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2015 (11) TMI 1437 - ITAT JAIPUR

2015 (11) TMI 1437 - ITAT JAIPUR - TMI - Penalty u/s 271(1)(c) - bogus liability - Applicability of Section 41(1) - Held that:- 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, in the instant case, where the addition itself is doubtful under the provisions of section 41(1), the s .....

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T(A), Ajmer dated 27-05-2011 for the assessment year 2007-08 wherein the effective ground raised by the assessee is that the ld. CIT(A) has erred in confirming the penalty of ₹ 1,20,959/- u/s 271(1)( c) of the Act. 2.1 Brief facts of the case are that the assessee is engaged in the business of purchase and sale of marble slab & tiles under the name and style of M/s. Rajasthan Marbles. The assessment of the assessee was completed by the AO vide his order dated 8-12-2009 determining taxa .....

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in their books of account. The AO after making enquiry came to the conclusion that the liability ofamount of ₹ 3,95,288/- shown by the assessee in the name of M/s. Ramesh Marble Udyog as bogus which he has treated as assessee's income and added the same by following observations. 2.2 The above denial by M/s. Rajasthan Marble Udyog was communicated to the assessee vide note sheet entry dated 27-11-2009. In response to which, the assessee filed a written reply in this office on 7-12-2009 .....

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een established on record that the assessee has shown a bogus liability in his books of account. It has been established on record that in actual there is no such liability is in existence. When the denial letter filed by M/s. Ramesh Marble Udyog was made known to the assessee, the assessee came forward with a surrender note submitting that the amount is being offered for taxation. 2.4 Therefore, after considering all the facts and circumstances of the case, the credit balance in the name of M/s .....

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rmed the penalty imposed by the AO vide para 4.22 of his order as under:- 4.22 When the present case was examined in view of this legal position, it is found that appellant had claimed bogus liability in respect of sundry credits balance of ₹ 3,95,288/- in the returned file by him. It was only when AO made enquiry from Ramesh Marble Udyog, that appellant agreed to surrender this amount. In such a situation, AO has rightly concluded that appellant furnished inaccurate particulars of his inc .....

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obvious that if his case was not selected for scrutiny, he would have never surrendered the amount of s 3,95,288/-. In this case, it is not established that the conduct and explanation of appellant was bona fide, therefore, the case falls in category (b) of para 4.19 as mentioned above. Therefore, levy of penalty u/s 271(1)(c) is therefore, justified in this case pursuant to the decision of Dharmendra Textiles. 2.4 During the course of hearing, the ld. AR of the assessee submitted that during th .....

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re no any kind of transaction with M/s. Rajasthan Marbles, Madanganj, Kishangarh during the F.Y. 2006-07. So there are no any type of account with the concern / firm. The ld. AR submitted that the assessee had no control over the affairs of third party i.e. the creditor who is non-related to the assessee and the assessee was also not in a position to explain as to how and in what manner it had recorded the transactions with the assessee in its books of account and under these circumstances in or .....

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the year under appeal assessee has paid a sum of ₹ 45,000/- to M/s Ramesh Marble Udyog (creditor) through payee s account cheque which as per that party i.e. M/s Ramesh Marble Udyog was not accounted for in its books of accounts however, such payment is not doubted by the AO who made the addition of the closing balance only. Thus, the fact remained that assessee had made part repayment to the creditor during the year and the same was not doubted by the AO. Thus, it becomes clear that a dua .....

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making addition u/s 41(1)(a) of the amount of closing balance shown payable to the abovementioned party by treating the same as non-verifiable at his own sweet will. The ld. AR of the assessee also relied on following decisions on this issue. (1) Narangs International Hotels (P) Ltd. vs. DCIT , Circle- 1 (2), Mumbai, 137 ITD 53 2. National Textiles vs. CIT , 249 ITR 125 (Guj.) 3. Smt. Durga Devi Somani (ITA No. 672/JP/2011 dated 31-10-2014), Jaipur Bench. 4. Ashish Gupta (ITA No. 671/JP/2011 dat .....

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of ₹ 3.95 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. Ramesh Marble Udyog amounting to ₹ 3.95 lacs under the head sundry creditors . The particulars of trade credits in name of M/s. Ramesh Marble Udyog were thus apparent and visible on the face of the balance sheet. From the perusal .....

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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 year under consideration and provisions of section 41(1) can come to the rescue of the AO as has been done in the instant case. In this regard, reference is invited to the decision of Hon ble Gujarat High Court in the case of CIT vs Bhogilal Ramjibhai Atara in Tax Appeal No. 588 of 2013. In the instant case, the facts are that for .....

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ere 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 the basis of such findings and considering that the debts were outstanding since several years, the Assessing Officer applied section 41(1) of the Income Tax Act, 1961 and added the entire sum as income of the assessee. The Assessing Officer held that liabilities have ceased to exist within the meaning of section 41(1) of the Act a .....

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s 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 suggest there was remission or cessation of liability that too during the previous year relevant to the assessment year 2007-08 which was the year under consideration. It is undoubtedly a curious case. Even the liability itself seems under serious doubt. The Assessing Officer undertook the exercise to verify the records of the so cal .....

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