TMI Blog2011 (12) TMI 676X X X X Extracts X X X X X X X X Extracts X X X X ..... that the AO had brought on records various material evidences to prove that the loans were not genuine. (2) On the facts and in the circumstances of the case and in law, the ld. CIT(A) has erred in deleting the penalty of ₹ 8,36,957/- imposed on the assessee u/s 271(1)(c) of the IT Act on the addition made u/s 68 without appreciating the fact that the assessee has failed to prove the genuineness and creditworthiness of the depositors during assessment proceedings as well as during the penalty proceedings. 2. None appeared on behalf of the assessee. So after hearing the ld. DR and going through the material on record we proceeded to decide the appeal. 3. The effective ground is regarding deletion of penalty of ₹ 8,64,100 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Varachha Road, Surat AAFHB7781A 2,50,000/- Rs.1,86,281/- cash on hand as on 31.03.05 and income of ₹ 98,630/- during the year Lilyben Haribhai Babaria, 27, Kasturba Nagar Society, Nr. Baroda Prestige, Varachha Road, Surat. AJSPB 5809A 3,25,000/- Business income of Asst. Year 2005-06 and Asst. Year 2006-07 as per the enclosed return of income. Lilaben Virjibhai, 56, Maheshwari Society Varachha Road, Surat. AJTPB2072P 3,50,000/- Business income of Asst. Year 2006-07 and Asst. Year 2006-07 as per the enclosed return of income. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Date of attendance fixed by Assessing Officer to produce the depositors 23.12.2008 Date of recording of statement of depositors On 23.12.2008 assessee produced 1) Jayantibhai V. Babariya (HUF) 2) Smith Jayantibhai, 3) Nareshbhai Haribhai Babariya and 4) Virjibhai Devrajbhai Babariya Reasons for non-production of 3 depositors Since a short time was allowed the 3 depositors 1) Haribhai V. Babariya, 2) Lilaben Virjibhai and 3) Lilyben Haribhai being out of station could not be produced. Date of issue of Show cause notice No show cause notice was issued before making the addition. Even ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir deposits are also not disproved. In view of the facts and evidences submitted the deposits are genuine in view of the identity of depositors proved before AO, the transaction being genuine as the loan were accepted by account payee cheques. The only dispute is on account of creditor-worthiness of depositors not accepted by AO for which penalty cannot be levied. The penalty should therefore, be deleted. 5. The ld. CIT(A) after going through the penalty order and taking into consideration the submissions of the assessee deleted the penalty by relying on the decision of the Tribunal in the case of Dhirubhai Gajera vs. ITO in ITA No.1147/Ahd/2009 and the decision of Hon ble Gujarat High Court in the case of National Textile vs. CIT 249 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e to give an explanation. However, the addition made on this count automatically cannot justify the penalty levied u/s 271(1)(c). Hon ble High Court further held that for levy of penalty u/s 271(1)(c) two factors must co-exist (i) there must be some material or circumstances leading to the reasonable conclusion that the amount does represent the assessee s income. It is not enough for the purpose of penalty that the amount has been assessed as income and (ii) the circumstances must show that there was animus, i.e. conscious concealment or act of furnishing of inaccurate particulars on the part of the assessee. Explanation -1 to section 271(1)(c) has no bearing on factor no.1 but has a bearing only on factor no.2. The explanation does not m ..... X X X X Extracts X X X X X X X X Extracts X X X X
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