M/S. PRAHALAD FINANCE & CAPITAL (P) LTD.,GHAZIABAD vs. DCIT, NEW DELHI

In support of the ground, the Learned AR submitted that due to non- service/delayed service of notices issued by the Assessing Officer, the assessee could not represent its case before the Assessing Officer and the assessment was thus framed ex parte under sec. 144 of the Income-tax Act, 1961. The assessee has declared income at Rs.7,103 and particulars of various bank accounts mentioned in its balance sheet was filed along with 2 the returns of income. The Assessing Officer has noted that despite opportunities, the assessee did not comply with the requirements issued by him and he has thus estimated the other income of the assessee at Rs. 1 lac as against Rs.7,103 and thus addition of Rs.92,897 has been made. A further addition of Rs.5,500 claimed as legal expenses has also been added by the Assessing Officer on the basis that details were not furnished. Penalty under sec. 271(1)(c) of the Income-tax Act, 1961 has been levied on the addition of Rs.92,897 on the basis that the assessee had concealed particulars of his income to the tune of Rs.92,897. The Learned AR submitted that before the Learned CIT(Appeals), the assessee had filed application for admission of additional evidence explaining the reason in detail for non-appearance before the Assessing Officer as the notices issued by the Assessing Officer on the old address remained unserved or these were served late. The Learned CIT(Appeals) did not allow the application on the basis that despite opportunities given by the Assessing Officer, the assessee did not comply with the requirements. He noted further that in case of change of address, the assessee should have informed the new address to the Assessing Officer. The Learned AR submitted further that during the year and in subsequent years, the assessee had not carried on any business. Even during the assessment year 2005-06, the assessee was having no business income. In 3 support, he furnished copies of assessment orders for the assessment years 2005-06, 2007-08 and 2008-09. The assessee had also preferred the appeal before the ITAT but could not succeed. He contended that since the addition has been made on estimate basis by the Assessing Officer, penalty under sec. 271(1)(c) of the Act cannot be levied. In support, he placed reliance on the following decisions: i) CIT vs. Vatika Construction (P) Ltd. (2014) – 45 Taxmann.com 471 (Del.); ii) Naresh Chand Aggarwal vs. CIT (2013) – 38 Taxmann.com 397 (All.);

The Learned Senior DR on the other hand placed reliance on the orders of the authorities below with the submission that despite several opportunities provided by the Assessing Officer to the assessee, the assessee failed to establish the income declared by it. Thus, there was no concealment of particulars of its income on the part of the assessee to justify the levy of penalty in question.

It is an established proposition of law that being penal in nature, provisions under sec. 271(1)(c) of the Act cannot be invoked in absence of clear finding beyond doubt that there was concealment of particulars of income for furnishing inaccurate particulars thereof on the part of the assessee towards the additions i.e. subject matter of the levy of penalty. The 4 assessee has tried to explain the reason for its non-appearance before the Assessing Officer by filing its affidavit before the Learned CIT(Appeals) with an application to allow the admission of additional evidences under Rule 46A of the Act, which was denied by the Learned CIT(Appeals) on the basis that sufficient opportunities were given by the Assessing Officer to the assessee to represent its case. Thus, the Learned CIT(Appeals) has upheld the addition made by the Assessing Officer in the assessment framed under sec. 144 of the Act. Under these circumstances and when the Assessing Officer undisputedly has made the addition on estimate basis at Rs.92,897, it cannot be said beyond doubt that there was concealment of particulars of income or furnishing inaccurate particulars thereof on the part of the assessee towards the said addition to attract penal provisions under sec. 271(1)(c) of the Act at Rs.31,269. We thus while setting aside orders of the authorities below direct the Assessing Officer to delete the penalty in question. The ground is thus allowed. 5. In result, the appeal is allowed. Order pronounced in the open court on 31 .03.2016 Sd/- Sd/- ( PRASHANT MAHARISHI) ( I.C. UDHIR ) ACCOUNTANT MEMBER JUDICIAL MEMBER Dated: 31/03/2016 Mohan Lal