RISK DESIGN & ADVERTISING LTD,MUMBAI vs. DCIT CEN CIR 38, MUMBAI

None appeared on behalf of the assessee even though these appeals were adjourned on several occasions at the request of the assessee. Hence, we proceed to dispose of the appeal ex-pare, without presence of the assessee.

We shall first take up the appeal filed for A.Y. 2006-07. We noticed that the grounds of appeal are not available on record. However, we notice that the assessee has filed the appeal against the order passed by the learned CIT(A) confirming the penalty levied u/s. 271(1)(c) of the Act. Hence, it appears that 2 M/s. Risk Design & Advertising Limited the assessee is aggrieved by the decision of the learned CIT(A) in confirming the penalty.

We have heard learned Departmental Representative and perused the record. The assessee has filed its return of income for A.Y. 2006-07 on 29.11.2006 declaring total income of ` 23,16,790/-. The assessee company is engaged in the business of printing and designing promotional material for film industry and is also engaged in production and distribution of films. A survey u/s. 133A of the Act was conducted on 12.9.2007 at the business premises of the assessee. During the course of survey, a sworn statement u/s. 131 of the Act was recorded from the director of the company named Mohd. Azam Khan. The assessee had received share application money during the year and in the sworn statement the assessee agreed to offer share application money of ` 2.40 crores received from M/s. RGV Films Pvt. Ltd. and ` 20 lakhs received from M/s. Singnora Finance Pvt. Ltd., both aggregating to ` 2.60 crores as income of the assessee . According to the surrender so made, the assessee filed revised return of income on 29-08-2009 declaring above said amount of ` 2.60 crores. The Assessing Officer accepted the revised return of income. Thereafter initiated penalty proceedings u/s. 271(1)(c) of the Act on the above said disclosure of ` 2.60 crores and levied penalty of ` 87,51,600/- equivalent to 100% of the tax sought to be evaded.

Before the learned CIT(A), the assessee took the plea that the above said sum of ` 2.60 crores was offered voluntarily to buy peace and avoid protracted litigation. Accordingly it was contended that penalty should not have been levied by the Assessing Officer. However, the Assessing Officer took the view that it is the responsibility of the assessee to offer explanations in terms of Explanation 1 to section 271(1)(c) of the Act and hence mere surrender income during the course of survey proceedings would not relieve the assessee from the liability of penalty u/s. 271(1)(c) of the Act. Accordingly he confirmed the penalty levied by the Assessing Officer. Aggrieved, the assessee has filed this appeal before us.

We notice that the tax authorities have not referred to any of the incriminating material to show that the share application money received by the assessee was bogus. On the contrary, the assessee has contended that it has voluntarily surrendered the amount for the reasons discussed above. It is a well settled proposition that the penalty proceedings are independent of assessment proceedings and hence the entire issue has to be examined afresh from the angle of penal provisions. The findings given in the assessment proceedings can be taken as a guide, but the same is not conclusive. We notice that the Ld CIT(A) has not gone into the factual details and submissions made by the assessee and he has proceeded to adjudicate the appeal by distinguishing various case laws relied upon by the assessee. In our considered view, the facts prevailing in the present case should have been examined by the Ld CIT(A) and then he should have adjudicated the appeal by placing reliance on various case laws. Under these set of facts, we are of the view that this issue requires fresh examination at the end of Ld CIT(A). Accordingly we set aside the order passed by Ld CIT(A) and restore all the issues to his file for adjudicating them afresh.

We shall not take up the appeal filed for A.Y. 2007-08, wherein the assessee is contesting the decision of the learned CIT(A) in confirming the disallowance of interest expenditure and disallowance of production expenses.

We noticed from the submissions made by the assessee before the learned CIT(A) that the assessee has received interest income of ` 35.90 lakhs from various parties. Further the assessee has also taken a stand that interest free advance have been given for business purposes only. We noticed that both the contentions of the assessee have not been considered by the learned CIT(A). With regard to the disallowance of production expenses, the assessee has submitted that it has been consistently following the same method for claiming expenses and this fact has also been overlooked by the learned CIT(A). It is well settled proposition of law that the entries made in the books of account cannot be considered as determinative factor and deduction claimed by the assessee should be examined in accordance with income tax provisions.

In view of the above discussion, we are of the view that both the issues require fresh consideration at the end of the learned CIT(A). Accordingly, we set aside the order passed by the learned CIT(A) on both the issues and restore the same to his file with the direction to examine them afresh after affording adequate opportunity of being heard to the assessee.