2014 (5) TMI 189 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act Income declared and assessed are same u/s 115JB of the Act Held that - It is not fit case for levy of penalty u/s 271(1)(c) of the Act - Merely because originally the AO has computed the income of the assessee under the normal provisions of law, is not decisive of the issue - the order passed u/s 154 of the Act dated 16.6.2011, the AO has computed the income as per the book profit u/s 115JB of the Act - the MAT u/s 115JB was greater than the regular income, book profit was taken as deemed total income u/s 115JB of the Act - penalty u/s 271(1)(c) of the Act was not imposable on the assessee Following CIT Vs. Nalwa Sons Investments Ltd. 2010 (8) TMI 40 - DELHI HIGH COURT - the penalty levied u/s 271(1)(c) of the Act Decided in favour of Assessee. Disallowance of transportation charges Held that - The Managing Director of the assessee-company has admitted that there was no movement of goods, and it has issued accommodation sales bills amounting to ₹ 30.69 crores during the year - the profit of ₹ 36.31 lakhs shown in the audited financial statement by the assessee for the relevant period and the same represents the actual sale of ₹ 28 crores and odd of goods effected by the assessee during the year assessee could not show that any income on account of bogus claim of transportation charges was included in the figure by the assessee somewhere else in the financial accounts of the assessee thus, the addition of transportation charges was rightly made by the CIT(A) Decided against Assessee. Addition made as unsecured loan and interest payable Held that - Shri Mahendra Bhansali happens to be the Managing Director of the assessee-company and has confirmed the transaction of advancing money to the assessee - Shri Mahendra Bhansali is an existing Assessee, and has given his PAN and it is not the case of the Revenue that the amount of deposit with the assessee-Company was not reflected in the I.T. records of the creditor - no case of addition could be made out. The assessee has discharged its onus of proving the identity and creditworthiness of the creditor by filing confirmation of Shri Mahendra Bhansali who happens to be Managing Director of the assessee-company, and was an existing I.T.assessee and also given his PAN - no case of addition could be made out - Decided in favour of Assessee. Addition made as share application money Held that -The assessee could not prove the genuineness of the deposit of share application money by these five companies at Kalkotta - there is no material to justify the charge of premium on the shares despite the fact that the profit of the assessee-company was negligible - The department was able to establish the discrepancies Following CIT Vs. N.R.Portfolio P. Ltd. 2012 (12) TMI 762 - DELHI HIGH COURT - the addition of ₹ 97 lakhs of share application money is confirmed Decided partly in favour of Assessee.

Summary

Issues Involved:
1. Condonation of delay in filing the appeal.
2. Imposition of penalty under section 271(1)(c) of the Income Tax Act.
3. Disallowance of transportation charges.
4. Addition of unsecured loan and interest.
5. Addition of share application money.

Detailed Analysis:

Condonation of Delay in Filing the Appeal:
The Tribunal addressed a delay of 292 days in filing the appeal by the assessee. The assessee attributed the delay to the laxity of their Chartered Accountant, leading to the appointment of a new Advocate. The Tribunal, considering the affidavit and sufficient cause shown by the assessee, condoned the delay, referencing a similar decision by the Hon'ble Gujarat High Court in Jayvantsinh N. Vaghela Vs. ITO.

Imposition of Penalty under Section 271(1)(c):
The assessee contested the penalty levied under section 271(1)(c), arguing that the book profit under section 115JB was higher than the total income assessed, thereby invoking the decision in CIT Vs. Nalwa Sons Investments Ltd. The Tribunal agreed, noting that the MAT under section 115JB was greater than the regular income, and thus, penalty under section 271(1)(c) was not applicable. The Tribunal canceled the penalty, aligning with the Delhi High Court's decision and the Supreme Court's dismissal of the SLP against it.

Disallowance of Transportation Charges:
The assessee admitted that a significant portion of sales involved accommodation bills without actual movement of goods. The Tribunal upheld the disallowance of Rs. 23,12,214 as transportation charges, agreeing with the AO and CIT(A) that no separate addition for transportation expenses could be made given the non-existent sales and purchases.

Addition of Unsecured Loan and Interest:
The assessee argued against the addition of Rs. 1,60,000 as an unsecured loan from Mr. Mahendra Bhansali, the Managing Director, who confirmed the transaction and provided his PAN. The Tribunal found the addition unjustified, noting that Mr. Bhansali was an existing income-tax assessee, and deleted the addition, allowing this ground of appeal.

Addition of Share Application Money:
The assessee contested the addition of Rs. 99,05,000 as share application money, split into Rs. 2,05,000 from Mr. Mahendra Bhansali and Rs. 97,00,000 from five companies. The Tribunal accepted the assessee's explanation for the Rs. 2,05,000 from Mr. Bhansali, deleting this addition. However, for the Rs. 97,00,000 from five companies, the Tribunal upheld the addition, noting the failure to prove the genuineness of the transactions and the non-existence of the companies, as evidenced by unserved summons. The Tribunal referenced decisions from various High Courts, including CIT Vs. Nipun Builders & Developers P. Ltd., to support their decision.

Conclusion:
The appeal in ITA No.2317/Ahd/2013 was allowed, canceling the penalty under section 271(1)(c). The appeal in ITA No.1092/Ahd/2012 was partly allowed, deleting the addition of the unsecured loan and a portion of the share application money, but upholding the disallowance of transportation charges and the addition of Rs. 97,00,000 as share application money.