Smt. Sumitra Devi Agarwal Vs. ITO (ITAT Jaipur)- The AO has questioned the genuineness of the liability and in absence of the requisite confirmation, has held the same to be a bogus liability. Where the liability itself has been held to be a bogus liability, where is the question of remission or cessation thereof. Thus, in the instant case, where the addition itself is doubtful under the provisions of section 41(1), the same cannot form the basis for levy of penalty.
INCOME TAX APPELLATE TRIBUNAL, JAIPUR
BEFORE: SHRI R.P. TOLANI, JM & SHRI VIKRAM SINGH YADAV, AM
ITA No. 687/JP/2011 Assessment Year : 2007-08
Smt. Sumitra Devi Agarwal Vs. ITO
Assessee by : Shri Manish Agarwal, CA
Revenue by : Shri O.P. Bhateja, Addl. CIT
Date of Hearing : 21/09/2015
Date of Pronouncement : 1/10/2015
ORDER
PER VIKRAM SINGH YADAV, AM
This is an appeal filed by the assessee against the order of the ld. CIT(A), Ajmer dated 27-05-2011 for the assessment year 2007-08 wherein the substantial ground of appeal raised by the assessee is that the ld. CIT(A) has erred in confirming the penalty of Rs. 1,51,930/- levied u/s 271(1)(c) of the Act.
2. Brief facts of the case are that in the quantum proceedings, credit balance shown in the books of accounts of the assessee in the name of M/s. Mayank Fabrics was held bogus and the amount of Rs. 5,18,000/- was treated as assessee’s income u/s 41(1)(a) of I.T. Act and added to the total income by the AO. The matter was carried in appeal before the ld. CIT(A) without any success and the matter has since attained finality as no further appeal was filed before the Tribunal. The AO thereafter levied penalty of Rs. 1,51,930/- u/s 271(1)(c) of the Act which the assessee appealed unsuccessfully before the Ld CIT(A). The assessee is now before us against the levy of said penalty.
2.1 Before we proceed to examine the matter of levy of penalty, it would be relevant to note the facts which have a bearing on the matter in more detail, the AO’s action and response/explanation of the assessee. 2.2. During the course of assessment proceedings on examination of balance sheet, AO found that the assessee has shown sundry credits of Rs. 5,18,000/- in the name and style of M/s. Mayank Fabrics. Information u/s 133(6) was called from M/s. Mayank Fabrics. M/s. Mayank Fabrics filed a written reply dated 21-08-2009 stating that no account is available in the name of M/s. Agarwal Texco Industries during the financial year 2006-07 in their books of account. Again vide office letter No. 965 dated 25-08-2009, M/s. Mayank Fabrics was provided copy of account in the books of assessee and requested to explain the difference. In response to this query, vide letter dated 4-09-2009 they have reiterated what waslstated in the earlier letter that no account is there in their books in the name of M/s. Agarwal Texco Industries.
2.3 These facts were made known to the assessee vide order sheet entry dated 13-10-2009 and requested to explain why the amount shown in the name of M/s. Mayank Fabrics should not be treated as income of the assessee. In response, the assessee filed reply dated 3-11-2009 stating as under:-
“There is credit balance of M/s. Mayank Fabrics of Rs. 5,18,000/- in the books of assessee. This balance comes from preceding financial year 2005-06. A copy of its accounts from preceding year is enclosed. As per the same, three cheques were received for Rs. 5,38,000/- and one cheque issued for Rs. 20,000/- in that year and balance of Rs. 5,18,000/- remained. A copy of our cash book of the above dates is also enclosed showing the details of cheque no. amount and the said cheques were credited in the bank account. Hence, the outstanding balance is correct, we could not understand why Mayank Fabrics denied for not having any account. While all the transactions are through cheques only. Hence, the balance shown in our books are correct…..’’
2.4. AO, on examination of the copy of ledger filed by the assessee alongwith reply dated 03-11-2009 found that there was credits into the account of assessee on following dates totaling to Rs. 5,38,000/-.
