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2015 (8) TMI 840 - ITAT AHMEDABAD

2015 (8) TMI 840 - ITAT AHMEDABAD - TMI - Penalty u/s.271(1)(c)- addition made on account of cash credit/disallowance of expenditure claimed as revenue in nature - Held that:- There is no dispute with regard to the addition was made on account of the expenditure claimed as revenue expenditure by the assessee which was treated as capital expenditure by the AO. The assessee has not concealed any particulars of income or furnished inaccurate particulars of income. The only difference in treatment o .....

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at:- CIT(A) has observed that bills cropped up when additional income was detected. It is not the case of the Revenue that bills furnished before the AO were not genuine as there is no finding by the AO that these bills/vouchers were not genuine and no inquiry has been made at the end of the AO. Therefore, we are of the view that this is not the case were penalty deserves to be sustained. We therefore accordingly direct the AO to delete the penalty. As a result, ground raised by the assessee is .....

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the income or furnishing of inaccurate particulars of income by the assessee, the Assessing Officer was rightly not justified in levying the penalty. - Decided in favour of assessee. - I. T. A. No.2572, 2573 , 2574 /Ahd/2011 - Dated:- 14-8-2015 - SHRI PRAMOD KUMAR AND SHRI KUL BHARAT, JJ. For The Appellant : Shri Parin S. Shah, AR For The Respondent : Shri P. L. Kureel, Sr. DR ORDER PER SHRI KUL BHARAT, JUDICIAL MEMBER : These three appeals by the Assessee are directed against the separate order .....

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. CIT(A) erred in law and on facts in confirming penalty levied by AO u/s.271(1)(c) on addition made on account of cash credit/disallowance of expenditure claimed as revenue in nature that is wholly unsustainable in law and on facts. Both the lower authorities failed to appreciate the fact that the Appellant neither furnished inaccurate particulars nor concealed any income. The penalty levied being without any merits and justification deserves to be quashed. The appellant craves leave to add, am .....

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of ₹ 15,698/- on account of disallowance of expenditure of job work, repairs & maintenance and further made addition of ₹ 49,834/- out of repairs & maintenance expenses treated as capital expenditure. The AO also initiated penalty proceedings u/s.271(1)(c) of the Act. Subsequently, the AO levied penalty of ₹ 24,000/- vide order dated 30/06/2009. Feeling aggrieved by the orders, assessee preferred an appeal before the ld. CIT(A), who after considering the submissions of .....

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AO during the course of assessment proceedings. He submitted that it is not the case of furnishing inaccurate particulars of income or concealment of income. He submitted that the ld. CIT(A) has confirmed the penalty on two additions; i. E. ₹ 7,000/- made on account of cash credit and disallowance of ₹ 49,834/- treated as the capital expenditure by the AO. He submitted that the penalty levied on cash credit is not sustainable. He placed reliance on the judgement of Hon ble Jurisdict .....

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authorities below as well as the judgements relied upon by the ld. Counsel for the assessee. We find that the ld. CIT(A) affirmed the penalty on both the issues by observing as under:- 3.2 I have considered the facts of the case as well as the observation of the AO and the arguments advanced by the AR. 3.2(i) So far as Levy of penalty in respect of addition of ₹ 7,000/- made on account of undisclosed cash credit is concerned it is seen from penalty order that the appellant had only filed .....

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ade any submission regarding levy of penalty on this issue. Provisions of explanation 1 to section 271(1)(c) of the I. T. Act,1961 are clearly applicable to the case of the appellant. In view of these facts it is held that the AO was justified in levying penalty under section 271(1)(c) of the I. T. Act,1961 for concealment of income is and furnishing inaccurate particulars of income in respect of the amount of ₹ 7,000/- taxed under section 68 of the I. T. Act,1961. 3.2.(ii) In respect of e .....

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e the basis for levying the penalty. Penalty levied by the AO on this amount, under section 271(1)(c) of the IT Act 1961, is therefore deleted. 3.2(iii) In respect of an amount of ₹ 49834/- disallowed by the AO as the capital expenditure it is seen from the bills submitted by the appellant that amount of ₹ 8350 was spent on purchase of energy saver kit which was a new item. Similarly amount of ₹ 31044 was spenton purchase of a CPU, motherboard, RAM, hard disk, keyboard, mouse,C .....

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AO that the computer parts were purchased for the purpose of repair of existing computers in future is not bonafide. The appellant has wrongly claimed a capital expenditure as the revenue one. In view of these facts, it is very clear that provisions of explanation 1 to section 271(l)(c) of the IT Act are clearly applicable to the case of the appellant. So far as case laws quoted by the appellant in its submission are concerned facts in those cases are found to be different. In this case claim of .....

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ited reported in 191 taxman 179 (Delhi) is applicable to the facts of the case. In this case Honourable High Court has held that: "19. It is true that mere submitting a claim which is incorrect in law would not amount to giving inaccurate particulars of the income of the assessee, but it cannot be disputed that the claim made by the assessee needs to be bona fide. If the claim besides being incorrect in law is mala fide, Explanation 1 to section 271(1) would come into play and work to the d .....

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ly untenable in law and has absolutely no foundation on which it could be made, the assessee would not be liable to imposition of penalty, even if he was not acting bona fide while making a claim of this nature, that would give a license to unscrupulous assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self-assessment under section .....

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t is well established that so long as the assessee has not concealed any material fact or the factual information given by him has not been found to be incorrect, he will not be liable to imposition of penalty under section 271(1)(c) of the Act, even if the claim made by him is not sustainable in law, provided that he either substantiates the explanation offered by him or the explanation, even if not substantiated, is found to be bona fide. If the explanation is neither substantiated nor shown t .....

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e of the assessee. In the present case, despite the fact that provision for bad and doubtful debts was expressly made not deductible in terms of the relevant provisions of section 36(1)(vii) of the Act, the assessee claimed the deduction, even when the amount had not been written off. We cannot overlook the fact that only a small percentage of the Income-tax Returns are picked up for scrutiny. If the assessee makes a claim which is not only incorrect in law but is also wholly without any basis a .....

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assessees to make wholly untenable and unsustainable claims without there being any basis for making them, in the hope that their return would not be picked up for scrutiny and they would be assessed on the basis of self assessment under section 143(1) of the Act and even if their case is selected for scrutiny, they can get away merely by paying the tax, which in any case, was payable by them. The consequence would be that the persons who make claims of this nature, actuated by an intention to .....

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he income of the assessee company. We cannot ignore the fact that the assessee is a company which is having professional assistance in computation of its income, and its accounts are compulsorily subjected to audit. In the absence of any details/explanation from the assessee, we fail to appreciate how such deductions could have been left out while computing the income of the assessee company and how it could also have escaped the attention of the auditors of, especially when the deduction for pr .....

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curate particulars of income in relation to provision for bad and doubtful debts and provision for diminution in the value of investments. Since the appellant has claimed deduction of ₹ 49,834/- as revenue expenditure, which in fact is a capital expenditure and there are no two opinions about disallowability of the deduction claimed and he has also failed to offer a bona fide explanation for the default of claiming wrong deduction, provisions of explanation 1 to section 271(1)(c) of the I. .....

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t of Hon ble Jurisdictional High Court rendered in the case of National Textiles vs. CIT(supra). There is no dispute with regard to the fact that during the course of assessment proceedings the assessee had filed a confirmation from Shri Chunibhai Patel. The AO has not summoned the depositor who had given confirmation. Under these facts, we are of the view that the ld. CIT(A) was not justified in confirming the penalty. Therefore, the AO is directed to delete the penalty. 6.1. Another issue is w .....

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d. Sr. DR supported the orders of the authorities below. 7. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgement relied upon by the ld. Counsel for the assessee. There is no dispute with regard to the addition was made on account of the expenditure claimed as revenue expenditure by the assessee which was treated as capital expenditure by the AO. The assessee has not concealed any particulars of .....

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r AY 2005-06. 8.1. The only effective ground is against confirmation of penalty of ₹ 24,600/-. The ld. Counsel for the assessee submitted that in the quantum proceedings, the AO made disallowance in respect of the difference between in the Profit & Loss A/c. filed along with the original return and in the revised return. The explanation given by the assessee was not found acceptable by the AO and he made addition. He submitted that under the facts of the present case, the penalty ought .....

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orted at (2010) 322 ITR 158(SC). 8.2. On the contrary, ld. Sr. DR supported the orders of the authorities below and vehemently argued that the assessee failed to give a plausible explanation in respect of the difference between in the Profit & Loss account filed along with the original return and in the revised return. 9. We have heard the rival submissions, perused the material available on record and gone through the orders of the authorities below as well as the judgements relied upon by .....

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his submission dated 19.12.2008, the relevant portion of which is as under:- Annexure-A Other Purchase Bill Date Supplier Bill No. Amount Remarks 04.01.05 Alekhan 217 9000 Bill of ₹ 10900 is wrongly entered as ₹ 1900 in original return now rectified. Copy of bill is submitted. Annexure-B-Paper Purchase Bills 20.5.04 Hareshkumar B. Shah 197 12650 Copy of bills are enclosed. The payment for purchase was made by cash. 20.5.04 Sohil Paper Mart 117 9850 19.02.05 Hareshkumar B. Shah 3125 1 .....

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d for electrical repair. 26.06.04 Gopalbhai - 5500C 15.10.04 Gopalbhai - 4500 21.03.05 Gopalbhai - 5500 3.1. The submission of the assessee has duly been taken into consideration, but the same is not found to be tenable. The assessee has failed to furnish any convincing reply except stating the reasons mentioned above. There is no merit in the case of the submission made by the assessee ad it is only an after thought to claim these expenses at the time of filing the revised return. Accordingly, .....

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hat the receipts from two bank accounts were not declared because the accountant forgot to consider the same and it was the genuine mistake on his part. The appellant has not clarified as to how certain bills of expenses were also not taken into account while filing the original return. It is also not explained as to how these bills cropped up when additional income was detected. Clearly, the intentions of the appellant were not honest. In respect of bill of one Shri Alekhan dated 4th of January .....

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/- are claimed to have been incurred in cash. Though bills in respect of these expenses have been filed before the AO no explanation has been provided to explain the circumstances in which such expenses remained to be accounted for in the original return and how these bills were preserved for so many years. It is also not explained as to how these bills cropped up when additional income was detected. It is clear from the above discussion that the appellant has failed to prove the bonafides of it .....

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e that bills furnished before the AO were not genuine as there is no finding by the AO that these bills/vouchers were not genuine and no inquiry has been made at the end of the AO. Therefore, we are of the view that this is not the case were penalty deserves to be sustained. We therefore accordingly direct the AO to delete the penalty. As a result, ground raised by the assessee is allowed and appeal of the assessee for AY 2005- 06 is allowed. 10. Now, we take up the assessee s appeal in ITA No.2 .....

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neither furnished inaccurate particulars nor concealed any income. The penalty levied being without any merits and justification deserves to be quashed. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 11. In this year, facts are identical to the facts as were raised in the AYs 2004-05 and 2005-06 in assessee s own case (supra) in respect of the penalty levied on the cash credit .....

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dings, disallowance was made by invoking the provisions of section 40(a)(ia) of the Act amounting to ₹ 3,43,293/-. The AO proceeded to levy penalty on this amount. The ld. CIT(A) without considering the submissions of the assessee, confirmed the penalty. He submitted that the AO had made addition for non-deduction of tax on the payment made to Kwik Cad Soni of ₹ 2,15,000/- and Asim Photo Carminals of ₹ 1,28,293/- (totalling to ₹ 3,43,293/-). The ld. Counsel for the assess .....

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lable on record and gone through the orders of the authorities below as well as the judgement relied upon the ld. Counsel for the assessee. There is no dispute with regard to the fact that the addition was made on account of non-deduction of tax. The Hon ble High Court of Gujarat in the case of CIT-IV vs. L. G. Chaudhary (supra), has held as under:- 3. We heard learned counsel, Ms. Paurami Sheth for the appellant and senior counsel, Mr. Soparkar for the respondent. Learned counsel, Ms. Sheth has .....

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