THE ITO, WARD-9(4),, AHMEDABAD vs. SHRI ATUL S. MEHTA,, AHMEDABAD

The revenue has raised following grounds of appeal:-

In this case, return of income declaring income of Rs. 9,95,990/- was filed on 26th October, 2007. Subsequently, the case was selected under scrutiny by issuing of notice u/s. 143(2) of the act on 25th September, 2008. During the course of assessment proceedings, the assessing officer has noticed that assessee has introduced capital to the amount of Rs. 39,30,624/-The assessee was asked to produce the detail in respect of source of introduction of capital during the year under consideration. The assessee failed to furnish the supporting evidences of capital introduction. Consequently, addition of Rs. 39,30,624/- was made to the total income of the assessee. Penalty proceedings u/s. 271(1)(c) of the act was initiated for furnishing of inaccurate particulars of income. During the course of assessment proceedings on further verification of the books of account and details, the assessing officer has also noticed that assessee has obtained fresh loan of Rs. 9 lacs during the year under consideration from Smt. Ratankunvar. To prove the I.T.A No. 589/Ahd/2014 A.Y. 2007-08 Page No 3 genuineness of the aforesaid loan transactions the assessee was asked to produced details such as confirmation, bank statement and PAN etc. But the assessee failed to submit the aforesaid information, therefore, the assessing officer had added the amount u/s. 68 as unaccounted cash credit to the total income of the assessee. The penalty proceedings u/s. 271(1)(c) of the act for concealment of particulars of income was initiated. On further verification of profit and loss account, the assessing officer noticed that assessee has paid freight payment of 2,50,86,492/- to truck owners. Out of the total payment, the assessee has deducted TDS on Rs. 11,61,679/- and for Rs. 5,52,275/-.The assessee claimed remaining amount not liable to deduct TDS as he has collected form no. 15J and further explained that the payments were below 20,000/-. The assessing officer on verification of ledger account of Evergreen Transport and Movex Logistic (main contractor of assessee) from the books of the assessee stated that all the payments made was above Rs. 20,000/- on which the assessee was liable to deduct TDS u/s. 194C of the act. Therefore, the assessing officer disallowed the amount of Rs. 2,39,24,763/- u/s. 40(a)(ia) for not deducting TDS on which penalty proceedings u/s. 271(1)(c) was initiated for furnishing inaccurate particulars of income. The ld. CIT(A) has confirmed the addition to the extent of following amount:- (i) addition of Rs. 39,30,624/- u/s. 68 (ii) addition of Rs. 9,00,000/- (iii) addition of Rs. 2,19,64,923/-

The assessee preferred appeal before the ld. CIT(A). The ld. CIT(A) has partly allowed the appeal of the assesseee by observing as under:- “I am inclined with the contention of A.O that in the absence of any reply/explanation against the show cause notice for penalty u/s. 271(1)(c) of the Act, explanation 1 to 271 (1)(c) of the Act comes in picture and A.O is justified in levying the penalty . But, even in these circumstances, the A.O has to draw a proper satisfaction in respect of various issues for which penalty has to be imposed. It is a settled legal preposition that assessment and penalty are two different and distinct proceedings and it is not in each and every case where addition is made, the penalty is exigible. In reference to addition for disallowances u/s. 40(a)(ia) of the Act for an addition of Rs. 2,19,64,923/- ail the details were submitted by appellant and were before the A.O as well as Ld. CIT(A). It is from the said details only, default of non deduction of TDS was found. As far as genuinely of such transaction with amount there was no ambiguity i.e. both A.O and Ld. CIT(A) admitted the same as genuine and allowable expenditure which appellant claimed in his books of account. It is only because of deeming fiction of section 40(a)(ia) of the Act, such expenditure were disallowed. The appellant's books of accounts were audited and the auditor has not made any adverse remarks in the tax audit report. Further appellant do complied (though partly as held by A.O. as well as Ld. CIT(A) provisions of TDS by deducting TDS on Rs. 11,61,679/- and collecting Form 151'from freight expenses of Rs. 552275 but failed in deducting TDS from other expenditure because major payments were made by contractors on behalf of appellant who had not deducted TDS. It is also true that these expenditure are allowable in any subsequent year on the basis of TDS payment. It is therefore, in my view the satisfaction of furnishing inaccurate particulars cannot be drawn for such genuine and allowable transactions for which all the details were reflected and submitted. The A.O in a mechanical way after the addition being confirmed applied explanation 1 to section 271(1)(c) of the Act and imposed the penalty which is not sustainable as far as legal preposition for imposition of penalty for such large amount is concerned. In reference to disallowances of such expenses, the appellant is already suffering huge tax liability for almost entire expenditure and again imposition of penalty for such addition will be stretching the purpose of section 40(a)(ia) of the Act to unreasonable limit. It is therefore, the penalty so imposed on disallowances of Rs. 2,19,64,923/- is directed to be deleted. In reference to other addition u/s. 68 of the Act, the appellant failed to Giscnarge its onus to prove source of funds. I am inclined with A.O that the same being out of the preview of tax audit and in the absence of any satisfactory reply, invocation of provision of explanation 1 to section 271(1)(c) of the Act is justified. Penalty so imposed on addition of Rs. 39,30,624/- and Rs. 900000/- is therefore upheld and confirmed.

The appellant's ground is partly allowed.”

In the result, the appeal of the revenue is dismissed. Order pronounced in the open court on 27-11-2017 (RAJPAL YADAV) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 27/11/2017