has been accounted by the assessee in the trade name of M/s. KLS Packaging Industries, which happened to be the proprietary concern of Shri Krishan Lal. The assessee submitted that it has furnished the very same PAN No. AAUPL0333K against the name of M/s KLS Packaging Industries. Accordingly it was submitted that Shri Krishan Lal and the KLS Packaging Industries represented very same party. It was submitted that the assessee could not give proper explanations in this regard, since the AO did not provide the details relating to Shri Krishan Lal. Accordingly, it was submitted that the purchases of Rs.20,90,635/- cannot be considered as bogus in nature. With regard to the addition of RS.12,239/-the assessee submitted that the AO did notraise any query and hence the assessee could came to know of the said addition only after receiving assessment order. It was submitted that the amount of RS.12,239/- could have been reconciled by the assessee, if proper opportunity had been given. It was submitted that the assessee has accepted

The Ld. CIT (A) did not accept the contentions of the assessee and he took the view that the difference between the returned income and the assessed income would automatically give rise to penalty u/s 270A of the Act. Accordingly, he confirmed the penalty levied by the AO.

We heard the parties and perused the record. The Ld A.R submitted that the assessee did not file appeal against the additions made by the AO, since the tax was payable under sec. 115JB of the Act. With regard to the addition of Rs.20,90,635/- relating to alleged bogus purchases, we notice that the assessee could not furnish explanations, since it had accounted those purchases under the trade name of M/s KLS Packaging Industries, while the assessing officer has noted it down in the name of the proprietor Shri Krishan Lal. However, the very same PAN number has been noted by the assessee and AO. This fact substantiates the claim of the assessee that both the refers to one and same party. We also notice that the assessee had time and again stated before the AO that it is not able to recognise Shri Krishan Lal and also asked for further details. However, the AO did not furnish any details. Hence, it is stated that the assessee could not furnish any explanation with regard to purchases made from Shri Krishan Lal, which has otherwise been accounted for in the books in the name of M/s KLS Packaging Industries. The Ld A.R submitted that the assessee was not aware of the name of the proprietor of M/s KLS Packaging Industries and it is the AO, who has identified the said name with the help of PAN number. If the AO did not furnish the relevant details, in our view, it cannot be said that the assessee was at fault in furnishing the details relating

With regard to the addition of Rs.12,239/-, it is the submission of the assessee that the AO has made this addition on his own, without calling for any explanation from the assessee. It was submitted that the assessing officer has identified difference on the basis of ledger account copy received from a supplier named M/s Print N Polypack and did not call for any explanation from the assessee. The Ld A.R submitted that it was a matter to be reconciled and the assessee could have offered proper explanation, had the AO confronted the same with it. With regard to this addition, we are of the view that it cannot be said that the above said addition would represent a case of under reporting of income, since the same has been made without calling for any explanation from the assessee and further, as submitted by the Ld A.R, it could have been reconciled by the assessee, had the relevant details were furnished by the AO.

We noticed earlier that the Ld CIT(A) has taken the view that the penalty u/s 270A shall be levied, if there is difference between returned income and assessed income, i.e., he has expressed the view that the penalty u/s 270A is automatic. The above said view of Ld CIT(A) has been disputed by the assessee by placing reliance on the decision rendered by Pune bench of Tribunal in the case of Adinath VasantraoWandhekar vs. ITO (ITA No.1388/Pun/2023 dated 08-03-2024), wherein it has been held that the imposition of penalty u/s 270A is at the discretion of the AO, since section 270 uses the word “may”. Following the above said decision of Pune bench of Tribunal, we are of the Writer Business Services Pvt. Ltd. view that the LdCIT(A) was not legally correct in holding that the additions would automatically give rise to penalty u/s 270A of the Act.

From the foregoing discussions, we notice that the AO did not supply the details relating to the addition of purchases and discount to the assessee, meaning thereby, he did not afford adequate opportunity to the assessee to offer clarifications on both the issues, which, otherwise, could have been explained by the assessee. Hence we are of the view that the assessee could not be found fault with, in respect of both the additions. Accordingly, we are of the view that the case of the assessee, in the present facts of the case, could be brought within the ambit of clause (a) of sec.270A(6) of the Act, which excludes certain additions from the ambit of “under reporting of income”. Accordingly, in the facts and circumstances of the case, we are of the view that the Assessing officer was not justified in imposing penalty u/s 270A of the Act and the Ld CIT(A) was not justified in confirming the penalty levied u/s 270A of the Act. Accordingly, we set aside the order passed by Ld CIT(A) and direct the AO to delete the impugned penalty.

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