Subscription   Feedback   New User   Login      
Tax Management India .com
TMI - Tax Management India. Com
Articles Highlights TMI Notes SMS News Newsletters Calendar Imp. Links Database Experts Contact us More....
Extracts
Home List
← Previous Next →

Org Informatics Ltd. Versus ACIT, Circle-4, Baroda

2016 (5) TMI 689 - ITAT AHMEDABAD

Penalty u/s 271(1)(c) - disallowance of stock written off - Held that:- 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

unt 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 account payee demand draft and above all there was a corresponding income by way of collection on gross revenue of approximate ₹ 2 crores from Mizoram-egovernance project and looking to th .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

, Baroda, dated 12.10.2011 in appeal No.CAB/III-53/10-11 passed against order u/s 271(1)(c) of the I.T. Act, 1961 (in short the Act) framed for Asst. Year 2005-06 by ACIT Circle-4, Baroda, dated 29.03.2010. Assessee has raised following grounds of appeal :- GROUNDS OF APPEAL Your appellant being aggrieved by the Order passed by the Commissioner of income Tax (Appeals)-lll, Baroda [hereinafter referred to "Learned CIT(Appeals)"], presents this appeal against the same on the following am .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

d to appreciate that there was no requisite satisfaction recorded by the learned A.O. for the purpose of initiating as well as levying penalty u/s 271 (l)(c) of the Act. 3. The learned CtT(A) erred in law and on facts in confirming the penalty U/S 271(1)(c) in spite of the fact that all the information and particulars relating to the claim of the appellant for obsolete stock written off and for selling and distribution expenses were adequately disclosed in the return of income, audited accounts .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

nd 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

rn of income on 31.10.2005 showing total income at Rs.NIL. The case was selected for scrutiny assessment. Notice u/s 143(2) of the Act was issued. Assessment was framed u/s 143(3) of the Act on 28.12.2007 after making additions of ₹ 1,45,26,695/-. Appeal before ld. CIT(A) brought part relief vide his order dated 15.10.2008 to the assessee and on further appeal before the Tribunal against the order of ld.CIT(A) in quantum appeal of assessee the same was partly allowed vide its order dated 1 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ing & distribution Expenses ₹ 37,61,506/- 4. However, no information was provided by the assessee before ld. Assessing Officer and he had no other option except to go for to pass an ex parte order and accordingly penalty of ₹ 18,73,720/- was imposed u/s 271(1)(c) of the Act. 5. Aggrieved, assessee went in appeal before ld. CIT(A) who also dismissed the appeal and confirmed the penalty u/s 271(1)(c) of the Act. 6. Aggrieved, assessee is now in appeal before the Tribunal. Assessee .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

garding no requisite satisfaction being recorded, we find that sufficient opportunity was given by ld. Assessing Officer to the assessee for hearing on 10.2.2010 and 15.3.2010 but none attended on behalf of the assessee nor any written 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 sell .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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, therefore, levy a penalty of ₹ 18,73,720 as against minimum pe .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

er> from the order of the AO as to whether the satisfaction for initiation of penalty or not is discernible from the order or not. Recently, the same view has been taken by Hon'ble Ahmedabad ITAT Bench, Ahmedabad in the case of Kailashbhai Ambalal Shah reported in 129 ITD 135(Ahd). In this regard, it is seen that the AO has discussed all the issues on which the penalty proceeding u/s 271(l)(c) have been initiated, separately in the assessment order and after discussing the nature of disal .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

of penalty and accordingly he had initiated the penalty in a very reasoned and selective manner. The addition on which the penalty has been finally levied was specifically mentioned by the Assessing Officer for initiation of penalty proceedings in his order. Therefore, the objection that there is no proper satisfaction is without any basis both on facts as well as in law in view of the above stated provisions of section 271(l)(c) of the I.T.Act,1961. Thus, it is clear from the assessment order .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

s 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ch penalty has been levied is disallowance of claim of deductions on account of furnishing of inaccurate particulars of income and the amounts so disallowed are to be deemed to be income in respect of which the particulars have been concealed. From the order of the A.O. levying the penalty, it is clear that the has levied the penalty for filing inaccurate particulars of income, as only these words have been used and at no place, the words 'concealed the particulars of income' have been u .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ere with the order and are of the view that proper satisfaction was made by ld. Assessing Officer while passing order u/s 271(1)(c) of the Act and the penalty order u/s 271(1)(c) of the Act is valid. Therefore, we find no substance in the point raised by assessee in the ground no.2. 10. Now we take up ground nos.1, 3 & 4 against the penalty imposed u/s 271(1)(c) of the Act at ₹ 18,73,720/-. Penalty has been imposed on two additions relating to stock written off of ₹ 13,59,000/- a .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

in the profit and loss account at ₹ 13,59,000/- on account of write off of slow moving items identified by assessee as there was no scope of such inventory being sold out in normal course of business cycle in light of market condition and technological development. Ld. Assessing Officer while making addition of ₹ 13,59,000/- observed as below :- 3.2. I have considered the submission put forth by the assessee. The same is not acceptable. The assessee has simply stated that since the c .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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. Thereaf .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

dismissed the ground of assessee. 14. Aggrieved, assessee went in appeal on quantum before the Tribunal but could not succeed as the co-ordinate bench in ITA No.4150/Ahd/2008 for Asst. Year 2005-06, vide its order dated 17.6.2011 confirmed the disallowance for written off of stock at ₹ 13,59,000/- by observing as under :- 10. We have considered the rival submissions and material on record and do not find any justification to interfere with the orders of the authorities below. The AO speci .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

ear. Therefore, same cannot be treated as slow moving or obsolete stock. On consideration of the above facts and details pointed out by the learned Counsel for the assessee we find no infirmity in the findings of the learned CIT(A) because majority of the items were issued prior to the starting of the financial year and further no evidence has been furnished in support of the claim of the assessee. In the absence of any material or evidence to support the claim of the assessee, we do not find an .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

earing 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 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 at ₹ .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

r about the type of the services against this impugned payment, assessee could not furnish any other evidences except the copies of bills dated 31.1.2005 and 7.3.2005 which were paid through account payee demand draft. Ld. Assessing officer disallowed these expenses as the assessee was unable to bring on record that NEITCS was capable of doing any job for the assessee company and therefore, this was non-business expenditure. Further ld. CIT(A) and the co-ordinate bench also confirmed the view ta .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

cer asked the evidences of rendering the services or capability of the said individual to render these services, the appellant only submitted copy of bills, and claimed that the said person is not related. The invoices have been raised and the payments have been made by cheques. The company earned more than ₹ 2 crores in respect of Mizoram Government projects. Apart from these submissions, no evidence in the form of any document or other evidences to prove the involvement of the said perso .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

t 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 .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

be allowed u/s. 37(1). The appellant's other argument that the party is not related is not relevant since the disallowance is made u/s. 37(1) and not u/s, 4QA(2) (b). Considering these, the disallowance made by the Assessing Officer is confirmed." 17. Further co-ordinate bench also confirmed the addition by observing as under :- 14. We have considered the rival submissions and do not find any justification to interfere with the orders of the authorities below. The assessee submitted tw .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

before the learned CIT(A) as well as before the Tribunal, the assessee has failed to prove as to what services have been rendered by this person for the purpose of business of the assessee. Thus, the assessee failed to discharge the onus upon it to prove genuineness of the expenditure incurred for the business of the assessee. Considering the facts of the case in the light of the findings of the authorities below and in the absence of any evidence in form of contract with the party, we are unabl .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

tain the project by way of filing necessary documents before the concerned department and other incidental expenses relating to liaisoning and marketing, project implementation 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 peru .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

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) of the Act an effort should have been made on the part of Revenue to verify the genuineness of the bills produced by the assessee which were .....

X X X X X X X

Extract - Part text only
Click here to Access Full Contents

X X X X X X X

 

 

 

 

 

what is new what is new
  ↓     bird's eye view     ↓  


|| Home || Acts and Rules || Notifications || Circulars || Schedules || Tariff || Forms || Case Laws || Manuals ||

|| About us || Contact us || Disclaimer || Terms of Use || Privacy Policy || TMI Database || Members || Site Map ||

© Taxmanagementindia.com [A unit of MS Knowledge Processing Pvt. Ltd.] All rights reserved.

Go to Mobile Version