M/S. SHEELA FOADM (P) LTD.,,DELHI vs. DCIT, NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: ‘G’: NEW DELHI BEFORE SH. I.C. SUDHIR, JUDICIAL MEMBER AND SH. O.P. KANT, ACCOUNTANT MEMBER ITA No. 5902/Del/2012 Assessment Year: 2004-05 M/s. Sheela Foam (P.) Ltd., C-55, Vs. Deputy Commissioner of Income Preet Vihar, Vikas Marg, Delhi Tax, Circle-8(1), New Delhi GIR/PAN : AAACS0189B (Appellant) (Respondent) Appellant by S/sh. Ajay Vohra & Gaurav Jain, Advocates; Ms. Bhavita Kumar, Adv. Respondent by Smt. Anima Barnwal, Sr. DR Date of hearing 13.04.2016 Date of pronouncement 02.06.2016 ORDER PER O.P. KANT, A.M.: This appeal of the assessee is directed against order dated 17/08/1012 of the learned Commissioner of Income-tax (Appeals)-XI, New Delhi, for assessment year 2004-05 in respect of penalty levied under section 271(1)(c) of the Income-tax Act, 1961 (for short “the Act”) by the Assessing Officer. The grounds of appeal raised by the assessee are as under: 1. That the Commissioner of Income Tax (Appeals) erred on facts and in law in not holding that the order dated 27.03.2009 passed by the assessing officer levying penalty under section 271(1 )(c) of the Income-tax Act, 1961 (“the Act”) was beyond jurisdiction, bad in law and void ab initio. 1.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in not holding that the penalty order under section 271(1 )(c) was beyond jurisdiction, bad in law and void ab-initio, in as much as the same was initiated on issues for which no prima facie satisfaction, qua concealment/furnishing of inaccurate particulars of income, was discernible from the assessment order passed under section 143(3) of the Act. Without Prejudice 2. That the Commissioner of Income Tax (Appeals) erred on facts and in law

2 ITA No. 5902/Del/2012 AY: 2004-05 in upholding the action of the assessing officer in imposing penalty under section 271(1 )(c) of the Act in respect of excess deduction of Rs. 5,77,22,220/- claimed under section 80IB of the Act, which was suo-moto disallowed and offered to tax by the appellant in the course of assessment proceedings. 2.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that the excess claim of deduction under section 80IB of the Act to the extent of Rs. 5,77,22,220/-, which was based on the certificate granted by the auditors, was made due to inadvertence and was a bonafide mistake, not warranting imposition of penalty under section 271(1 )(c) of the Act. 2.2 That the Commissioner of Income Tax (Appeals) erred on facts and in law in holding that excess claim of deduction under section 801B was not suo-moto offered for disallowance by the appellant during the course of assessment proceedings. 2.3 That the Commissioner of Income Tax (Appeals) erred on facts and in law in holding that suo-moto surrender of excess claim of deduction under section 80IB of the Act through a letter, during the course of assessment proceedings did not partake the character of revision of income, in the absence of filing revised return within the time limit and in accordance with the provisions of section 139(5) of the Act, and therefore, was of no consequence in the eyes of law. 2.4 That the Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that in view of suo-moto surrender of excess claim of deduction under section 80IB before completion of assessment proceedings, there was no concealment of income or furnishing of inaccurate particulars of income, warranting imposition of penalty under section 271(1)(c) of the Act. 2.5 That the Commissioner of Income Tax (Appeals) erred on facts and in law in alleging that the appellant deliberately brought the fact of excessive claim of deduction under section 80IB of the Act forward at the fag end of the assessment proceeding and tried to take a chance to hoodwink Revenue. 3. That the Commissioner of Income Tax (Appeals) erred on facts and in law in upholding penalty imposed on disallowance of deduction under section 80 IB of the Act, amounting to Rs. 6,95,173/-, on account of higher allocation of indirect/head-office expenditure to units eligible for deduction under that section. 3.1 That the Commissioner of Income Tax (Appeals) erred on facts and in law in not appreciating that penalty under section 271(l)(c) of the Act was not leviable in respect of the aforesaid disallowance under section 80IB of the Act, as the issue of allocation of common expenses was (i) debatable; (ii) based on bonafide difference of opinion, and (iii) all material facts were properly disclosed by the appellant. 4. That the Commissioner of Income Tax (Appeals) erred on facts and in law in upholding the action of the assessing officer in levying penalty under section 271(1)(c) of the Act in respect of disallowance of interest of Rs. 19,200 paid in respect of loan taken from Mr. Ravi Kapoor, which was treated as unexplained cash credit under section 68 of the Act in the preceding assessment year. The appellant craves leave to add to, alter, amend or vary from the above grounds of appeal before or at the time of hearing.

3 ITA No. 5902/Del/2012 AY: 2004-05 2. The facts in brief are that the assessee was engaged in manufacturing and sale of PU foam, PU foam products, acquirer mattresses etc. and having manufacturing units located in various places in the country. In the return of income filed the assessee claimed deduction of Rs. 10,32,97,807/- under section 80-IB of the Income-tax Act, 1961 (for short “the Act”) at the rate of hundred percent in respect of three units namely Unit-V (Ralholi-Silvasa), Unit-X (Saily- Silvasa), Unit-IX (Pondicherry) and 30% deduction in respect of Unit-IV (Saily- Silvasa). Subsequently, in the course of scrutiny proceedings through letter dated 01/12/2006, the assessee revised its claim of deduction under section 80- IB of the Act to Rs. 5,77,22,220/- stating that deduction in respect of unit-X and unit-IX was claimed wrongly at the rate of 100% as against the 30% allowable, accordingly in the order under Section 143(3) of the Act, the Assessing Officer allowed the deduction at the rate of 30% in respect of the two units. Further, the Assessing Officer observed that common expenses related to the units eligible for 80-IB deduction incurred by the head office had not been allocated to the respective units. The Assessing Officer after determining common expenses of Rs. 72,13,618/- allocated the expenses in the ratio of the turnover of the respective unit resulting into reduction of deduction under section 80-IB of the Act. The deduction finally allowed after withdrawing the access deduction under claimed under section 80-IB in respect of the two units and in reduction in profit due to allocation of common expenses was of Rs. 4,48,80,415/- as against claim of Rs. 10,32,97,807/-. The Assessing Officer also disallowed interest expenses of Rs. 1,06,200/- in respect of the amount received from five persons held as unexplained cash credit in earlier years. Penalty proceedings under section 271(1)(c) of the Act were initiated in the assessment order passed under section 143(3) of the Act on 29/12/2006. On appeal, the learned Commissioner of Income Tax (Appeals), confirmed the above additions/disallowances in respect of deduction under section 80-IB of the Act and disallowance of interest in respect of unexplained cash credits. In view of the confirmation of the additions,

4 ITA No. 5902/Del/2012 AY: 2004-05 the AO levied penalty under section 271(1)(c) of the Act wide order dated 27/03/2009 in respect of both the additions/disallowances. On appeal the learned Commissioner of Income-tax(Appeals) upheld the penalty levied but on further appeal to the Tribunal, it was observed that ground of penalty on account of disallowance of deduction under section 80 IB of the Act for non-allocation of head office/common expenses was not dealt by the learned Commissioner of Income-tax(Appeals), therefore, the order of the learned Commissioner of Income-tax (Appeals) was restored back by the Tribunal through order dated 23.07.2010 in ITA number 353/Del/2010 to the file of the ld. Commissioner of Income Tax(Appeals) to consider all aspects of disallowances and pass a speaking order. In compliance thereof, the learned Commissioner of Income Tax(Appeals), after allowing opportunity of hearing to the assessee, again confirmed the penalty levied under section 271(1)(C) of the Act allowing a part relief on in the penalty in respect of interest related to unexplained cash credit. Aggrieved with the findings of the learned Commissioner of Income Tax(Appeals), the assessee is in appeal before the Tribunal. 3. The grounds no. 1 and 1.1 are not pressed by the learned Authorized Representative of the assessee and, therefore, we dismiss the same as infructuous. 4. In grounds no. 2 to 2.5, the assessee has challenged levy of penalty under section 271(1)(c) of the Act in respect of excess deduction claimed of Rs. 5,77,22,220/- under section 80-IB of the Act. The facts in respect of the issue in dispute are that the Assessing Officer levied the penalty on the ground that the assessee failed to substantiate its explanation regarding addition/disallowances made in the assessment. The learned Commissioner of Income-tax (Appeals) in the impugned order has repeated the finding of the earlier Commissioner of Income-tax (Appeals) on the issue in dispute. According to the Commissioner of Income-tax (Appeals) the correct amount of addition on this account would have been Rs. 5,84,17,392/-, which was not objected by the Authorized

5 ITA No. 5902/Del/2012 AY: 2004-05 Representative of the assessee. The learned Commissioner of Income-tax (Appeals) held that mere filing of letter before the Assessing Officer rectifying the claim of deduction under section 80-IB would not absolve the assessee from the charges of furnishing inaccurate particulars/concealment committed by the assessee. The learned Commissioner of Income Tax(Appeals) was of the view that the said income was never disclosed in the return, not even by way of the revised return and, therefore, provisions of section 271(1)(c) were attracted. As regard to the argument of the assessee that it was a bona-fide mistake, the learned Commissioner of Income-tax (Appeals) observed that there was no material evidence on record to justify that it was detected by on its own volition and the assessee tried to manage the situation by filing a letter before the AO on 04/12/2006 rectifying the excess claim. The learned Commissioner of Income Tax(Appeals) held that the assessee chose to revise its claim only after notice of scrutiny issued by the Department and, therefore, the assessee had furnished inaccurate particulars of income with a view to concealment of income and accordingly the penalty on the incorrect claim of deduction under section 80-IB was confirmed. 4.1 Before us, addressing the grounds the learned Authorized Representative of the assessee submitted that there was a bona fide mistake in claim of deduction under section 80-IB in respect of the two units at the rate of hundred percent as against eligible at the rate of the 30%, as it was claimed in the return of income based on the Auditor’s certificate. The learned Authorized Representative drawn our attention towards the original audit reports in form No. 10 CCB in respect of two units filed at pages No. 70 to 73 and pages 102 to 105 of the paper book, where by mistake of the Auditor, hundred percent deduction under section 80-IB was computed as against eligibility of deduction at the rate of 30% only. The learned Authorized Representative further submitted that no penalty could be levied in case of a wrong claim made on the basis of the bona fides mistakes of the consultant/auditors. In support of the

6 ITA No. 5902/Del/2012 AY: 2004-05 proposition, he relied on the judgment of the Hon’ble Supreme Court in the case of Price Waterhouse Coopers Private Limited vs. Commissioner of Income Tax, reported in 348 ITR 306 (SC). Further, he submitted that no penalty could be levied where disallowance/addition is made on account of bona fide mistake. In support of the proposition, he relied on the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Arvind Nagpal in ITA No. 481/2013. The learned Authorized Representative also relied on the judgment of the Hon’ble Supreme Court in the case of CIT versus reliance Petroproducts Private Limited 322 ITR 158. The learned AR, relying on the decision of the Delhi High Court in the case of CIT Vs. S.A.S. Pharmaceutical, (2011) 355 ITR 259, submitted that no penalty on suo motu disallowance of inadvertent/wrong claim be levied. 4.2 On the contrary, learned Sr. Departmental Representative relying on the orders of the authorities below submitted that notice under section 143(2) was issued to the assessee for scrutiny of the case and then only the assessee realized mistake and no revise return was filed by the assessee rectifying its mistake. 4.3 We have heard the rival submission and perused the material on record. We find that there is no dispute on the issue that the claim of 100% deduction under section 80-IB in respect of the two units was wrong but the dispute is whether the mistake was bonafide and whether it was detected suo motu by the assessee and rectified before being noticed by the Assessing Officer. We find from the facts of the case that the Auditor computed deduction @ 100% in respect of the two units in reference and the assessee claimed the same deduction in the return of income filed. According to us, it is a very much likelihood that a normal person will claim the deduction in the return of income what has been computed by the Auditor, who has been authorized by the Act to submit a audit report in form No. 10 CCB in respect of the claim of deduction. In the circumstances, it cannot be said that there was a malafide intention behind the claim of excess deduction and it occurred due to the wrong claim computed by the Auditor. In the case of Price Waterhouse Coopers Private Limited Vs.

7 ITA No. 5902/Del/2012 AY: 2004-05 CIT (supra), the assessee omitted to add the provision of the gratuity not allowable under section 47A(7) of the Act even though specifically mentioned in the Audit Report in form No. 3CD. In the facts of the case, the Hon’ble Supreme Court has held as under: “18. The fact that the Tax Audit Report was filed along with the return and that it unequivocally stated that the provision for payment was not allowable under section 40A(7) of the Act indicates that the assessee made a computation error in its return of income. Apart from the fact that the assessee did not notice the error, it was not even noticed even by the Assessing Officer who framed the assessment order. In that sense, even the Assessing Officer seems to have made a mistake in overlooking the contents of the Tax Audit Report. 19. The contents of the Tax Audit Report suggest that there is no question of the assessee concealing its income. There is also no question of the assessee furnishing any inaccurate particulars. It appears to us that all that has happened in the present case is that through a bona fide and inadvertent error, the assessee while submitting its return, failed to add the provision for gratuity to its total income. This can only be described as a human error which we are all prone to make. The calibre and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present does not mean that the assessed is guilty of either furnishing inaccurate particulars or attempting to conceal its income. 20. We are of the opinion, given the peculiar facts of this case, that the imposition of penalty on the assessee is not justified. We are satisfied that the assessee had committed an inadvertent and bona fide error and had not intended to or attempted to either conceal its income or furnish inaccurate particulars.” 4.4 Following the ratio in the case of Price Waterhouse Coopers Private Limited (supra) the Hon’ble Delhi High Court in the case of CIT Vs. Arvind Nagpal (supra) also held as under: “Tribunal has recorded a finding of fact accepting the explanation given by the assessee that it was a case of mistake. He noticed that there was no dispute about figures and the transaction in question. The first transaction and full gain was disclosed by the respondent-assssee as short-term capital gains. The assessee had paid tax @ 10% which was applicable to short-terms capital gains. The Assessing Officer had observed that tax at normal rate of 30% was applicable. The assessee accepted the said position and has paid and interest. In Price Waterhouse Coopers Pvt. Ltd. Vs. Commissioner of Income Tax, (2012), the Supreme Court deleted the penalty and has accepted that human errors do happen in spite of caliber, expertise and due care. Mistakes, when explained and shown to be bona find, do not justify levy of penalty. It has been observed as under:- ?? The contents of Tax Audit Report suggest that there is no question of the assessee concealing? Its income. There is also no question? of the assessee furnishing any inaccurate particulars. All that happened in the present case is that through a bona

8 ITA No. 5902/Del/2012 AY: 2004-05 fide? and inadvertent error? failed to add the provisions for gratuity to its total income. This can only be described as a human error? Which we are all prone to make. The caliber and expertise of the assessee has little or nothing to do with the inadvertent error. That the assessee should have been careful cannot be doubted, but the absence of due care, in a case such as the present, does not mean that the assessee is guilty of either furnishing inaccurate particulars or attempting to conceal its income. Consequently, given the peculiar facts of this case, the imposition of penalty on the assessee is not justified.? On the question relating to addition of Rs. 5,56,254/-, the tribunal has observed that the assessee had received the said amount as dividend from a mutual fund. As per Section 94(7) of the Income Tax Act, 1961, the assessee was required to reduce the dividend amount from the cost price of the units of mutual fund. This again, the tribunal has held that was a bona fide mistake which was corrected/rectified by filing a revised computation of income. Full details and particulars had been submitted by the assessee to the Assessing Officer. We do not see any reason to interfere.”

4.5 We find that in the case of Price Waterhouse Cooper Pvt. Ltd (supra) cited above the mistake was occurred despite the amount was mentioned to be not allowable in the audit report, whereas in the case in hand there was mistake in the audit report itself and the assessee followed the computation of the audit report, thus there was bonafide mistake on the part of the assessee, and following the decisions cited above no penalty could be levied on the issue in dispute. 4.6 Another contention raised by the Authorized Representative was that the claim was suo motu disallowed by the assessee without pointing out by the Assessing Officer. On perusal of the assessment order, we find that the Assessing Officer has mentioned only the letter dated 01/12/2006 submitted by the assessee on 04/12/2006 revising its claim of deduction under section 80-IB of the Act and accordingly allowed the claim at the rate of 30% and nowhere held that the mistake was pointed out by the Assessing Officer to the assessee. When the assessee itself noticed the mistake and came forward and offered the income for taxation, the assessee cannot be held in default for furnishing inaccurate particulars.

9 ITA No. 5902/Del/2012 AY: 2004-05 4.7 In view of above discussion, we are of the opinion that the excess claim under section 80-IB of the Act made by the assessee was on the basis of the bonafide mistake of the Auditor and the assessee cannot be held for furnishing inaccurate particulars of income and, accordingly, the penalty levied under section 271(1)(c) of the Act on the incorrect claim of deduction under section 80-IB is deleted. Accordingly, the grounds 2 to 2.5 of the appeal are allowed. 5. In grounds no. 3 to 3.1 the assessee has challenged penalty levied on disallowance of deduction under section 80-IB of the Act amounting to Rs. 6,95,173/- on account of higher allocation of head office/common expenses. The facts in respect of the disallowance are that the Assessing Officer in the details furnished during the course of assessment observed that the assessee had not allocated the head office expenses with the unit eligible for deduction under section 80-IB of the Act. It was submitted by the assessee that books of account of each unit were independent and there was no common expenses which were relatable and allocable to those units. The Assessing Officer did not accept the submission of the assessee and held that head office was nothing but a controlling agency for all the units and thus it cannot be said that the expenditure incurred in the head office had no relation with the activities carried out at different units. The assessee maintained its stand but without prejudice to its submission, provided the detail of the common expenses at head office and allocated the same amongst the eligible units in the ratio of the turnover to the total turnover of the company and the deduction under section 80-IB was computed as under: Unit Eligible profit Allocable Eligible profit Eligible before allocation expenses (in after allocation deduction (in expense (in rupees) expenses (in rupees) Rupees) rupees) Unit IV @ 1,88,16,554/- 2,28,678 1,85,87,876 55,76,363 30% Unit V @ 1,51,92,527 2,79,139 1,49,13,388 1,49,13,388 100%

10 ITA No. 5902/Del/2012 AY: 2004-05 Unit X @ 6,40,61,035 9,17,762 6,31,43,273 1,89,42,982 30% Unit IX @ 1,83,99,279 2,40,340 1,81,58,939 54,47,682 30%

5.1 The Assessing Officer levied a penalty with the remark that the explanation offered by the assessee was found to be not justified. The learned Commissioner of Income-tax (Appeals) in the impugned order held that the assessee did not provide the correct details or apportionment of the expenses and, thus, had furnished inaccurate particulars and confirmed the penalty on the issue in dispute. 5.2 Before us, addressing the grounds, the learned Authorized Representative of the assessee submitted that addition was made based on the facts disclosed by the assessee and the assessee has filed all the particulars of income in this respect and addition was merely on the difference of opinion. The learned Authorized Representative in support of his contention relied on the judgment of the Hon’ble Delhi High Court in the case of CIT Vs. Dharmpal Premchand reported in 329 ITR 572, wherein the finding of the Tribunal that allocation of expenses between the head office and the unit would always be a debatable issue, was affirmed and the deletion of penalty by the Tribunal was accordingly held to be justified. 5.3 On the contrary, learned Sr. Departmental Representative relied on the findings of the authorities below. 5.4 We have heard the rival submissions and perused the material on record. In the case of CIT Vs. Dharmpal Premchand Ltd. (supra) the assessee was engaged in the manufacture of flavoured chewing tobacco and kiwam and claimed deduction under section 80-IA and 80-IB of the Act. The claim of deduction of the assessee was denied and penalty under section 271(1)(c) of the Act was levied. The learned Commissioner of Income Tax(Appeals) deleted the penalty accepting the assessee’s contention that it had disclosed all material facts

11 ITA No. 5902/Del/2012 AY: 2004-05 pertaining to the computation of deduction admissible under section 80-IA and 80-IB that the directors remuneration had been duly debited in the head office and no amount was allocated towards a unit and the interest earned on banks and interest paid to the others had a direct nexus to the business activities and, therefore, the deduction of said amount would be admissible to the assessee. The Tribunal held that allocation of expenses between the head office in the unit would always be a debatable issue and affirmed the order of the Commissioner of Income-tax (Appeals). The Hon’ble High Court in the circumstances of the case in CIT Vs. Dharmpal Premchand Ltd. (supra) held as under: “12. It was tried to be suggested that section 14A of the Act specifically excluded the deductions in respect of the expenditure incurred by the assessee in relation to income which does not form part of the total income under the Act. It was further pointed out that the dividends from the shares did not form the part of the total income. It was, therefore, reiterated before us that the Assessing Officer had correctly reached the conclusion that since the assessee had claimed excessive deductions knowing that they are incorrect; it amounted to concealment of income. It was tried to be argued that the falsehood in accounts can take either of the two forms: (i) an item of receipt may be suppressed fraudulently; (ii) an item of expenditure may be falsely (or in an exaggerated amount) claimed, and both types attempt to reduce the taxable income and, therefore, both types amount to concealment of particulars of one's income as well as furnishing of inaccurate particulars of income. We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the revenue then in case of every return where the claim made is not accepted by the Assessing Officer for any reason, the assessee will invite penalty under section 271(1)(c). That is clearly not the intendment of the Legislature." 5.5 When we advert to the facts of the case in hand, we find that facts of allocation of common expenses are identical to the facts of the case of Dharmpal Premchand Ltd (supra), thus respectfully following the ratio of the said decision, we are of the opinion that no penalty could be levied for furnishing inaccurate particulars of income on the issue in dispute, and accordingly the grounds of the appeal from 3 to 3.1 are allowed.

12 ITA No. 5902/Del/2012 AY: 2004-05 6. In ground No. 4 the assessee has challenged levy of penalty of in respect of disallowance of interest of Rs. 19,200/- paid in respect of the loan taken from Mr. Ravi Kapoor, which was treated as unexplained cash credit under section 68 of the Act in the preceding assessment year. 6.1 The facts in respect of the issue in dispute are that in the assessment proceeding the AO made addition of Rs. 1,06,200/- for interest paid in respect of loan taken from five parties, which were held as unexplained cash credit in earlier years. The penalty was levied only in respect of one loan from Mr. Ravi Kapoor which was only finally sustained by the ITAT as unexplained cash credit. The learned Commissioner of Income Tax(Appeals) has upheld the penalty on the ground that the assessee has shown a false entry in the form of unexplained cash credit which amounted to furnishing of inaccurate particulars of income. 6.2 Before us learned Authorized Representative of the assessee submitted that all documents in respect of the cash creditors were submitted before the Assessing Officer and relied on the judgment of the Punjab and Haryana High Court in the case of CIT Vs. Sunila Sharma in ITA No. 57/2013 (P&H H.C.) wherein it is held that no penalty can be imposed if the confirmations from the parties could not furnished due to the extraneous reasons. On the other hand, learned Sr. D.R. relying on the order of authorities below submitted that the assessee has furnished inaccurate particulars in respect of interest expenditure which has been held as unexplained cash credit by the Tribunal. 6.3 We have heard the rival submission and perused the material on record. We find that the Tribunal in the assessee’s own case in ITA Nos. 1606/Del/2005 (AY: 2001-02) & 4454/Del/2007 (AY: 2004-05), has decided the issue of unexplained cash credit in the case of Mr. Ravi Kapoor as under:

“7. We have considered the rival submissions. As rightly submitted by the learned DR the primary onus to prove genuineness of the cash credit lieson the assessee. However, in the present case the assessee never filed any confirmation letter from the creditor.

13 ITA No. 5902/Del/2012 AY: 2004-05 Thus except stating that the amount was borrowed from Ravi Kapoor, his identity is not proved. By filing bank particulars of the creditor, the creditworthiness of the creditor is also not proved. The assessee has also failed to prove the genuineness of the transaction. In the circumstances, it cannot be said that the criteria for a genuine cash credit has been satisfied. The decision of Tribunal in the assessee’s case is also distinguishable. In the said case the assessee has proved the identity of the creditor and also filed confirmation letter showing the source of credit by the creditor also. Even the bank account of the creditor was also filed. In those circumstances the Tribunal relying upon the decision of Hon’ble Gauhati in the case of Nerni Chand Kothari vs. CIT, 264 ITR 254 and on the decision of Hon’ble Supreme Court held that the cash credit was genuine. However, in the present case the assessee failed to prove not only the identity' of the creditor but also failed to prove creditworthiness of the creditor. Therefore, the addition was rightly made by the Assessing Officer.”

6.4 From the findings of the Tribunal in respect of unexplained cash credit from Mr. Ravi Kapoor, we observed that the addition has been sustained not only due to not filing of confirmation letter, but due to failure of the assessee in satisfying all the requirements of section 68 of the Act. The assessee has placed reliance on the judgment of the Hon’ble Punjab and Haryana High Court in the case of CIT versus Sunila Sharma (supra). In the facts of the case the Hon’ble High Court has held as under: “9. The factual matrix of the case has been discussed above. The assessee furnished the details regarding the bank accounts from where she got the gifts, the dates, the details of the bank accounts and the demand drafts of Toronto Dominion Bank, Canada were furnished to substantiate that the gift was from her brother who was residing at Canada. The concealment, as such, in the facts and circumstances, was missing, as admittedly, it was not that the amount was detected subsequently but the factum of the gifts from the brother and sister had been mentioned in the note in the income tax return. The explanation was later on asked for and further particulars could not be furnished on account of sour relationship and the fact that she was not in touch with her brother who had allegedly shifted Canada, thereafter. 10. In such circumstances, the discretion which has been exercised by the Tribunal, in setting aside the penalty, cannot be said to be perverse or suffering from such illegality which would warrant interference. The Tribunal has discussed the matter in detail and thrashed out the factual aspect and granted the discretionary benefit to the assessee on valid grounds which does not raise any substantial question of law, as such, which would warrant interference by this Court.” 6.5 We find that facts of the case in hand are different from the case cited by the assessee. In the case in hand, the assessee has failed to prove the identity and creditworthiness of the creditor as well as genuineness of the transaction. In

14 ITA No. 5902/Del/2012 AY: 2004-05 view of the facts of the case, the assessee is liable for furnishing inaccurate particulars of income in respect of the issue in dispute and accordingly we uphold the penalty levied in respect of disallowance of interest of Rs. 19,200/- paid in respect of the loan taken from Mr. Ravi Kapoor which has been held as unexplained cash credit under section 68 of the Act in the assessment year 2001- 02. Accordingly, this ground of the appeal is dismissed. 7. In the result, the appeal filed by the assessee is partly allowed. The decision is pronounced in the open court on 2nd June, 2016.

Sd/- Sd/- (I.C. SUDHIR) (O.P. KANT) JUDICIAL MEMBER ACCOUNTANT MEMBER Dated: 2nd June, 2016. Laptop/- Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR Asst. Registrar, ITAT, New Delhi