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2015 (7) TMI 279 - ITAT HYDERABAD

2015 (7) TMI 279 - ITAT HYDERABAD - TMI - Penalty u/s. 271(1)(c) - disallowance of expenditure/ claims and additions made on the basis of un-reconciled amounts or unconfirmed creditors - CIT(A) deleted penalty levy - Held that:- The Hon'ble Supreme Court in the case of B.A. Balasubramaniam and Bros. Co., Vs. CIT [1998 (1) TMI 7 - SUPREME Court] in fact was considering the presumption of concealment where the returned income was less than 80% of income assessed. It was held that Explanation to Se .....

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nd addition on the basis of non-furnishing reconciliations or non-furnishing of confirmations. As seen from the balance sheet, there are many more credits which the AO has accepted as assessee was in a position to furnish the confirmation letters. Just because he could not confirm the two of the credits occurred during the year and two of the credits carried over from earlier year, it cannot be held that assessee's case come under concealment of Income. CIT(A) was correct cancelling the penalty .....

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. During assessment proceedings, assessee was not able to produce certain bills and documents as well as reconciliation of various bank statements and confirmations for various outstanding credits. Additions were made on account of estimations and non-production of details. Even though no satisfaction was recorded while initiating penalty, notice u/s. 271(1)(c) was issued. In the order u/s. 271(1)(c), Assessing Officer (AO) has given an opportunity to assessee. Assessee explained that the firm i .....

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as concealed income or furnished inaccurate particulars. It was further submitted that the balances appearing in the books are as per information available in the books. Assessee could not get confirmation of the balances and was not in a position to reconcile as to how the difference arose. It was further contended that there being no finding that the amounts that were added relate to transactions of this year and actually be assessed in this year, mere addition of income can t lead to levy of .....

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the tax sought to be evaded. 4. Before the Ld.CIT(A), it was contended that AO was not correct in levying the penalty as the additions u/s. 68 of the Act were made on balances outstanding under the head 'Sundry Creditors' and further, additions were made as assessee could not furnish the proper reconciliations during the assessment proceedings. These cannot lead to levy of penalty. It was further contended that citation given by assessee that of Bhuramal Manikchand Vs. CIT [138 ITR] is .....

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y Creditors. Assessee relied on the decision of the Supreme Court in the case of Pricewaterhouse wherein their Lordships has cancelled the penalty u/s. 271(1)(c) holding that for inadvertence, penalty cannot be levied. Assessee further submitted that the balances brought to tax were arising in earlier years and they cannot be considered as income of this year and just to buy the peace, assessee having failed to reconcile the balance /obtain confirmations has accepted for addition. Penalty cannot .....

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Further, the assessing officer has added all the balances under the head sundry creditors etc. He has not even bothered to find out as to which amounts were introduced during the year and absolutely no details have been obtained to verify the credits and other details. Even in the penalty order the only reason provided is that the onus to prove the genuineness was on the appellant. There is no reason or enquiry made and penalty has been imposed on the basis of estimations and unverified credits .....

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en the assessee himself admitted the incomes during the course of assessment after AO started enquiry about various purchases and entries in the Books of Accounts. The Ld. DR relied on the following case law: i. Kamal Chand Jain Vs. ITO [277 ITR 429] (Delhi ); ii. CIT Vs. Jagabandhu Prasanna Kumar Ruplal Sen Poddar [133 ITR 156]; iii. B.A. Balasubramaniam and Bros. Co., Vs. CIT [236 ITR 977] (SC); iv. Rajkumar Chaurasia Vs. CIT [288 ITR 329] (Allahabad); and v. CIT Vs. Mangha Ram Om Prakash [276 .....

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d, AO has simply disallowed the amounts i.e., 4 items in the assessment order and the reasons given for that were that assessee could not furnish the relevant purchase vouchers (an amount of ₹ 3,21,972/-; Expenses ₹ 43,646/-). In addition to the above, AO notes that verification of balances in bank account revealed that difference of ₹ 81,593/- and in the absence of reconciliation between the details furnished and the bank statement, the difference of ₹ 81,593/- was added .....

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e is whether mere disallowance of expenditure/ claims and additions made on the basis of un-reconciled amounts or unconfirmed creditors can lead to penalty for concealment of income. I am of the opinion that facts do not indicate that there is any concealment. Assessee has explained during the assessment proceedings as well as during the penalty proceedings that it was not in the business at the time of assessment and was not in a position to furnish the bills/vouchers for two items i.e., purcha .....

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9;s contentions on that are correct. The balance of the amounts pertain to M/s Futura Polysters Ltd., and HP Exports. These were new entries during the year, but these seems to be arising from the purchases/job works. Without any disallowance of purchase to the same extent, the outstanding balance at the end of the year cannot be considered as income and certainly cannot be considered for levy of penalty. There is no evidence on record to indicate that there is cessation of liability so as to ta .....

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ent out of business. The mere disallowance of amounts in my opinion cannot lead to levy of penalty. 11. Ld. DR relied on various case law. In the case of Kamal Chand Jain Vs. ITO [277 ITR 429] (Delhi), Hon'ble Delhi High Court has upheld the levy of penalty on the reason that after insertion of Explanation-I to Section 271(1)(c), it is obligatory on the part of assessee to substantially support his explanation and if no proper explanation from assessee was offered except surrendering certain .....

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80% of the assessed income in those assessment years of 1975-76 and 1976-77. When there was no valid explanation from assessee under Explanation-I, which was also found to be false, the imposition of penalty was held valid. However, the provisions were amended subsequently and there is no presumption of concealment as was then existing. Moreover, assessee has given a bonafide explanation under Explanation-I which was not proved false. Accordingly, this judgment also does not apply. 13. In the c .....

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