The assessment proceedings and penalty proceedings are two separate and distinct proceedings. The fact that certain additions were made in the assessment proceedings would not automatically justify for imposition of penalty u/s 271(1)(c) of the Act.
In the recent judgment of the Hon’ble jurisdictional High Court in the case of Madhukar Khosla vs. ACIT (supra), the Hon’ble Court has held that ‘if there is no reason to believe that the income has escaped assessment based on new tangible material, then the reopening of assessment amounts to impermissible review’.
The assessee company is not the shareholder in M/s Precision Stock & Credit Pvt. Ltd. and received the amount from the said company in the course of ordinary business activities. Therefore, in view of ratio laid down by the Hon’ble Jurisdictional High Court in the aforesaid referred to case, the provisions of section 2(22)(e) of the Act were not applicable.
The assessee submitted that he produced following evidences before the AO to prove the identity and creditworthiness of Shri Vinod Kumar :- (i) Copy of Share Application received from Mr. Vinod Kumar (ii) Copy of Shares Certificate of shares Allotted to him (iii) Copy of confirmation received from him
Assessee, a partnership firm, was engaged in the business of manufacturing of enameled wire, submersible wire, bare copper wire etc. Assessee filed its return of income related to AY 2009-10 declaring gross loss of (-)3.65% against the total turnover of Rs.590703526/- with net loss of Rs.36385885/-
Here the assessee originally did not have the correct PANs of all the persons from whose payments, tax at source was required to be deducted. Despite that, the assessee did deduct tax at source and paid the amount to the exchequer well in time. The only fault of the assessee was in not filling PANs of some of the deductees which were not available at the time of filing e-returns. As soon as the AO issued notice for imposing penalty u/s 272B, the assessee obtained the relevant PANs and complied with the requirement by filing the revised statement.
In the present case, it is an admitted fact that the assessee was engaged in the business of dealing in shares & securities and has incurred loss from dealing in derivatives (shares futures). It is not the case of the AO that the share futures in which the assessee was dealing were not recorded in recognized Stock Exchange, the loss incurred by the assessee was also not disputed by the AO.
The main issue in both the years relates to whether transaction made in normal course of business can be treated as deemed dividend u/s 2 (22) (e) of the act. The another issue besides the issue above in AY 2007-08 is addition of Rs. 45,00,000/- as unexplained cash credit.
The issue in dispute raised in additional ground relating to non issue of the mandatory notice u/s. 143(2) of the Act is decided in favour of the assessee and we hold that the impugned assessment order dated 31.12.2009 passed u/s. 147/143(3) of the Act by the AO as invalid.
Issue- On the facts and in the circumstances of the case, the Ld.CIT(Appeals) has erred on facts and in law in deleting the addition of Rs.10,83,555/- which was made by the Assessing Officer by invoking the provisions of section 43B of the Act as the service tax payable in the balance sheet was not deposited before due date of filing of return.
