ASHIS ROY CHOWDHURY,KOLKATA vs. I.T.O WD - 33(2),KOLKATA, KOLKATA

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ITA 718/KOL/2013Status: DisposedITAT Kolkata03 February 2016AY 2007-083 pages
AI SummaryAllowed

What did the Tribunal hold?

The Tribunal held that penalty was not initiated for the disallowance under Section 40A(3) and interest on refund, directing cancellation for these additions. For the cash credit, the Tribunal noted the assessee offered it in good faith and the AO did not prove concealment, thus deleting the penalty for this addition as well.

What were the facts?

The assessee's assessment included additions for disallowance under Section 40A(3), unexplained cash credit under Section 68, and interest on income tax refund. The AO levied penalty under Section 271(1)(c) for all three additions, which was upheld by the CIT(A).

What were the issues?

Whether penalty under Section 271(1)(c) can be levied for additions where penalty proceedings were not initiated by the AO, and whether offering an amount in good faith negates the requirement of proving concealment for penalty.

Which sections of the Income-tax Act were involved?

Section 40A(3),Section 68,Section 271(1)(c)

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Income Tax Appellate Tribunal, “ C” BENCH, KOLKATA

Before: Shri M. Balaganesh

ORDER SHRI M.BALAGANESH, AM

This appeal of the assessee arises out of the order of the Learned CIT(A)-XIX, Kolkata in Appeal No. 229/CIT(A)-XIX/Circle-33(2)/Kol/12-13 dated 08/01/2013 for the Asst Year 2007-08 against the order of penalty levied by the Learned AO u/s 271(1) ( c) of the Income Tax Act, 1961 (hereinafter referred to as the ‘Act’).

2.

The brief facts of this issue are that the assessee is engaged in the business of civil construction. He had taken contract receipts from M/s. Bharat Petroleum Corporation Limited [ In short ‘ M/s. BPCL]. The assessment u/s. 143(3) of the Act was completed by making following additions:- 1) Disallowance u/s. 40A(3) of the Act Rs.22,360/- 2) Unexplained cash credit u/s. 68 of the Act Rs.1,00,000/-, and 3) Interest on income tax refund Rs. 3,195/- 2.1 The Learned AO levied the penalty u/s. 271(1)( c) of the Act in respect of said three additions. The assessee did not prefer any appeal against the original assessment

1 Shri Ashis Roy Chowdhury framed u/s. 143(3) of the Act, but he preferred appeal before the Learned CITA against the order of penalty levied u/s. 271(1)(c ) of the Act. On 1st appeal, the ld.CIT(A) has upheld the order of the ld.AO in levying penalty u/s. 271(1)( c) of the Act. Aggrieved, the assessee is in appeal before us on the following grounds:- “

1. For that the Penalty Order is bad in law.

2. For that the assessee accepted the demand & paid the tax. No further dispute was raised by the assessee. As per the judgement of the Hon'ble Supreme Court in "SRI SHADILAL SUGAR & GENERAL MILLS LTD. VS CIT [1987) 168 ITR 705, it is not a fit case for penalty.

3. For that the Penalty Order is erroneous. The direction was made in the Penalty Order not to add Rs.22, 260/- for violation of Sec 40(A)3 of the Act. But in the calculation of penalty the amount was taken. The same mistake was made in the Appeal Order. The observation of the Ld. Appellate Authority is not justified.

4. For that the appellant seeks kind permission to raise new contentions and grounds.

2.2 The ld.AR argued that though the ld.AO had made the said additions in the assessment u/s. 143(3) of the Act, the penalty proceedings u/s. 271(1)( c) of the Act was initiated by him only in respect of unexplained cash credit of Rs. 1 lakh. Hence, he prayed before us for cancellation of said penalty levied in respect of other two additions. He also argued that the assessee had also agreed for the addition made towards unexplained cash credit u/s. 68 of the Act during the course of assessment proceedings in good faith. He also relied upon the decision of the Hon’ble Supreme Court in the case of Sri Shadilal Sugar & General Mills Ltd vs CIT reported in 168 ITR 705 (SC). In response to this, the ld. Sr.DR vehemently supported the order of the ld.AO.

3.

We have heard the rival submissions. We find from the assessment order that the penalty was not initiated by the ld.AO in respect of additions made u/s. 40A(3) of the Act and on account of interest on income tax refund. Hence, the levy of penalty on this addition is hereby directed to be cancelled.

2 Shri Ashis Roy Chowdhury

4.

Apropos the addition made in respect of cash credit u/s. 68 of the Act of Rs. 1 lakh, it is seen that the assessee was in receipt of Rs. 1 lakh from M/s. Econ India, which got credited in his bank account and had come forward to offer the same in good faith before the ld.AO before the completion of assessment proceedings. The ld. AO had not proved the concealment made by the assessee in this regard, which is one of the crucial ingredient before initiating penalty proceedings. In view of these facts, the order of levying penalty u/s. 271(1)( c) of the Act in respect of this addition is hereby directed to be deleted.

5.

In the result, the appeal of the assessee is allowed as stated above.

THIS ORDER IS PRONOUNCED IN OPEN COURT ON 03-02-2016

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