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2021 (3) TMI 999 - AT - Income TaxPenalty u/s 271(1)(c) - additions towards unproved liabilities / cessation of liability and unexplained cash credit u/s. 68 of the Act for the reason that the assessee has failed to prove liability shown under the head map drawing charges and has also failed to prove unsecured loan taken - HELD THAT:- On examining the reasons given by the AO for levy of penalty u/s.271(1)(c) of the Act, we find that the reasons given for levy of penalty is not on sound footing, because the sole basis for making addition is report of Inspector of income tax, which was taken during the course of assessment proceedings, which was in the year 2015, whereas, payment against services has been made in the year 2011 and 2012. It is very difficult for the recipient of payment to confirm exact date of receipt of money. Therefore, for that reason alone, it cannot be inferred that liability shown in the books of account is unexplained. Assessing Officer has not disputed the fact that the assessee has furnished all evidences in respect of unproved liability. In fact, recipient of payment has confirmed rendering of services as well as receipt of money. Therefore, at best, the case can be considered as claim of expenditure with necessary evidence, but unsubstantiated to the satisfaction of the Assessing Officer. It is a well settled principle of law by the decision in the case of CIT Vs.Reliance Petro Products Pvt.Ltd [2010 (3) TMI 80 - SUPREME COURT] that mere making of claim which is not sustainable in law by itself would not amount to furnishing inaccurate particulars regarding income of the assessee. Therefore, we are of the considered view that on this addition, penalty u/s.271(1)(c) cannot be levied. Additions made towards unexplained cash credit being unsecured loan taken from Mr. Karur Ramasamy - as the explanation of the assessee before the Assessing Officer that party has confirmed loan given to the assessee. Once the assessee has furnished confirmation letters to prove identity of the parties, then initial burden cast upon the assessee was successfully discharged. No doubt, the Assessing Officer may not accept the explanation furnished by the assessee with regard to source and nature of credit, but that by itself would not be a ground to reject explanation furnished by the assesse, when the assessee genuinely explains the credits found in books of account disclosing all necessary facts. Therefore, merely for the reason that the Assessing Officer has not satisfied with the explanation furnished by the assessee, it cannot be said that the assessee has furnished inaccurate particulars of income. Therefore, on this count also, penalty levied by the Assessing Officer u/s.271(1)(c) of the Act is incorrect. Therefore, considering the facts and circumstances of the case, we are of the considered view that the Assessing Officer has erred in levying penalty u/s.271(1)(c) of the Act in respect of the two additions. The learned CIT(A), without appreciating the facts has simply confirmed penalty levied by the Assessing Officer, hence, we set aside the order passed by the learned CIT(A) and direct the Assessing Officer to delete penalty levied u/s.271(1)(c) - Appeal filed by the assessee is allowed.
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