M/S. M.G. PORTFOLIO LTD.,NEW DELHI vs. DCIT, NEW DELHI

Assessee challenged the penalty order before the ld. CIT (A) by way of appeal who has dismissed the same. Feeling aggrieved, the assessee has come up before the Tribunal by way of filing the present appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

The ld. AR for the assessee challenging the impugned order contended inter alia that due to unavoidable circumstances, the assessee has failed to explain the source of income of Rs.8,00,000/- made as addition by the AO; that penalty proceedings as well as assessment proceedings are required to be decided independently; that none of the information filed by the assessee found to be false rather assessee could not furnish the explanation now brought on record. However, on the other hand, the ld. DR relied upon the orders passed by AO/CIT(A)/ITAT.

Undisputed facts necessary for adjudicating the controversy at hand are inter alia that addition of Rs.8,00,000/- had made by the AO and affirmed by the CIT (A) as well as by the ITAT due to non-furnishing of any information by the assessee on the basis of reopening made u/s 147/144 of the Act on receiving information from the Investigation Wing; that the assessee has even failed to explain the amount of Rs.8,00,000/- before appellate proceedings; that in penalty proceedings as well as assessment proceedings are required to be decided independently.

In the backdrop of the aforesaid undisputed facts, arguments addressed by the ld. AR and ld. DR, we are of the considered view that the penalty order passed by the AO and affirmed by the ld. CIT (A) is not sustainable in the eyes of law for the following reasons :- i. that bare perusal of the provisions contained u/s 271(1)(c) of the Act goes to prove that to impose penalty upon the assessee under the relevant provisions of the Act, two conditions are required to be fulfilled one: that the assessee must have furnished inaccurate particulars of income and two: the assessee must have concealed particulars of income from the tax authorities. ii. that in the case cited as CIT vs Harsh Talwar – 335 ITR 200 (Del.) and CIT Vs SAS Pharmaceuticals – 335 ITR 2359 (Del.) delivered by Hon’ble Jurisdictional High Court held that, “to proceed with the imposition of penalty u/s 271(1)(c), the A.O. has to prove that there was concealment of particulars of income or assessee has furnished inaccurate particulars of such income”. iii. that the AO had merely made addition of Rs.8,00,000/- on the ground that the assessee has failed to furnish any explanation regarding alleged undisclosed income of Rs.8,00,000/- but has not investigated as to how the amount of Rs.8,00,000/- is undisclosed income; iv. that the assessee has brought on record income-tax return of Shruti Finstock Ltd. for the AY 2000-01, copy of assessment order for AY 1998-99, PAN of Shruti Finstock Limited, Memorandum of Articles & Association, certificate of incorporation, copy of certificate of registration of Shruti Finstock Ltd. issued by Reserve Bank of India as NBFC, copy of audited Balance Sheet for the subsequent AYs, to whom the alleged entry of Rs.5,00,000/- as share application money was taken. v. that assessee has also brought on record copy of balance sheet as on 31.03.2000 (available at page 48 to 52 of the paper book), copy of Board’s Resolution allotting shares (available at page 53 & 54 of the paper book), copy of return of allotment filed with ROC after allotting shares (available at page 55 to 58 of the paper book), copy of members register evidencing that Ltd. in October 2003(available at page 59 & 60 of the paper book) and copy of Form No.18 & 32 filed with ROC (available at page 61 to 65 of the paper book) to whom share application money of Rs.3,00,000/- in whose case amount of Rs.3,00,000/- has been treated as undisclosed income. vi. that the documents referred above in para (ii) & (iii) apparently goes to prove that the assessee has received a sum of Rs.8,00,000/- from Shruti Finstock Ltd. and Antriksha Securities Pvt. Ltd. as share application money whose identity, genuineness and creditworthiness is not in dispute. Assessee cannot be penalized u/s 271(1)(c) only because of the reasons that during quantum proceedings, it has failed to prove the genuineness, creditworthiness as well as identity of the aforesaid share investing companies; because this fact were required to be independently looked into during the assessment as well as penalty proceedings by the AO, without which it cannot be concluded that assessee has furnished inaccurate particulars of income; vii. that when it is admitted case of the respondent that the assessee has not furnished any explanation which the assessee has furnished during the penalty proceedings, the question of furnishing inaccurate particulars of income in order to conceal the income does not arise; viii. that the amount in question is proved to be share application money from the books of account of the assessee as on 31.03.2000 as well as from the audited balance sheet, available at page 3 of the paper book; ix. that had there been proper investigation made by the and Antriksha Securities Pvt. Ltd. now brought on record by the assessee viz. income-tax return, assessment order, PAN, certificate issued by RBI, would have been perused by him which are enough to explain the receipt of Rs.8,00,000/- by the assessee as share application money but the AO merely in a mechanical manner has proceeded to conclude that since the assessee has failed to furnish any explanation, this is undisclosed income of the assessee and has made an addition u/s 68 of the Act; x. that even otherwise, when admittedly amount of Rs.5,00,000/- was received by assessee from Shruti Finstock Ltd. by way of cheque drawn in favour of the assessee, the entire information regarding share application money was within the public domain but AO has not preferred to peruse the same for the reason best known to him; xi. that even detail of allotment of shares stood filed wherein the creditors’ name also appeared as allottees; xii. that Hon’ble jurisdictional High Court in case cited as CIT vs. Oasis Hospitalities (P) Ltd . – (2011) 238 CTR (Del) 402 dealt with the identical issue and held that when the assessee has proved identity, creditworthiness and genuineness of the creditor, penalty proceedings u/s 271(1)(c) are not attracted; xiii. that no doubt findings returned in the quantum proceedings amounts to cogent evidence so far as addition is concerned but it is not conclusive evidence to impose penalty u/s 271(1)(c) which are separate and independent in nature and to be proved by the AO by way of cogent evidence; xiv. that without any cogent evidence on record that the assessee has concealed or has furnished inaccurate particulars of income, provisions contained u/s 271(1)(c) cannot be invoked.

In view of what has been discussed above, we hereby accept the present appeal filed by the assessee and the penalty order dated 30.03.2011, affirmed by the ld. CIT (A), is hereby set aside.