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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI N.K. BILLAIYA & SHRI C.N. PRASAD
आदेश / O R D E R
PER N.K. BILLAIYA, AM:
This appeal by the assessee is preferred against the order of the Ld. CIT(A)-33, Mumbai dated 01.08.2013 pertaining to assessment year 2009-10.
The sole grievance of the assessee relates to the levy of penalty u/s. 271(1)(c) of the Act on account of addition out of sundry creditors of earlier years.
Briefly stated the facts of the case are that the assessee is in the business of Real Estate Consultant and Commission agent. Return for the year was filed on 30.9.2009 declaring total income of Rs. 50,18,900/-.
3.1. The roots for the levy of penalty lie in the assessment order dated 20.12.2011 made u/s. 143(3) of the Act.
3.2. While scrutinizing the return of income, the Assessing Officer noticed that the assessee has shown under the head current liabilities and provisions in its balance sheet a sum of Rs. 14,99,58,342/- as payable towards advance for plots. The AO further noticed under the head current assets loans and advances given by the assessee at Rs. 15,83,37,096/-. The assessee was asked to explain the purpose of giving and taking the loans and advances. The assessee explained the necessary query made by the AO. The assessee was asked to furnish ledger copies of all the persons who have given loans and advances to the assessee alongwith confirmations.
3.3. The assessee showed his inability to furnish confirmations from the respective parties as the same were old balances. The assessee also submitted that he has forfeited the advances and the same can be treated as income of the assessee. On this concession made by the assessee the amount of Rs. 42,61,000/- was treated as unexplained advance and added to the income of the assessee.
3.4. Penalty proceedings were separately initiated u/s. 271(1)(c) of the Act. During the course of the penalty proceedings, the assessee was asked to explain as to why penalty should not be levied for the additions accepted in the assessment proceedings. The assessee strongly contended that the AO has made the additions only because the assessee has accepted the same. No enquiry was made by the AO and merely on the basis of acceptance of the assessee, no penalty should be levied. This contention of the assessee was rubbished by the AO who concluded by levying penalty of Rs. 14,48,382/-.
The assessee carried the matter before the Ld. CIT(A) but without any success.
Before us, the Ld. Counsel for the assessee challenged the validity of the additions made in the course of the assessment proceedings. It is the say of the Ld. Counsel that the additions itself made by the AO are bad in law and therefore on the basis of such additions, no penalty can be levied. Strong reliance was placed on the decision of the Delhi Bench in 96 ITD 406. It is the say of the Ld. Counsel that it is open to the assessee to set up/raise the question of validity of assessment in the appeal against the levy of penalty. The Ld. Counsel continued stating that all the advances pertained to earlier years therefore additions made on account of failure by assessee to file confirmations is not justifiable and since the additions itself are not justifiable, no penalty should be levied.
We have given a thoughtful consideration to the orders of the authorities below. We have also considered the judicial decisions relied upon by the Ld. Counsel. We find force in the contention of the Ld. Counsel. Undisputedly, the additions were made on account of advances taken by the assessee in earlier assessment years. Since during the impugned assessment year the assessee was asked to file confirmations and since the assessee could not file the confirmations, he accepted the advances of earlier years has being forfeited and offered the same as income for the year under consideration. The Hon’ble High Court of Delhi in the case of CIT Vs Usha Stud Agricultural Farms Ltd 301 ITR 384 has held that since the credit balance in the accounts of the assessee did not pertain to the year under consideration, the AO was not justified in making the additions. A similar view was taken by the Rajasthan High Court in the case of CIT Vs Prameshwar Bohara 301 ITR 404 wherein the Hon’ble High Court has held that the carried forward amount for the previous year did not become an investment or cash credit generated during the impugned assessment year.
The reference made to the above judicial decisions no doubt relates to the quantum proceedings and the assessee has not preferred any appeal against the quantum additions. What we want to emphasis is that the additions made by the AO are not according to the provisions of the law and settled proposition of law. It shows that the additions have been made merely because the assessee accepted the same.
In our considered opinion and in our understanding of the law, no penalty u/s. 271(1)(c) can be levied on account of additions which are not justifiable in law.
Merely because the quantum additions have not been agitated by the assessee does not ipso facto give rise to the right to levy penalty u/s. 271(1)(c) of the Act. We, therefore set aside the findings of the Ld. CIT(A) and direct the AO to delete the penalty levied u/s. 271(1)(c) of the Act.
In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 15th January, 2016.