2010 (2) TMI 733

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....d to profit and loss a/c. on account of stitching charges were Rs.9,76,36,767/-. The original assessment was completed on 29-1-1998 wherein ad hoc disallowance of 1% of the total expenditure was made based on the earlier years. However, on the basis of assessment proceedings for asst. year 1996-97, it was noticed that the assessee had advanced interest free loans to large number of parties while it has been charging huge interest to the profit and loss a/c. Accordingly, reasons were recorded for initiating proceedings u/s.148 and notice u/s.148 was issued on 26-3-1999. Thereafter, the assessment u/s.143(3) read with sec. 147 was completed on 27-12-2000. Addition on account of stitching charges at Rs.1,38,83,838/- was made along with certain....

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....r No.CIT(A)-VIII/IT-51/06-07 dated 25-1-2007. A copy of the order is also filed. After considering the submissions and perusing the other material on record, the CIT(A) gave the following finding which is recorded at pages 4 and 5 of his order:-   "After considering the facts and circumstances in the penalty case, it is concluded that there is no change in the facts. However, it is noticed that the addition of Rs.1,38,83,838/- pertaining to the year under consideration has been based on the enquiries made during the A.Y.1996-97 and A.Y. 1997-98. It is also pointed out by the appellant that no penalty proceedings u/s.271(1)(c) was initiated for A.Y. 1996-97 during the enquiries made for the A.Y. 1996-97, hence, no addition was made o....

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....e of penalty proceedings. It was further submitted that similar stitching charges were paid for asst. year 1996-97. It was further submitted that on the basis of assessment proceedings the assessment for the year under consideration was re-opened and the assessee filed as much confirmations as possible. However, some of the parties left their premises and therefore confirmations could not be obtained from them. It is not the case of the department that the claim of the assessee is false or the explanation filed by the assessee is untrue or is false. Similar disallowances were also made for asst. year 2001-02. Penalty was also levied for asst. year 2001-02. However, the CIT(A) has cancelled the levy of penalty for asst. year 2001-02 also and....