RITA TEJWANI,MUMBAI vs. ITO WD 19(3)(2), MUMBAI

Instant appeal by the assessee is directed against the order dated 10th October 2012, passed by the learned Commissioner (Appeals)–30, confirming penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 (for short "the Act"), for the assessment year 2008–09.

2 Rita Tejwani filed her return of income on 30th September 2008, declaring loss of ` 44,25,120. During the assessment proceedings, the Assessing Officer noticing that the assessee has debited an amount of ` 32,17,966 to the Profit & Loss account under the head amount written–off called upon the assessee to produce necessary details. In response to the query raised, it was submitted by the assessee that the amount written–off represent payment made to Gitika Kapoor / Shiavi Smart Solutions for purchase of shares for share trading. However, in spite of best effort, the assessee could not receive the shares from the said person. Therefore, since the amount became irrecoverable, the assessee has written–off the amount from the books. The Assessing Officer, however, was not convinced with the explanation of the assessee. He was of the view that if the amount constituted a debt due to the assessee it should have been reflected in her balance sheet which is not the case as the balance sheet as on 31st March 2007, does not show any debt outstanding. He also observed that the assessee could not furnish any details to establish the identity of the party for payments made. Inferring that the assessee has claimed the deduction to reduce her tax liability A.O. disallowed the same.

4 Rita Tejwani of ICICI Bank, copies of delivery slips and demat statement of transfer of shares to Gitika Kapoor, copy of PAN and passport of Gitika Kapoor and certain newspaper articles sought to be produced as additional evidence submitted, these documents not only establish the identity of the person concernrf viz. Gitika Kapoor but also substantiate assessee’s claim that the amount was paid to her. In this context, the learned Authorised Representative also submitted sworn affidavit of the assessee stating the reasons for not furnishing the additional evidences earlier. Therefore, requesting for admission of additional evidence learned Authorised Representative submitted, on the basis of these evidences it is necessary to decide whether penalty can be imposed under section 271(1)(c) for furnishing inaccurate particulars of income. Learned Authorised Representative submitted, when the assessee has disclosed all material facts in her possession, she cannot be accused of furnishing inaccurate particulars of income.

5 Rita Tejwani 32,17,968 on account of bad debt was primarily for the reason that the assessee was not able to furnish necessary details in respect of such claim. However, in the course of proceedings before us, the assessee has sought to produce a number of documentary evidence by way of additional evidence to not only establish the identity of Gitika Kapoor but also substantiate her claim that payments were actually made to the concerned person by the assessee which subsequently became bad debt. On a perusal of the documentary evidence sought to be produced by the assessee by way of additional evidence, it appears that the assessee has not only paid an amount of ` 3,00,000 through banking channel to Gitika Kapoor but there are evidences by way of delivery slips, demat statement, which shows transfer of shares by the assessee to Gitika Kapoor. It is not disputed that the assessee is engaged in trading of shares. Therefore, these additional evidence produced by the assessee prima–facie establishes not only the identity of Gitika Kapoor but also the fact that assessee has paid money to the concerned person which subsequently became irrecoverable. Therefore, as these documentary evidences have a crucial bearing on imposition of penalty, we admit them. However, as these evidences were neither before the Assessing Officer nor before learned Commissioner (Appeals) either at the time of assessment proceedings or in the course of penalty proceedings, in the interest of fair play and 6 Rita Tejwani justice, we restore the issue of imposition of penalty under section 271(1)(c) to the file of the Assessing Officer for deciding afresh after considering the documentary evidences brought on record by the assessee. We make it clear that the assessment proceedings and penalty proceedings being two distinct and separate proceedings merely because disallowance was made in the assessment proceedings, for whatever may be the reason, on that basis alone the Assessing Officer cannot impose penalty under section 271(1)(c) alleging furnishing of inaccurate particulars of income. While imposing penalty under section 271(1)(c) the Assessing Officer must consider the evidences brought on record by the assessee and decide whether a case for imposition of penalty under section 271(1)(c) is made out. Thus, with these observations, we restore the issue back to the file of the Assessing Officer for deciding afresh after providing due opportunity of being heard to the assessee.