2019 (2) TMI 988

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....1.2018 by delay of 41days. The assessee in its petition for condonation of delay has stated that the assessee company has closed down its operation in India and was therefore, seeking legal remedy. It was initially considered that the demand raised under penalty order be cleared to settle the case under Income Tax Act, 1961. However, on consultation the legal experts, the assessee company was advised about the repercussions of paying off outstanding demand for penalty and possibility of launching of prosecution. Therefore, the appellant company was convinced that it would be in the best interest of the assessee company to appeal against the order of CIT (A)-24, Mumbai. Therefore, the delay was caused. The assessee has supported its view by placing reliance on the judgement of Hon`ble Supreme Court in the case of Collector, Land Acquisition v. Mst. Katiji & Of Rs. 1987 AIR SC1353: 167 ITR 471 (SC)., N. Balakrishnan v. Krishnamurthy (1998) 7 SC 124 (SC) and others as per his petition. The assessee company has filed an affidavit dated 03.01.2018 from its director Shri Sayaji Kaka Rakshe, in which he has deposed that the delay has occurred due to facts mentioned in petition for cond....

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....f each day to be explained but every day delay must be explained does not employ a pedantic approach. The doctrine must be applied is rational, common sense and with pragmatic approach. When substantial justice and technical considerations are pitted against each other, because of substantial justice is to be preferred, for the other side cannot claim to have a vested right is injustice being done because of non-deliberate delay. In the case of N. Balakrishnan vs. M. Krishnamurthy AIR 1998 SC 3222; there was a delay of 883 days in filing of application in setting aside the ex-parte decree for which application for condonation of delay was filed. We find that the explanation offered by the assessee is the only criteria for condoning the delay. Therefore, on the facts of the present case, we are of the considered opinion that the assessee has been able to demonstrate sufficient reasons in the shape of closure of business by which it was approaching for settlement of tax case. Therefore, we deem it fit to condone the delay of 41 days and admit the appeal. 6. Now we proceed with the appeal on merits. 7. Ground no. 1 to 2 states that Ld. CIT (A) was erred in law and on facts in co....

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.... of the Act. The AO has also initiated penalty proceedings on these additions/ disallowances. Since the resultant income was at Nil. The assessee has not filed any appeal against quantum addition. Accordingly, the AO has allowed the opportunity of being heard to the assessee during penalty proceedings, but the assessee has failed to furnish any reply of penalty show-cause notice. Under the circumstances, the AO observed that the assessee has not furnished any sort of reply which means that the assessee has failed to furnish basic details as to why the payments was made without deduction of TDs and payment of service tax liability and MVAT was paid late which was disallowable under section 43B for which the assessee has no objection. The assessee has failed to furnish source of cash deposits in bank account. Further, no appeal was filed against these additions nor preferred to file any explanation. Therefore, by invoking the Explanation 1 to section 271(1)(c), the AO levied a penalty under section 271(1)(c) Rs. 9,18,395 being 100% of tax sought to be evaded on above disallowances of Rs. 29,74,078. 11. Being, aggrieved, the assessee filed an appeal before the Ld. CIT (A). Befor....

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....t applicable to service tax as held in Pharma Search v. ACIT [2012] 21 taxmann.com 44 (Mumbai-Trib). Further reliance was placed in the case of DCIT v. M/s. M C Retail Pvt. Ltd. I.T.A.No. 419/Mum/2017 dtd.28.09.2018(PB-103) in which it was held that unpaid VAT and service tax liability are not being debited to Profit & Loss Account were not claimed as expenditure, hence, cannot be added back under section 43B of the Act. Therefore, there was no question of any concealment of income or furnishing of inaccurate particulars of income. 14. With regard to addition of Rs. 10,90,000 as unexplained cash credit under section 68 of the Act, the learned counsel for the assessee referred a chart showing (Paper book page no. 123) and extract of bank statement (PB-124-144) reflecting that there are cash withdrawals of equal amount before 2 to 15 days of depositing cash in the bank account on various dates. These facts evidenced that cash deposits in bank account are out of cash withdrawals made before in the same very bank account. This fact is also reflected in cashbook maintained by the assessee. However, the AO has disbelieved this contention of the assessee by observing that there is gap ....

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....nt order reveals that the AO has made addition on the basis of facts as disclosed by the assessee in the return of income and during the course of assessment proceedings. We find that the assessee has furnished all relevant facts; therefore, the penalty cannot be levied merely because that it was not acceptable to the AO. Where the explanation is bonafide and all the facts relating to the same have been disclosed, penalty is not leviable. It is trite law that penalty proceedings are distinct and separate proceedings from assessment proceedings. The finding recorded in the assessment order is not conclusive for deciding the imposition of penalty. It only has a persuasive value. Any finding recorded in the assessment order does not mean that the penalty has to be imposed automatically. Explanation 1 to section 271 (l) (c) provides that the penalty would be deemed to attract where in respect of a fact material to the computation of income either no explanation is offered, or explanation offered is found to be false. In this case, the assessee has offered explanation during the course of assessment proceedings itself that there was no requirement for tax deduction and the assessee h....

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....e by observing that there is gap between cash withdrawals and cash deposits and made addition of the same. However, this cannot be ground for addition as held in the case of Gordhan V. ITO [I.T.A.No. 811/Del/2015 dtd. 19.10.15 copy filed] wherein it was held that no addition can be made merely because there was time gap between cash withdrawals and cash re-deposits. Similarly, in the case of Jasbir Singh Saini v. ITO [2015] 61 taxmann.com 230 (Chandigarh) it was held that where in quantum appeal tribunal has accepted assessee`s explanation in respect of part of deposit and partly confirmed addition stating that explanation given by the assessee which was not convincing, it could not be said that the assessee has concealed the his income or furnished inaccurate particulars of income warranting of levy of penalty under section 271(1)(c). Non-filing of appeal against quantum addition does not mean that the assessee has concealed income of furnished inaccurate particulars of income. The assessment was made at Nil hence; the assessee has choose not to file appeal. However, that does not mean that the assessee has concealment of income of his income or furnished inaccurate particul....