TMI Blog2014 (2) TMI 1151X X X X Extracts X X X X X X X X Extracts X X X X ..... losses accumulated in the year under consideration. The ld. CIT(A) was, therefore, justified in holding that even the addition is doubtful in nature. It is, therefore, clear that the assessee has bona fide explanation and is supported by the above judgments cited. Therefore, it is not a fit case of levy of penalty u/s. 271(1)(c) of the IT Act. Similarly, it was find that Dharmada was not expenditure of this year and it was merely carried forward from the earlier years. On mere disallowance of expenses u/s. 43B of the IT Act, penalty would not be leviable as per judgment of Madras High Court in the case of MSK Construction Pvt. Ltd. (supra). The assessee has been further able to explain that the major item of disallowance u/s. 43B was addition on account of service tax on processing charges payable of ₹ 2,20,997/-, which amount was not payable as service tax and was, therefore, offered for taxation in subsequent year by the assessee. These facts would clearly disclose that the assessee has not furnished any inaccurate particulars of income and has also not concealed the particulars of income. The ld. CIT(A) was, therefore, justified in canceling the penalty. - Decided in f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow outstanding balances against them in a sum of ₹ 69,64,254/- and the AO in view of the above facts stated by the assessee made the addition of ₹ 69,64,254/- u/s. 41(1) on account of remission / cessation of trading liability. 2.1 Similarly, the addition of ₹ 4,09,914/- was made u/s. 43-B of the IT Act. The details of same are noted at page 4 of the assessment order because statutory payments could not be made as per section 43-B. The same were accordingly disallowed. 2.2 The AO also made addition of ₹ 30,969/- on account of Dharmada, which was collected on sale invoices to be spent for charitable purpose, but the same remained outstanding at the end of the year. The AO found that since the amount was not spent, therefore, the addition was made. The AO on all these additions, levied penalty u/s. 271(1)(c) of the IT Act, subject matter in this appeal. 3. The assessee challenged the levy of penalty on all the above additions before the ld. CIT(A).The written submissions of the assessee is noted in the appellate order in which the assessee briefly explained that surrender u/s. 41(1) was made of outstanding balances along with Dharmada, as the Dharmada ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The ld. CIT(A) relied upon several decisions in support of his findings. The ld. CIT(A) also found that addition made on account of deemed income would also not lead to levy of penalty. The ld. CIT(A) considering the details found that even the addition is doubtful in itself and as such would not lead to levy of penalty. The other additions on account of Dharmada and disallowance of expenses, the ld. CIT(A) found that disallowance of Dharmada does not attract penalty since it is not the expenditure of this year and the balance was carried forward from earlier years. Further disallowance of expenses u/s. 43-B would not attract levy of penalty. Penalty was accordingly cancelled. 4. The ld. DR relied upon the order of the AO and submitted that when the assessee agreed for addition on the above heads, the AO was justified in levy of penalty. He has relied upon the decision of Hon ble Delhi High Court in the case of CIT vs. Zoom Communication (P) Ltd., 327 ITR 510, in which it was held that the assessee company was having professional assistance in computation of its income and accounts were compulsorily subjected to audit, then the assessee would not be under bona fide belief to cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld - Held, dismissing the appeal, that the Tribunal after going through the records observed that the disallowance of interest under section 43-B of the Act did not amount to concealment of income and that when there is no tax payable, penalty could not be levied. The cancellation of penalty was justified. 4.2 The ld. counsel for the assessee also filed copy of acknowledgement of fling of return for subsequent assessment year 2009-10 and balance sheet to show that the amount of sundry creditors outstanding in assessment year under appeal was also carried forward in subsequent assessment year 2009-10. Therefore, penalty was correctly cancelled. With regard to service tax payable of ₹ 2,20,997/-, he has stated that since no service tax was payable on this amount, the assessee offered the same amount for taxation in the assessment year 2009-10. He has, therefore, submitted that the penalty was rightly cancelled in the matter. 5. We have considered the rival submissions and the material on record and do not find any justification to interfere with the order of the ld. CIT(A) in cancelling the penalty. For making addition u/s. 41(1), it has to be proved that the assessee h ..... X X X X Extracts X X X X X X X X Extracts X X X X
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