Case Law Details
Brief summary of the case
Assessee being partnership firm was engaged in the business of builders & developers. A search u/s 132(1) of the I.T. Act was carried out in case of Shri Shreeram H. Soni on 29-07-2003. During search, blank promissory note and blank undated cheques worth Rs.5 Lacs related to the assessee-firm were found beside some other documents. On the basis of such seized material notice u/s 153C was issued on the assesse-firm. In response, assessee-firm filed its return for A.Y. 1998-99. During the assessment proceedings, A.O asked the confirmation of unsecured loans. The assessee failed to furnish loan confirmations of Rs.5 Lacs taken from Shri Shreeram H. Soni. Beside this some confirmations was filed by assessee-firm without having PAN and addresses. Since the assessee-firm failed to prove the genuineness of the loan transactions by giving their PAN, bank account extract etc to the satisfaction of A.O., an addition of Rs.2620000/- along with disallowing corresponding proportionate interest of Rs.576400/- was made to the income of the assessee. On an appeal, CIT(A) provided a relief of Rs.1470000/- along with proportionate interest to the extent of Rs.323400/- on the basis of remand report of A.O. Aggrieved revenue filed the appeal before Tribunal against the order of CIT(A) which was dismissed by ITAT.
Subsequently, A.O. initiated penalty proceeding u/s 271(1)(c) on account of various additions. However during the appellate proceedings, CIT(A) sustained the penalty amount to the extent of addition of unexplained cash credit of Rs.1150000/- and proportionate interest thereon of Rs.253000/-. Aggrieved with the penalty order, assessee filed appeal before ITAT.
Contention of the Assessee
Assessee argued that original return was filed disclosing the loan creditors including Rs.5 Lac entry. In response to notice u/s.153C the assessee filed the return. The issue of notice u/s.153C was based on some promissory notes of Rs.5 lakhs found from the residence of Shri Shreeram H. Soni. He submitted that no incriminating materials were found, therefore, in absence of any incriminating materials found, no penalty u/s 271(1)(c) of the I.T. Act can be levied. Merely because some additions was made, the same does not call for automatic levy of penalty u/s 271(1)(c) of the I.T. Act. It was further submitted that the assessment u/s.153A will be made on the basis of the incriminating material which in the context of relevant provisions means (1) books of account or other documents found in the course of search but not produced in the course of original assessment and (2) undisclosed income or undisclosed property discovered in the course of search. Since the assessee has already filed original return of income disclosing details of loans & Advances, therefore no penalty u/s 271(1)(c) is leviable since the addition is not based on any incriminating material found during the course of search in the case of Shreeram H. Soni. Moreover some addition was made on the ground of not proving the genuineness of the loan in the absence of PAN, bank account details, however it is not proved that loans are bogus hence penalty u/s 271(1)(c) is not leviable.
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