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Income Tax Appellate Tribunal, “D” Bench, Mumbai
Before: Shri B.R. Baskaran (AM)& Ramlal Negi (JM)
The appeal filed by the assessee is directed against the order dated 21.12.2010 passed by learned CIT(A)-20, Mumbai and it relates to A.Y. 2003- 04.
The assessee is aggrieved by the decision of learned CIT(A) in confirming the penalty of ` 1,50,000/- levied by the Assessing Officer u/s. 271(1)(c) of the Act.
We heard the parties and perused the record. We noticed that the penalty was levied on the addition of ` 3,55,000/- relating to unproved unsecured loans assessed u/s. 68 of the Act. Learned counsel appearing for the assessee submitted that the assessee had taken over ‘development of a housing project’ from the original developer named M/s. Ekta constructions vide development agreement dated 26.1.2002 along with the liabilities attached to the project, which are specified in the agreement. Accordingly, the assessee
2 Rapid Inexci Services P Ltd. took over the liability of ` 44,05 lakhs relating to seven investors. At the time of assessment proceedings, the Assessing Officer made inquiries with regard to seven creditors and the AO was not satisfied with the details furnished by the assessee to the extent of ` 3,55,000/-. Hence the same was assessed by the Assessing Officer as unproved unsecured loan. Learned AR submitted that the assessee has not borrowed funds during the year under consideration and it was taken over from the previous developer, who had taken the same in the earlier years. Accordingly, he submitted that the addition, if any, relating to unproved loan should have been made in the year in which it was received. He submitted that the assessee has not contested the addition in view of the smallness of the amount. However, since the assessee has not obtained loan, it could not prove the same to the satisfaction of the Assessing Officer which lead to the impugned addition. Learned AR placed reliance on the following case laws to contend that the penalty u/s. 271(1)(c) of the Act is not liable under the circumstances :-
CIT Vs. Bhimji Bhanjee & Co. (1084) 146 ITR 145 (Bom) Shree Nirmal Commercial Ltd. Vs. CIT (2009) 308 ITR 406(Bom) CIT Vs. Mrs. Baljeet Jolly (2003) 263 ITR 239 (Del)
On the contrary, learned Departmental Representative placed reliance on the order passed by learned CIT(A).
Having heard the rival submissions, we are of the view that there is merit in the contention of the assessee. First for all, the impugned advances have been received by the previous developer in the earlier years. Hence there is merit in the submissions of the assessee that it could not prove those advances to the satisfaction of the Assessing Officer. However, in our view, the genuineness of the loans is established by the fact that the assessee has taken over the same alogwith an incomplete project. Had the loan not been genuine, there was no scope for taking up the non-existent liability. Under these set of facts, we are of the view that the explanations of the assessee in this regard
3 Rapid Inexci Services P Ltd. should be considered as bonafide one. Accordingly, we are of the view that the penalty u/s. 271(1)(c) of the Act shall not be exigible able on the impugned addition. Accordingly, we set aside the order of learned CIT(A) and direct the Assessing Officer to delete the addition.