IN THE INCOME TAX APPELLATE TRIBUNAL "B" BENCH, MUMBAI
BEFORE SHRI JOGINDER SINGH, JM AND SHRI RAJESH KUMAR, AM
./I.T.A. No. 8760/Mum/2011
( / Assessment Year: 2003-04)
M/s. Meta Tiles Private Limited Income Tax Officer 1 (2) 3,
New India Center, 5th floor Room No. 536, 5th floor
/
17, Cooperage Road Aayakar Bhavan
Mumbai 400 039. Vs. M.k. Road,
Mumbai 400 020.
. / . /PAN/GIR No. AAACT 3954F
( /Appellant) : ( / Respondent)
/ Appellant by : Shri Vishwas V. Mehendale
/Respondent by : Shri Mavrya Pratap
/ : 12/10/2015
Date of Hearing
/
: 07/01/2016
Date of Pronouncement
/ O R D E R
PER RAJESH KUMAR, A. M:
This appeal by the assessee is directed against the order dated 12.10.2011 of
Commissioner of Income Tax (Appeals)-2, Mumbai (hereinafter called as the
CIT(A) ) for assessment year 2003-04.The assessee has raised following grounds
of appeal:
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M/s. Meta Tiles Private Limited Vs.ITO
ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW
1. The learned CIT (A) erred in confirming the Penalty u/s 271(1)(c) of
Rs.45633/- on the facts and circumstances of the case.
2. The learned CIT (A) erred in not appreciating the fact that addition of
Rs.124170/- made by the AO u/s.41(1)(a) was solely on account of different
views taken on the same set of facts which at the best can be termed as
difference of opinion and certainly not concealment of income or furnishing of
inaccurate particulars of such income.
3. The learned CIT (A) further erred in appreciating the fact that the appellant
company was legally bound to entertain the claim of creditor of Rs.1,24,170/-
reflected in appellant company's books of account for a period of three years
during which creditor can make their claim for their dues.
2. The only issue raised in all the grounds of appeal relates to confirmation of
penalty u/s 271(1)(c) of Rs.45,633/- by CIT(A) for the addition made u/s 41(1)(a)
to the tune of Rs.1,24,170/-. The brief facts of the case are that the assessment was
framed at a loss of Rs.1,06,890/- vide order dated 08.02.2006 against returned loss
of Rs.3,85,938/- by making various additions inter alia of Rs.1,24,170/- on account
of unexplained expenses/cessation of liability. The penalty proceedings were
initiated u/s 271(1)(c) r.w.s. 274 on 08.02.2006. The quantum appeal is confirmed
by the CIT(A) and assessee had not gone into further appeal against the order of
the CIT(A) in quantum proceedings. During the course of assessment the AO
found that assessee had shown a liability of Rs.1,53,119/- payable to M/s. Punit
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M/s. Meta Tiles Private Limited Vs.ITO
Agency. The ld. AO issued a notice u/s 133(6) to Punit Agency and in reply to the
said notice stated that a sum of Rs.28,949/- was due from assessee as on
31.03.2003 and not Rs.1,53,119/- as claimed by the assessee and added
Rs.1,24,170/- u/s 41(1)(a) of the Act by holding that difference between the
confirmation from M/s. Punit Agency and in the books of assessee represented
the cessation of liability and hence considered as the income in the hands of the
assessee. The ld. AO imposed the penalty of Rs.45,633/- on the ground that the
assessee had concealed particulars of its income by overstating its liability.
3. The ld. CIT(A) confirmed the order of the AO by observing as under:-
" After examining the facts and circumstances of the case, I find that it was
due to the efforts of the Assessing Officer the difference in the accounts of
M/s. Punit Agency P. Ltd vis a vis books of accounts of the appellant was
detected. The addition in the quantum of appeal has already been confirmed
by my predecessor, CIT(A) due to cessation of liability amounting to income
of Rs.1,24,170/- in the hands of the appellant company. The argument of the
Authorized Representative that this income has been subsequently, offered
for taxation in the A.Y. 2006-07 is without any merit and the same is not
acceptable. Since the appellant company has furnished inaccurate
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M/s. Meta Tiles Private Limited Vs.ITO
particulars of income, therefore, it is liable to pay penalty u/s 271(1)(c) of
the Income-Tax Act. I find no reason to interfere with the penalty order
passed by the Assessing Officer in this case and accordingly, penalty
imposed by the Assessing Officer is confirmed."
4. The ld. AR submitted before us that the assessee had correctly accounted for
all the transactions entered into with M/s. Punit Agency and it was only the
mistake in the books of M/s. Punit Agency which had resulted in the difference of
Rs.1,24,170/-. The ld. Counsel further submitted that penalty could not be levied
u/s 271(1)(c) of the Act where there was the difference of opinion on the issue .
The ld. Counsel further argued that the addition was made u/s 41(1)(a) of the Act
which was in respect of remission or cessation of liability and further argued that
the penalty could not even be imposed in that case. The ld. AR defended the case
of the assessee while relying on the decision of the Gujrat High Court in case of
CIT Vs. Bhogilal Ramjibhai Atara 43 taxmann.com55(Gujrat). The ld. DR relied
on the order of the authorities below.
5. We have heard the rival submissions and perused the material on record. On
the basis of the facts before us, we find that there was a difference of Rs.1,24,170/-
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M/s. Meta Tiles Private Limited Vs.ITO
which was added u/s 41(1)(a) of the Act. The difference had arisen between the
confirmation as received by the AO and books of the assessee when the AO called
for information u/s 133(6) of the Act. The AO added the said difference to the
income of the assessee by holding that trading liability of the assessee had ceased
and imposed the penalty of Rs.45,633/- u/s 271(1)(c) for furnishing the in accurate
particulars of income. The assessee submitted before the AO that the said
difference was only because of wrong entries in the book of M/S Punit Agency Pvt
Ltd and tried to explain the same through a reconciliation statement listing out
various reasons of differences which was filed before the AO as well as before the
CIT(A) which is placed on page no.20 of the paper book in which the entire
difference was explained. The assessee also filed the copies of the bills issued by
of M/s. Punit Agency Private Ltd. which is placed at pg no. 21-23 of the paper
book. The assessee also filed various payment vouchers on pg. no. 24-26 of the
paper book which is regarding the various payments made to M/s. Punit Agency
Private Ltd. It is clear from these facts that this is not a case of concealing the
particulars of income nor inaccurate particulars of income. The assessee had even
denied that the liability was ceased during the year. In our view this is a case of
difference of opinion in which the case the penalty u/s 271(1)(c) cannot be levied.
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The case of the assessee also find support from the case of CIT Vs. Bhogilal
Ramjibhai Atara(supra) wherein the Hon'ble Gujrat High Court has held as under:-
"Section 41(1) would apply in a case where there has been remission or
cessation of liability during the year under consideration subject to the
conditions contained in the statue being fulfilled. Additionally such cessation
or remission has to be during the previous year relevant to the assessment
year under consideration.
In the instant case, both elements are missing. There was nothing on record
to suggest that there was remission or cessation of liability that too during
the previous year relevant to the assessment year 2007-08. It is undoubtedly
a curious case. Even the liability itself seems under serious doubt. The
assessing officer undertook the exercise to verify the records of the so called
creditors. Many of them were not found at all in the given address. Some of
them stated that they had no dealing with the assessee. In one or two cases,
the response was that they had no dealing with the assssee, nor did they
know him. Of course, these inquiries were made ex parte and in that view of
the matter, the assessee would be allowed to contest such findings.
Nevertheless, even if such facts were established through bi parte inquiries.
The liability as it stands perhaps holds that there was no cessation or
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remission of liability. Therefore, the amount in question cannot be added
back as deemed income under section 41(1).
This is one of the strange cases where even if the debt itself is found to be
non genuine from the very inception, at least in terms of section 41(1) there
is no cure for it. Therefore, the appeal filed by the revenue was liable to be
dismissed."
5.1 In the case of the assessee, there was no cessation of trading liability during
the year and the assessee had even denied the difference in its books of accounts
and the reasons of difference were explained through reconciliation and also filed
the copies of the bills of the said party and details of vouchers qua payments made.
In our opinion the case of the assessee is squarely covered by above decision and
we respectfully following the same decision delete the penalty levied by the AO by
allowing the appeal of the assessee. The AO is directed accordingly.
In the result, the assessee's appeal is allowed.
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M/s. Meta Tiles Private Limited Vs.ITO
Order pronounced in the open court on 7th January, 2016
Sd/- Sd/-
(Joginder Singh) (Rajesh Kumar)
/ Judicial Member / Accountant Member
Mumbai; Dated : 07.01.2016
Ps. Ashwini Gajakosh
/Copy of the Order forwarded to :
1. / The Appellant
2. / The Respondent
3. () / The CIT(A)
4. / CIT concerned
5. , , / DR, ITAT,
Mumbai
6. / Guard File
/ BY ORDER,
/ (Dy./Asstt. Registrar)
, / ITAT, Mumbai
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