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2015 (11) TMI 480 - ITAT JAIPUR

2015 (11) TMI 480 - ITAT JAIPUR - TMI - Penalty u/s 271(1)(c) - bogus credit balance shown in the books of accounts of the assessee in the name of M/s. Mayank Fabrics and treated as assessee’s income u/s 41(1)(a) - Held that:- The AO has questioned the genuineness of the liability and in absence of the requisite confirmation, has held the same to be a bogus liability. Where the liability itself has been held to be a bogus liability, where is the question of remission or cessation thereof. Thus, .....

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Per Vikram Singh Yadav, AM This is an appeal filed by the assessee against the order of the ld. CIT(A), Ajmer dated 27-05-2011 for the assessment year 2007-08 wherein the substantial ground of appeal raised by the assessee is that the ld. CIT(A) has erred in confirming the penalty of ₹ 1,51,930/- levied u/s 271(1)(c) of the Act. 2. Brief facts of the case are that in the quantum proceedings, credit balance shown in the books of accounts of the assessee in the name of M/s. Mayank Fabrics wa .....

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t the levy of said penalty. 2.1 Before we proceed to examine the matter of levy of penalty, it would be relevant to note the facts which have a bearing on the matter in more detail, the AO s action and response/explanation of the assessee. 2.2. During the course of assessment proceedings on examination of balance sheet, AO found that the assessee has shown sundry credits of ₹ 5,18,000/- in the name and style of M/s. Mayank Fabrics. Information u/s 133(6) was called from M/s. Mayank Fabrics .....

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is there in their books in the name of M/s. Agarwal Texco Industries. 2.3 These facts were made known to the assessee vide order sheet entry dated 13-10-2009 and requested to explain why the amount shown in the name of M/s. Mayank Fabrics should not be treated as income of the assessee. In response, the assessee filed reply dated 3-11-2009 stating as under:- There is credit balance of M/s. Mayank Fabrics of ₹ 5,18,000/- in the books of assessee. This balance comes from preceding financial .....

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ng any account. While all the transactions are through cheques only. Hence, the balance shown in our books are correct….. 2.4. AO, on examination of the copy of ledger filed by the assessee alongwith reply dated 03-11-2009 found that there was credits into the account of assessee on following dates totaling to ₹ 5,38,000/-. Cheque No. Date Amount 482199 8-04-2005 2,29,000 482200 8-04-2005 2,00,000 482188 11-04-2005 1,09,000 5,38,000 Therefore, in order to verify the correctness of a .....

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rom Branch Manager, State Bank of India, Madanganj-Kishangarh stating that the above cheques were issued by M/s. Vikas Industries, Subhash Colony, Madanganj-Kishangarh. In the meantime, M/s. Mayank Fabrics have also filed copy of their bank statement maintained with Oriental Bank of Commerce for the period 1-04-2005 to 15-04-2005. On examination of the same, it is found that no cheque has been issued to M/s. Agarwal Texcom Industry in these dates. 2.5. The above facts were made known to the asse .....

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me of M/s. Mayank Fabrics was bogus and the amount of ₹ 5,18,000/- was treated as assessee s income u/s 41(1)(a) of I.T. Act and added to the total income. 2.7 Being aggrieved by the order of the AO, the assessee carried the matter before the ld. CIT(A) who dismissed the appeal of the assessee by observing (para 4.22) as under:- When the present case is examined in view of this legal position, it is found that appellant claimed bogus liability in respect of sundry credit balances of ₹ .....

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selected for scrutiny and in all other cases, income declared by the assessee is accepted u/s 143(1) without making any further enquiry. Appellant was well aware of this and tried to make undue advantage of this scheme of the Department. It is obvious that if her was not selected for scrutiny, she would have never surrendered the amount of ₹ 5,18,000/-. In this case, it is not established that the conduct and explanation of appellant was bona fide. The levy of penalty u/s 271(1) © is .....

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were received by assessee from M/s. Mayank Fabrics and accordingly were credited in its name in the books of assessee. Merely because the cheques were not issued by M/s. Mayank Fabrics but were endorsed by it to the assessee, it cannot be alleged that the amount was not received by assessee in view of the fact that receipt of the amount by assessee was not doubted since the same has been received through banking channel. Further, the party issuing cheques is an existing concern identity of whic .....

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e books of assessee. 2.9 The ld. AR further submitted that the law is well settled that though the finding recorded in the assessment orders are relevant for penalty proceedings, but these cannot be the foundation for holding the assessee guilty of concealment of particulars of income more particularly when no amount whatsoever was received during the year under appeal and the amount for which the assessee is held as concealing the particulars of income was the opening balances for which the cre .....

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anner. It is an admitted fact that the assessee had received a sum of ₹ 5,38,000/- through cheques in the F.Y. 2005-06 relevant to A.Y. 2006-07 out of which an amount of ₹ 20,000/- was repaid in the same year to M/s. Mayank Fabrics (creditor) through payee s account cheque which as per that the party i.e. M/s. Mayank Fabrics was not accounted for in its books of accounts. However, such payment is not doubted by the ld. AO while making assessment for A.Y. 2006-07. Thus, the fact remai .....

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fulness of such information. 2.10 The ld. AR of the assessee further relied on following case laws:- (i) Narangs International Hotels (P) Ltd. vs. DCIT, Circle- 1(2), Mumbai, 137 ITD 53 (ii) National Textile vs. CIT, 249 ITR 125 (Guj.) (iii) Smt. Durga Devi Somani (ITA No. 672/JP/2011 dated 31-10-2014) (iv) Ashish Gupta (ITA No. 671/JP/2011 dated 17-10-2014) (v) Ashok Kumar Kamdhar (ITA No. 684/JP/2011 dated 18-11-2011) (vi) CIT vs. Reliance Petroproducts (P) Ltd. 36 DTR 449 (SC) (vii) Goswami S .....

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the AO and the ld CIT(A). 2.12 We have heard the rival contentions and perused the material available on record including the written submission of the assessee. In the instant case, the AO has made an addition of ₹ 5.18 lacs claiming the same to be a bogus liability and added the same to the total income of the assessee u/s 41(1)(a) of the Act. In this regard, from the perusal of the balance sheet, it is noted that the assessee's has shown particulars of M/s. Mayank Fabrics amounting .....

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6-07 relevant to subject assessment year 2007-08 and these were not trade credits which were received during the subject assessment year. Thus, legally speaking, if trade credits are treated as credits whose liability has ceased to exist, the relevant entries exists in books of accounts and if they are held as bogus, they belong to earlier financial year 2005-06 and not to the year under consideration. Further, if that be the case, whether the said bogus liability can be brought to tax in the ye .....

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uired into such outstanding dues of the assessee. The assessee supplied details of 27 different creditors. The Assessing Officer issued summons to all these so called creditors and questioned them about the alleged credit to the assessee. In detail, the Assessing Officer in his order of assessment recorded that number of parties were not found at the given address. Many of them stated that they had no concern with the assessee. Some of them conveyed that they did not even know the assessee. On t .....

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reement with the view of the Tribunal. Section 41(1)of the Act as discussed in the above three decisions would apply in a case where there has been remission or cessation of liability during the year under consideration subject to the conditions contained in the statute being fulfilled. Additionally, such cessation or remission has to be during the previous year relevant to the assessment year under consideration. In the present case, both elements are missing. There was nothing on record to sug .....

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