RAJSHREE CREATIONS,MUMBAI vs. ASST CIT 15(3),

This appeal is against the order of Commissioner of Income-tax (Appeals)- 26, Mumbai [hereinafter called CIT(A)] dated 09-06-2014 passed against the penalty order u/s 271(1)(c) dated 29-03-2012 for A.Y. 2006-07 on the following grounds: “l On the Facts and circumstances of the case and in Law the Ld. Commissioner of income Tax (A) erred in confirming the penalty u/s. 271 (1)(c) leviable on the following expenses claimed by the appellant holding that the same are not genuine expenses. Advocate Fees Rs. 30,000/- a)

The brief background of the case is that the four items as mentioned above in the grounds were disallowed by the AO which were subsequently confirmed by the CIT(A) in the first appeal. Thereafter penalty proceedings were initiated by the AO and being dissatisfied with the explanation of the assessee, the penalty was levied by the AO. The penalty order was contested by the assessee before the Ld. CIT(A) where no relief was given and penalty order was confirmed on all the above said four items of disallowances. Being aggrieved, the assessee is in appeal before us.

During the course of hearing, it has been contended by the Ld. Counsel that the disallowances were made by the AO in a routine manner by finding out some discrepancies in the details and evidences and the claim of the assessee was not proved to be bogus or false. There was no concealment of income on the part of the assessee. It was also submitted that return was filed at a loss of R.30,95,405 and even after the additions, the income was still assessed at a loss of Rs.24,91,970 and thus, apparently, there was no motive with the assessee to evade any tax. The assessee had not filed second appeal as there was no tax implications involved in the quantum appeal. But that does not automatically mean that it was a case of concealment of income and, therefore, penalty has been wrongly levied. He drew our attention on the detailed submissions made before the CIT(A) which were not properly considered by him while confirming the penalty. It was also submitted that the Ld.CIT(A) has confirmed the penalty order exparte and the order has been passed without properly dealing with various arguments of the assessee. It was also submitted that penalty proceedings are very serious and, therefore, the Ld. CIT(A) should not have passed the penalty order in a casual manner even if the same was passed exparte. The Ld. CIT(A) ought to have considered in detail, each and every submissions of the assessee before confirming the levy of penalty.

Per contra, the Ld. DR relied upon the order of the Ld. CIT(A). He also fairly agreed that penalty order has been confirmed by the Ld. CIT(A) exparte in spite of the fact that written submissions were on record before him and, therefore, he accepted that this case may go back to the CIT(A) for fresh adjudication.

We have gone through the orders of the lower authorities. It is noted from the perusal of the orders passed by the Ld. CIT(A) that written submissions were on record before the Ld.CIT(A). The order has been passed exparte. It is further noted that various arguments made by the assessee in the written submission, a copy of which is placed before us also, have not been properly dealt with by the Ld. CIT(A). It has been submitted in detail in the written submission by the assessee that though cogent evidences were not available to substantiate the expenses disallowed by the AO, but, these expenses were not false or bogus. In our opinion, all these submissions were to be properly dealt with before confirming the penalty. The action of confirmation of penalty may further lead to prosecution of the assessee and, therefore, in our considered opinion, before such a harsh action is taken, the assessee should be given full opportunity and well reasoned order should be passed. Therefore, keeping in views all the facts and circumstances of the case, we send this appeal back to the file of the Ld. CIT(A) with a direction to pass fresh order after giving adequate opportunity of being heard to the assessee.

As a result, the appeal may be treated as allowed for statistical purpose. Order pronounced in the court on this 30th day of September, 2016.