TaxTMI 
TaxTMI 
2003 (6) TMI 167
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....on 7th Nov., 1997, declaring an income of Rs. 1,34,290. During the course of assessment proceedings, the AO asked the assessee to prove the genuineness of the outstanding trade creditors. Meanwhile, the assessee filed declaration under VDIS on 30th Dec., 1997, declaring an amount of Rs. 4,02,947 on account of creditors in 5 cases. However, the ITO was still not satisfied and proceeded with his enquiries. Therefore, the assessee filed a revised return declaring an additional income of Rs. 1,52,807. There was another dispute regarding the genuineness of the salary paid to a minor daughter Miss Jigana Shah of Rs. 48,000. Thus, in the revised return the assessee declared an additional income of Rs. 1,52,807 (Rs. 1,04,807 on account of unproved ....
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....ITO in his order dt. 10th May, 2001, was deleted by the learned CIT(A) by his order dt. 27th Aug., 2001. 6. The learned Departmental Representative Shri V.L. Lamdade reiterated the grounds raised in the appeal which are as follows: "Reference to the then CIT(A), Belgaum's, order of 12th Dec., 2000, in ITA No. 16/BJP/1990-2000 shows that he had "partly allowed" the appeal filed by the assessee against the original penalty order of 3rd Dec., 1999, The then CIT(A), Belaum, had directed the AO to determine concealed income after giving the assessee an opportunity of being heard and then to recompute the penalty under s. 271(1)(c) accordingly. As such, it is not correct on the part of the learned CIT(A) to presume that his predecessor has ....
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....order giving effect to the directions of the predecessor CIT(A), Belgaum. The AO passed the requisite appeal effect order on 10th May, 2001 and endorsed a copy of the same to the Addl. CIT, Belgaum Range, Belgaum. After receipt of this copy the Addl. CIT Belgaum range, Belgaum, issued certain directions through his letter dt. 15th May, 2001. The learned CIT(A) has taken note of the said letter of 15th May, 2001, to come to the conclusion that the penalty order was passed by the AO without the approval of the Addl. CIT. However, as evident from the foregoing, this finding is not based on the material available on record. The learned CIT(A) failed to appreciate that the additional income brought to tax in the assessee's hands by way of tra....
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....s and hence the entire salary paid to her should have been considered by the AO. It was, therefore, stated that the penalty levied under s. 271(1)(c) is not sustainable in law and should be cancelled. 8. Rival submissions and records were persued. The additions made during the order under s. 143(3) on which penalty has been levied consists of two parts. (i) A sum of Rs. 1,04,807 being unproved sundry creditors, and (ii) An amount of Rs. 32,000 being salary paid to Ms. Jigana Shah. Admittedly, the assessee has offered both these amounts in the revised return filed by the assessee. However, as has been held by the Supreme Court in the case of Sir Shadilal Sugar & General Mills Ltd. vs. CIT (1987) 64 CTR (SC) 199 : (1987) 33 Taxman....
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.... of all these firms before me. It would be seen that these outstanding balances have been carried forward from a number of years. In other words, these are not the sundry creditors of the previous year under consideration. Therefore, even if it is held that these outstanding sundry creditors are not genuine, the same cannot be taxed in the year under consideration. They have to be taxed in the year in which they arose for the first time in the books of accounts of the assessee. At the most, these outstanding sundry creditors can be taxed under s. 41(1) by invoking the Explanation. However, the primary condition for the same is that they should be written off in the books of account of the assessee. In the present case, these sundry creditor....
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....rd to attaining the age of majority or minority. The primary condition for allowing salary is rendering of services. If she has rendered the services, the salary paid to her has to be allowed irrespective of the fact that whether she is a minor or major during the previous year under consideration. The AO has not brought on record any material to prove that the services have not been rendered by Miss Jigana Shah. In fact, he has allowed the salary paid to Miss Jigana Shah, after she had attained the majority implying thereby that Ms. Jigana Shah was rendering the services. Therefore, this amount also cannot be considered for the levy of penalty since the AO has not discharged initial burden that lay upon him for imposing the penalty." 11....