TMI Blog2015 (12) TMI 891X X X X Extracts X X X X X X X X Extracts X X X X ..... that case any variation in the claims of the assesse will not entail penalty. This judgment also supports the case of the assesse, in view thereof also the penalty in this case can not be imposed by merely referring to the alleged surrender and without considering the explanation. Thus, in consideration of entirety of facts, circumstances and case laws as relied on by assesse, we delete the penalty. - Decided in favour of assessee. - ITA No. 671/JP/2011 - - - Dated:- 17-10-2014 - SHRI R.P. TOLANI AND SHRI T.R. MEENA For the Petitioner : Shri Manish Agarwal For the Respondent : Shri Rajesh Ojha ORDER PER R.P. TOLANI, JM This is an appeal filed by the assessee against the order of the ld. CIT(A), Ajmer dated 27-05-2011 for the assessment year 2007-08 challenging the imposition of penalty of ₹ 5,56,790/- u/s 271(1)( c) of the I.T. Act, 1961. 2.1 The brief facts of the case are that the assessee is an individual and running proprietary business in the name and style of M/s. Ashish Marbles at Kishagarh and is engaged in the business slabs and tiles made of marbles and granites. The impugned penalty is levied in respect of cessation of liability ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Yogi Marbles, assesse had sold goods to them on credit as the payments were made its account reflected nil closing balance. The AO obtained the copy of the account and found that M/s. Yogi Marbles had shown an amount of ₹ 5,02,210/- payable to the assessee. In this behalf, assessee filed following reply. in the case of M/s. Yogi Marbles, Landhe Ke, Moga, the balance shown by us was Nil but in your accounting following DDs were received from Goyal Marbles, Hoshiyapur (Punjab) but wrongly credited in the account of M/s. Yogi Marbles by our accountant, hence as per our books the correct balance was ₹ 2,70,447/- which was to be received from M/s. Yogi Marbles as on 31-03-2007. D.D. No. Date Amount 807626 01.07.2006 94980.00 476244 29.01.2007 87741.00 476251 29.01.2007 87726.00 The Yogi Marbles is showing the balance of ₹ 5,02,510/- payable to us. The reason of difference could not be known to us. Hence ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that penalty u/s 271(1) c cannot be levied in these facts and circumstances: i. CIT v Sureshchandra Mittal 251 ITR 9 (SC) ii. Gebilal Kanhaiyalal (HUF) v. ACIT 270 ITR 523 (Raj) iii. CIT v Badrilal Chaturbhuj 265 ITR 329(Raj) f. Penalty proceedings were separate and distinct from assessment proceedings and mere fact that income has been offered for taxation will not tantamount to admission of furnishing inaccurate particulars without properly examining the explanation and circumstances in this behalf. 2.5 The ld. CIT(A) however confirmed the penalty by following observations: 4.22 When the present case is examined in view of this legal position, it is found that the appellant claimed bogus liability in respect of sundry credit balances of ₹ 14,17,993/- in the return filed by him. Similarly amount shown in the account of M/s. Yogi Marbles by the appellant was incorrect to the extent of ₹ 2,32,063/-. It was only when AO made enquiry from appellant regarding these parties that appellant agreed to surrender this amount. In such a situation, AO has rightly concluded that appellant furnished inaccurate particulars of his income, in the retu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sputed facts that balances do not pertain to this year but are carried forward from earlier years. To avoid litigation assesse may have agreed for addition but this surrender don t discount the actual nature of entries. In fact ld. AO instead of accepting the surrender ought to have made proper inquiries in earlier relevant year and propose the addition in that year. Thus merely because assesse in her poor knowledge about intricacies of income tax law surrendered some income, it doesn t absolve the AO from his statutory obligation of taxing the income in right year. Thus the penalty in this behalf is not imposable in this year. Once AO himself held that the surrender is not acceptable as it was not voluntary, in that case he was under obligation to make addition in the year in accordance with law and initiate the penalty proceeding depending in his findings in relevant year. Thus the additions have been made in wrong year and penalty also has been imposed in wrong year. The assesse has a statutory right to raise the plea of correct year of imposition in penalty proceedings. The surrender of income to avoid litigation which is also not accepted on face value by AO may be good reason ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oceedings ought to have been considered, controverted and not summarily brushed aside. Thus Mak data case is not applicable to assesse. Besides all the relevant particulars having been furnished with the return, Honble Supreme Court judgment in the case of reliance Petro Products is squarely applicable. 2.10 We have heard the rival contentions and perused the material available on record. We are inclined to delete the penalty on following reasons:- i. It clearly emerges that the amounts in question were carried over trade credits from earlier year, corresponding purchases were included in trading a/c thus legally speaking if trade credits are added as cessation of liability, the relevant entries exist in books and if they are held as bogus then they belong to earlier years. ii. These pleas can be taken by assesse in penalty proceedings and in that case penalty can be imposed not on the sole basis of alleged surrender but after consideration of merits of the explanation. iii. AO has held that the surrender is not acceptable and chose to add it u/s 41(1) of the Act. Thus technically even the surrender is not accepted. iv. The Mak data judgment relied by ld DR ..... X X X X Extracts X X X X X X X X Extracts X X X X
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