TaxTMI 
TaxTMI 
2016 (5) TMI 464
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....cts and circumstances of the case as well as law on the subject, the learned Commissioner of Income Tax (Appeals) has erred in partly confirming the action of the Assessing Officer in sustaining penalty on addition of Rs. 28,70,422/-- out of total addition of Rs. 36,91,511/-u/s. 271(1)(c) of the Act. 2. It is therefore prayed that above penalty levied by Assessing Officer and confirmed by CIT(A) may please be deleted.. 3. Appellant craves [eave to add, alter or delete any ground(s) either before or in the course of hearing of the appeal. 2. Briefly stated facts of the case as culled out from the assessment records are that assessee is a private limited company engaged in the business of twisting & warping of polyster fi....
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....s. During the earlier year i.e. year ended 31.03.04 (A.Y.2004-05), the turnover of the company was of Rs. 6.70 crores which included job work of Rs. 3.67 lacs only. Whereas during the year i.e. A.Y.2005-06, the company's turnover was only Rs. 1.04 crores and it included Rs. 29.93 lacs for jobwork income. It clearly indicates that the company's own business shows downward trend and it had to start job work to keep factory in running condition. The acute crisis of working capital compelled the company to start job work instead of doing its own business of sale of cloth and yarn. In the earlier year i.e. A.Y.2004-05, the company had earned profit of Rs. 1,76,616/- whereas during the year it had incurred loss of Rs. 84,31,982/-, This cl....
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....ned the penalty of Rs. 10,50,354/- being pro-rata calculated on the basis of order of ld. CIT(A) against the order u/s 271(1)(c) of the Act imposing penalty for furnishing inaccurate particulars of income towards unverifiable purchases at Rs. 28,70,422/-. On perusal of the record, we find that assessee's turnover has drastically increased so much so that revenue has come down to 1.06 crores in Asst. Year 2005-06 from 6.98 crores in Asst. Year 2004-05 and also loss of Rs. 84.33 lacs has been suffered by the assessee as against loss of Rs. 6 lacs in the previous year. We also observe that sundry creditors for goods and expenses which were shown in the books of accounts on 31.3.2004 at Rs. 54,91,467/- has come down to Rs. 28,70,422/-, which sh....
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....duly submitted and no independent enquiry was carried out by the Assessing Officer to prove that balance standing under the head sundry creditors were not genuine. Coupled with this it is hard to believe by us that how the assessee can be visited by penalty u/s 271(1)(c) of the Act for unverifiable sundry creditors even when a considerable amount has been paid during the year to most of the sundry creditors and detailed list of outstanding sundry creditors was available on record with the assessing authority. 8. We further find that similar issue has been dealt in by the coordinate bench in the case of DCIT vs. M/s Darshan Agro Oils Ltd. in ITA No.26/Ahd/2013 for Asst. Year 2008-09 wherein vide its order dated 14.02.2014, the bench has o....
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....tion is doubtful in nature. It is, therefore, clear that the assessee has bona fide explanation and is supported by the above judgments cited. Therefore, it is not a fit case of levy of penalty u/s. 271(l)(c) of the IT Act. Similarly, it was fund that Dharmada was not expenditure of this year and it was merely carried forward from the earlier years. On mere disallowance of expenses u/s. 43B of the IT Act, penalty would not be leviable as per judgment of Madras High Court in the case of MSK Construction Pvt. Ltd. (supra). The assessee has been further able to explain that the major item of disallowance u/s. 43B was addition on account of service tax on processing charges payable of Rs. 2,20,997/-, which amount was not payable as service tax ....