TMI Blog2016 (5) TMI 689X X X X Extracts X X X X X X X X Extracts X X X X ..... he financial year is backed up by correct value. It is true that assessee has been unable to give any explanation that why earmarked slow moving items do not have any scrap value but this cannot be a basis for which penalty u/s 271(1)(c) of the Act can be imposed. We are, therefore, of the view that assessee should not be visited with penalty u/s 271(1)(c) of the Act for the addition confirmed upto the stage of Tribunal for disallowance of stock written off - Decided in favour of assessee Disallowance of selling and distribution expenses towards Mizoram-e-governance project - Held that:- , in the given appeal relating to imposition of penalty u/s 271(1)(c) of the Act, we observe that no such effort has been made on the part of Revenue to get the information from Mr. Larsingh M (proprietor of NEITCS) and also no other efforts were made to take information about the bank account in which the impugned payment was credited. Assessee has already lost in appeal on quantum addition but as far as penalty u/s 271(1)(c) of the Act, we are of the view that details of types of services provided to assessee were clearly mentioned in the bills issued by Larsingh M, payments were made by accou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m proceedings not on the ground that the information furnished was false. Your appellant submits that under the circumstances the case of the appellant is fully covered by the ratio of Hon'ble Supreme Court decision in the case of Reliance Petroproducts Ltd. reported at 230 CTR 320 and hence no penalty u/s 271 (l)(c) in the facts and circumstances in respect of these two issues should have been confirmed by the CIT(A). 4. The learned CIT(A) erred in holding that the explanations offered by the appellant in respect of the issues under dispute in the quantum proceedings are not bona fide and that the appellant has not been able to substantiate them. Your appellant submits that the additions in quantum proceedings are only on a different view taken by the Hon'ble ITAT in the quantum proceedings and hence penalty u/s 271 (l)(c) could not be levied in respect of these additions. Your appellant submits that it be so held now and penalty of ₹ 18,73,720/- as levied by learned A.O, and confirmed by the CIT(A) be deleted. Your appellant prays for leave to add, alter and/or amend all or any of the grounds before the final hearing of appeal. 2. Briefly stated facts as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... explanation/reply was submitted. Thereafter while framing penalty order u/s 271(1)(c) of the Act, ld. Assessing Officer has discussed in detail the issues arising in the two confirmed additions on account of stock written off of ₹ 13,59,000/- as well as selling distribution expenses of ₹ 37,61,506/- and has observed complete satisfaction in his penalty order which reads as below :- 4.4 As stated herein above that the assessee did not respond to the opportunities allowed to it to represent its case. In view of the detailed discussion made above, it is held that the assessee has written off the stock without any basis and has also claimed bogus expenditure to reduce its income and thereby avoid payment of legitimate tax thereon amounts to filing of inaccurate particulars of income. In these circumstances and that the assessee has failed to offer any plausible explanation, I am satisfied that the assessee has willfully, knowingly and without reasonable cause furnished inaccurate particulars of its income and, thus, tried to conceal the income so as to evade payment of tax thereon for which it is liable to for penalty u/s.271(l)(c) of the Income-tax Act, 1961. I, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enalty order has clearly mentioned that the assessee did not avail of the opportunity of being heard granted to it and thus filed no explanation. He has also held that the appellant has written off the stock without any basis and has also claimed bogus expenses to reduce the income and has thereby avoided payment of legitimate thereon, which amounts to filing of inaccurate particulars. He has further held that the appellant has willfully, knowingly and without reasonable cause furnished inaccurate particulars of income and, thus tried to conceal the income so as to evade payment of taxes thereon. In the present case, the deductions claimed by the appellant were disallowed as the appellant had filed inaccurate particulars of income and hence it amounted to deemed concealment of income as per the provisions of Explanation 1 to Sec.271(l)( c) of the Act. It may be mentioned here that The Hon'ble Supreme Court in its decision in the case of [2001] 118 taxman 324 (SC)K.P. Madhusudhanan has held that no express invocation of Explanation to section 271 in notice under section 271 is necessary before provisions of Explanation therein are applied. Thus the charge for which penalty has b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orth by the assessee. The same is not acceptable. The assessee has simply stated that since the company has identified the slow moving items, which are not moving since considerably long period of time having regard to the nature of asset and new technological developments and hence the company has decided to write off the same. The assessee has not furnished the basis for the present valuation. The valuation in the books is arbitrary and without any scientific basis. The assessee has also not submitted any valuation report in support of the present value of these items. It is stated by the assessee that above stock is not moving since considerably long period , But: it is not understood as to why the said stock remained for long period. In these circumstances, the explanation submitted by the assessee with no supporting evidence / material is not acceptable. Therefore, the stock written off is. not allowed to the assessee. The same is added back to the total income of the assessee. Penalty proceedings u/s.271(l)(c) of the Income-tax Act, 1961 are separately initiated. 13. Thereafter in appeal before ld. CIT(A) it was observed by ld. CIT(A) that assessee made such claim withou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such income. The impugned disallowance of stock written off finds its origination from the books of account, as the assessee which is maintaining regular books of account with complete quantitative details, figured out certain slow moving items depicted at pages 31 to 34 of the paper book having a list of 79 items which are mainly related to computer hard-wares and the same were categorized under list of items not moving for a long time due to change in technology and other wear and tear and the total of these items at ₹ 13,59,000/- were specifically debited to profit and loss account. Certainly this action of assessee cannot be categorized as furnishing of inaccurate particulars of income or concealment of income because the same have been carried out in the normal course of business and when this entry was made by assessee it was in the firm belief that all these items which are slow moving and having no present market value, needs to be cleared off from the inventory, so that inventory is appearing on the last date of the financial year is backed up by correct value. It is true that assessee has been unable to give any explanation that why earmarked slow moving items do no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e . with necessary documentary or other evidence, the fact of rendering services, the appellant only relied upon the bills issued by the party. When any expenses is claimed by the appellant, onus is on the appellant to prove that the same has been incurred for the purpose of business and it is not for the activities against Law. Unless the appellant submits the details and evidences, the claim cannot be verified. It is held by many judicial decisions that merely making payment by cheques does not prove any expense for business purposes. It is clear that the appellant did not prove the rendering of services and just relied upon the bills submitted by the person. Therefore the appellant has not discharged its onus. Another argument of the appellant is that it received income from Mizoram Government, so the claim of expenses should be allowed, goes against it. In the case: of government contracts/work, there cannot be any intermediary. More than 15% of gross receipts from Mizoram Government was paid to the person whose credentials or business activity are not known. This clearly means that payment has gone not for business purposes. The submission of bill or the mention of activ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ementation and services, efforts towards realization of payments, charges towards the products and material deployed in various department, net working equipment and project implementation co-ordination services. 19. On the other hand, ld. DR supported the orders of lower authorities. 20. We have heard the rival contentions and perused the material on record and also gone through the order of the co-ordinate bench. We observe that there is no dispute to the fact that assessee has provided services to Mizoram-e-governance project and gross revenue around ₹ 2 crores has been earned from this project. Assessee has submitted copies of bill of NEITCS having its address and telephone number out of which one bill is signed by the proprietor and another passed by his accountant. We also observe that assessee has claimed this expenditure in its books of account on the basis of these invoices and has also made payment by account payee demand drafts. Addition had already been confirmed in the hands of assessee for not providing details of types of services provided by Mr. Larsing M relating to Mizoram-e-governance. But on the other hand, before imposing the penalty u/s 271(1)(c) o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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