2015 (1) TMI 299 - AT - Income Tax

Addition su/s 68 - Burden to prove - cash credit - genuineness of creditors Held that - The assessee furnished before CIT(A) certain details relating to the loan creditors for each of the year under consideration - In the remand report, the AO has pointed out that there were differences between the details so furnished and the Balance Sheet of the assessee - it was pointed out by the AO that the Statement of accounts claimed to have been obtained by the assessee from the creditors have been signed by the director of the assessee company - CIT(A) has also noticed that the assessee has failed to prove the credit worthiness of the creditors - the assessee company has failed to prove the cash credits in terms of sec. 68 of the Act - the initial burden of proof to prove the cash credits is placed upon the assessee u/s 68 of the Act, i.e., the assessee is required to prove three main ingredients viz., the identity of the creditors, the credit worthiness of the creditors and the genuineness of transactions - the assessee has failed to discharge the initial burden placed upon it thus, the order of the CIT(A) is upheld Decided against assessee. Orders passed u/s 201(1) & 201(1A) Held that - The assessee could not controvert the findings given by the ITO(TDS) except pointing out certain computational error - Hence the ld CIT(A) has confirmed the orders subject to verification of the errors pointed out by the assessee - the assessee did not furnish any material for giving reason to interfere with the orders of CIT(A) - Though the assessee has submitted that the recipients have paid the tax on the income received by them, yet no material was furnished to substantiate the same the order of the CIT(A) is upheld - Decided against assessee. Levy of penalty u/s 271C Held that - The financial problem, i.e., lack of money may be considered reasonable cause, since the financial problem has made the staffs and Chartered Accountant to leave the assessee company - Hence, there is merit in the submission of the assessee that it did not get proper assistance to comply with the tax laws - the assessee has shown that there was reasonable cause for his failure to deduct tax at source the order of the CIT(A) is set aside and the penalty levied u/s 271C is to be set aside. Penalty levied u/s 272A(2)(c) failure to submit TDS return in time - Held that - The provisions of sec. 272A(2) is subject to the provisions of sec. 273B of the Act - As per the provisions of sec. 273B of the Act, the penalty u/s 272A(2) is not imposable if the assessee proves that there was reasonable cause for the said failure - the reasonable cause has to be examined from the point of view of a common man with reasonable mind - While dealing with the appeals relating to the penalty levied u/s 271C of the Act, the financial crisis faced by the assessee coupled with the fact of no staffs and lack of help from Chartered Accountant may be considered to be reasonable cause - The assessee has offered identical explanations for non-furnishing of annual return prescribed in sec. 206 of the Act in time - the assessee did not file the annual return for all the four years under consideration - The reason for the same is understandable, i.e., when the assessee did not remit the tax deducted at source, then it would not be in a position to file the annual return prescribed in sec. 206 of the Act - there was reasonable cause for the assessee for the failure to furnish the annual returns for all the years thus, the order of the CIT(A) is set aside and the ACIT is directed to delete the penalty u/s 271A(2)(c) Decided in favour of assessee.

Summary

Issues:
1. Challenging orders passed by Ld CIT(A) against different orders by assessing officer for various assessment years.
2. Failure to prove loan credits under sec. 68 of the Act.
3. Orders passed u/s 201(1) & 201(1A) for non-remittance of tax deducted at source.
4. Penalty levied u/s 271C for failure to deduct or pay tax deducted at source.
5. Penalty levied u/s 272A(2)(c) for non-furnishing of returns or statements under specified sections.

Analysis:
1. The appeals challenged orders passed by the Ld CIT(A) against the assessing officer's orders for different assessment years. The assessee failed to appear, leading to ex-parte disposal of appeals. The issues included quantum assessment orders, re-opening of assessments, penalty orders under various sections, and non-furnishing of returns.

2. Regarding failure to prove loan credits under sec. 68 of the Act, the assessee's initial burden was to establish the identity, creditworthiness, and genuineness of the transactions of the creditors. The Ld CIT(A) found discrepancies in the details provided, leading to the confirmation of assessment orders. The burden of proof was not discharged by the assessee, resulting in no interference with the Ld CIT(A)'s decision.

3. Orders passed u/s 201(1) & 201(1A) were related to non-remittance of tax deducted at source by the assessee. The Ld CIT(A) upheld the orders due to the failure of the assessee to provide substantial evidence to refute the findings of the ITO(TDS). The absence of material to support the claim led to the confirmation of the orders.

4. Penalty under sec. 271C was imposed for failure to deduct or pay tax deducted at source. The Additional Commissioner's penalty for non-remittance of TDS amounts was found to be incorrect as it did not align with the provisions of the Act. The assessee demonstrated reasonable cause for the failure, citing financial problems and lack of assistance, leading to the deletion of penalties for all years under consideration.

5. Penalty under sec. 272A(2)(c) was levied for non-furnishing of returns or statements as per specified sections. The assessee provided reasonable cause for the failure to furnish annual returns, attributing it to financial constraints and lack of staff assistance. Consequently, the penalties were set aside for all years in consideration.

In conclusion, the appeals related to penalties under sec. 271C and 272A(2)(c) were allowed, while other appeals were dismissed. The decisions were pronounced on 8th Oct, 2014.