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TMI Blog2017 (5) TMI 573X X X X Extracts X X X X X X X X Extracts X X X X ..... 271(1)(c) of the Act. The levy of penalty being without jurisdiction and totally uncalled for deserves to be quashed. 2. The learned CIT(A) has erred in law and on the facts of the case in confirming the action of learned AO in levying penalty under section 271(1)(c) of the Act only on the basis of addition u/s 68 of the Act which creates a legal fiction only for quantum addition and the same cannot be extended to penalty. 3. The learned CIT(A) has erred in law and on facts in confirming the action of AO in initiating and levying penalty under section 271(1)(c) of the Act without recording mandatory satisfaction as contemplated under the Act at the time of framing the assessment order. 4. In any case, the impugned penalty order is barred by limitation and thus without jurisdiction and illegal. 5. In any case, quantification of the penalty is erroneous and excessive. 6. Both the lower authorities have passed the orders without properly appreciating the fact and that they further erred in grossly ignoring various submissions, explanations and information submitted by the appellant from time to time which ought to have been considered before passing the impugned order. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as unexplained cash credits as per the provisions of section 68 of the IT act. The assessing officer also initiated penalty proceedings u/s. 271(1)(c) of the act for furnishing inaccurate particulars/concealment of income. During the course of penalty proceedings as mentioned below in the penalty order the assessing officer has not accepted the explanation of the assssee .He stated that assessee failed to discharge its onus to establish the genuineness and creditworthiness of the credit entry found in the books of accounts and held that it was a clear case of concealment of income, therefore, he levied a penalty of Rs. 11,89,650/- vide penalty order u/s. 271(1)(c) of the act passed on 10th February, 2015. Assessing officer in the penalty order while imposing the penalty has discussed as under:- "2. During the course of assessment proceedings, on verification of Balance Sheet of the assessee it was noticed that the Share Capital has been increased by an amount of Rs. 3 crore and the premium thereon was also credited to the Balance Sheet. The details of persons to whom shares claimed to have been issued, were called from the assessee. The assessee had furnished the following detail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tter ' was discussed with him. However, neither any satisfactory explanation could be given by the assessee nor could it produce any contrary evidence, to otherwise prove the amount of Rs. 35 lakhs credited to the Balance Sheet as genuine and explained. No cross verification or- cross examination was demanded by the assessee against the contentions/statement made by the non- confirming party i.e. Dugar Polymers Ltd In view of .the above a show cause notice vide this office letter dated 11.02.2013 was issued to the assessee. In response to the same, the assessee vide reply dated 22.02,2013 had submitted as under: " as regards the investment in our company by Dugar Polymers Ltd. which he has unfortunately denied it is submitted that first that parties has been identifiable at the place of which address we submitted to yourself and we are also attaching the copy of the Bank Statement which was given by him when the allotment was made to him and the amount debited into his bank account is reflecting in our books of account as well as in our bank account. We enclosing the copy of the bank statement along with copy of the share allotted to him. In the above circumstances the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llant Company, it is clear that the share capital ofRs.35,00,000/- is not explained by the Appellant, even when it is clearly established that the money received by the appellant towards share capital has flown from the bank account of the said Dugar Polymers Ltd. Under the circumstances, it is held that the AO's action in making the addition of Rs. 35,00,000/- u/s.68 is justified. Therefore, the addition of Rs. 35,00,000/- made u/s.68 of the Act by the AO is confirmed and accordingly this ground of appeal is dismissed." 4. As the issue has been decided in favour of Revenue, another notice u/s.274 r.w.s. 271(1)(c)of I.T. Act was issued on 23.09.2014, a fresh asking the assessee to show cause why an order imposing penalty on it should not be passed. In response, the assessee has furnished its submission vide reply dated 06.12.2014, received in Dak on 10.12.2014. The submission of assessee is re-produced as under: "With reference to your show cause notice under above section we have to submit that the assessing officer while making the assessment initiate the penalty for concealing the income for addition of Rs. 35 lacs for the investment made by the Dugar Polymers Ltd u/s. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amount of Rs. 35 lakhs towards share value and premium thereof, had denied to have made any such transaction with the appellant which has been reproduced by the AO in the order. Appellant could not furnish any satisfactory explanation nor could produce any contrary evidence to prove that the amount of Rs. 35 lakhs credited to the Balance Sheet as genuine and explained. The addition made by the AO was contested by the appellant before the CIT(A) and the issue was decided against the appellant. In such facts and circumstances, AO concluded that appellant failed to discharge its onus to establish that the genuineness and creditworthiness of the credit entry found in the books of Accounts and according imposed penalty of Rs. 11,89,650/- being 100% of the tax sought to be evaded. Against the above action of the AO, appellant has contended that the evidences as placed on record by the Appellant has not been found to be incorrect or non-genuine by the AO and further contended that merely relying on the statement of Dugar Polymer Ltd., it is inappropriate to hold that they have not made investment in the shares of the Appellant Company. In this regard appellant has also relied on vari ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs Ltd itself denies of making an investment in the shares of Appellant Company, it is clear that the share capital of Rs. 35,00,000/- is not explained by the Appellant, even when it is clearly established that the money received by the appellant towards share capital has flown from the bank account of the said Dugar Polymers Ltd. Under the circumstances, it is held that the AO's action in making the addition of 35,00,000/- u/s 68 is justified. Therefore, the addition of Rs. 35,00,000/- made u/s 68 of the Act by the AO is confirmed and accordingly this ground of appeal is dismissed." In the quantum proceedings, the addition was confirmed as the appellant could discharge the complete liability to establish that the genuineness, creditworthiness of the credit entry and also the fact that Dugar Polymers Ltd denied making an investment in the shares of the appellant company. All three ingredients of transaction is proved by the appellant on the basis of statement of Dugar Polymers Ltd and the company Dugar Polymers Ltd has denied to have made such investment which lead to inaccurate particulars of income and concealment by the appellant. In such facts, it was established that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents, and hold, for valid reasons, that the transaction is not genuine. The reasons should be based on materials, and not the product of conclusions based on suspicion. In the case of the assessee we find that the Assessing Officer went into great lengths to verify the genuineness of these transactions and issued summons to the share applicants and his reasons that transaction was not genuine based on statement of the party , and not the product of conclusions based on suspicion. We observe that the facts of the case indicate the onus on the assessee to discharge complete liability to establish that the genuineness, credit-worthiness of the credit entry found in the books of accounts. In the present case, when the Dugar Polymers Ltd itself denied of making an investment in the shares of assessee Company and enclosed the audited balance sheet for financial years 2009 - 2010 for ready reference then the assessee should have responded positively to proceed next step for cross-verification and crossexamination to prove its point. In view of the above facts and findings we considered that opportunities were provided by the assessing officer to the assessee to substantiate its claim and ..... X X X X Extracts X X X X X X X X Extracts X X X X
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