PRAVIN PHARMA,MUMBAI vs. ITO 23(3)(1),

The grounds of appeal raised by the assessee in this appeal are as under: - “1) Your appellant had filed a return of Income declaring a income of Rs.29,757/- 2) The case was selected under scrutiny and an order was passed U/S 143(3) of Income-tax Act, 1961. The new capital introduced and a new Loan taken amounting to Rs.7,10,500/- and Rs.36,93,011/- respectively were added to Income as Unexplained Income. 3) The said addition was confirmed by the Commissioner of Income- Tax Appeal. 4) Your Appellant had requested the Honourable Commissioner of Income Tax to keep the penalty proceedings in abeyance till the M/s. Pravin Pharma principal appeal is being heard. In view of the time barring factor an order is being passed.”

The case was fixed for hearing a number of times and the case was re-posted on account of none being present for the assessee nor any adjournment being sought on its behalf. On two occasions when the Bench did not function, the case was adjourned by notice/intimation through the Notice Board. Even issue of notices by PRAD on more than one occasion has not elicited any response from the assessee. We also observe that the impugned order of the learned CIT(A) has also been passed exparte. In these circumstances, we are constrained to form the opinion that the assessee is not interested in pursuing this appeal. On the other hand, the learned D.R. for Revenue was present and ready to argue the matter. We, therefore proceed to dispose off this appeal with the assistance of the learned D.R. for Revenue and the material on record. 4.1 We have heard the learned D.R. for Revenue and perused and carefully considered the material on record. From the details on record it is seen that the assessee filed its return of income for A.Y. 2006-07 on 26.10.2006 declaring income of `29,757/-. The case was taken up for scrutiny and the assessment was completed under section 143(3) of the Act vide order dated 05.12.2008 wherein the assessee’s income was determined at `74,70,255/-. Penalty proceedings under section 271(1)(c) of the Act was also initiated simultaneously in respect of unexplained capital introduced amounting to `41,35,106/- and unexplained new loans amounting to `29,38,136/- taken from various persons during the year. On appeal by the assessee, the learned CIT(A) in his order sustained the addition of `41,35,106/- on account of unexplained capital to the extent of Rs.7,10,500/- and enhanced the addition made on account of unexplained new loans taken by assessee from `29,38,136/- to `36,93,011/-. 4.2 In penalty proceedings, the explanations put forth by the assessee firm did not find favour with the Assessing Officer (AO). The AO held that the assessee had committed the above defaults and therefore rendered itself liable for levy of penalty and proceeded to levy penalty of M/s. Pravin Pharma `14,82,221/- @100% of tax sought to be evaded on unexplained capital introduction of `7,10,500/- and unexplained new loans of `36,93,001/-. 4.3 In the impugned order, the learned CIT(A) has considered and upheld the levy of penalty of `14,82,221/- under section 271(1)(c) of the Act for A.Y. 2006-07 as under: - “4.1 During appellate proceedings, li is seen that despite specifically being asked to file written submission on merits, as appeal against penalty cannot be kept ill indefinitely only because the assessee has preferred second appeal before the ITAT, absolutely nothing has been submitted from the side of the appellant. There is nothing on record to throw light on the grounds of appeal raised, except the following mentioned in Statements of Facts. 1) Your appellant has filed return of Income on 26.10.2006 declaring an income of Rs. 29,7571-. 2) An order was passed u/s 143(1)(a) & it was selected for Scrutiny u/s 142(1) of the Income Tax Act, 1961. 3) The learned ITO officer had completed an assessment on the ground that the few details were not submitted and have added: - a) Capital Introduced by partners Rs.41,35,106.00 b) New Loans Introduced Rs.29,38,136.00 c) Ad hoc addition of Administrative Expenses Rs.1,33,358.00 d) Packing Expenses Rs.38,971.00 e) Cash Deposit u/s 269(SS) 4) Your appellant had preferred had preferred an appeal with CIT(A) and learned C1T(A) had sustained (a) New capital Introduced Rs.7,10,500 (b) New Loan Introduced Rs.36,93,011 5) Your appellant had preferred an appeal with Appellate Tribunal of Income Tax. The matter is yet to be heard. 6) Subject to the pendency of hearing at Appellate Tribunal of Income Tax, on account of time barring Factor, the learned Income Tax Officer have levied a penalty u/s 271(I)(c) of Income Tax Act, 1961 amounting to Rs. 14,82,221. 7) Your appellant states that the said addition is on account of non referring to one more bank A/c of partners and non referring Balance Sheet of loanee. 8) Your appellant states that if given a opportunity the credit- worthiness of creditors and genuineness of transaction can be proved. Further an appeal of principal order is yet to be heard. Under such circumstances the levy of penalty is unjustified M/s. Pravin Pharma 4.2 I have considered the Statements of Facts mentioned by the appellant in the appeal memo and the order of the AO. It is seen that on the basis of facts and supporting evidences produced by the assessee, the CIT(A) has sustained the addition on account of new capital introduced at the level of Rs. 7,10,500/-, and allowed substantial relief from the addition of Rs. 41,35,106/- made by the AO in this regard. On the other hand, in respect of the addition for new loans treated as unexplained at Rs. 29,38,136/-, the CIT(A) has enhanced this addition to the level at Rs.36,93,011/-. Thus all the facts and evidences submitted by the appellant have been duly considered by the AO and the CIT(A) and the additions sustained/enhanced are based thereon. During penalty proceedings, no valid explanation was submitted by the assessee before the AO in response to the show cause notice issued to him. No explanation has been furnished during the course of appellate proceedings also to justify the grounds of appeal