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2016 (12) TMI 1185 - AT - Income TaxPenalty u/s 271(1)(c) - service tax liability - Held that - Assessing officer has questioned the assessee regarding the service tax liability reflected in the balance sheet. In this connection the assesee had explained that the total service tax credited was ₹ 20,21,750 against which the amount of ₹ 17,08,150 was paid. He further explained that the balance unpaid amount of ₹ 3,04,834 consisted of ₹ 2,35,437 exempted u/s 65 sub-section 27 of service tax and the remaining amount of ₹ 69,397was payable by the Gas Authority of India. We noticed that the assessee had explained his claim and the nature of these transaction with supporting details. We also observed that all the facts were fully disclosed and apparently there was no case of furnishing inaccurate particulars of income by the assessee. We find that in this case assessee had disclosed all the particulars of service tax paid/ payable and detailed of loan transactions carried with related parties. The assessing officer had failed to substantiate his findings with supporting material and evidences to prove that there was concealment of particular of income in the case of assessee. - Decided in favour of assessee.
Issues Involved:
1. Legality of the penalty order under Section 271(1)(c) of the Income Tax Act. 2. Applicability of Section 43B on service tax payable. 3. Interest disallowance on advances to related parties. 4. Adequacy of the Assessing Officer's satisfaction for initiating penalty proceedings. 5. Validity of the show-cause notice issued along with the assessment order. Detailed Analysis: 1. Legality of the Penalty Order under Section 271(1)(c) of the Income Tax Act: The assessee challenged the penalty order under Section 271(1)(c), asserting that the order dated 31-03-2011 was bad in law. The assessee contended that the penalty was levied without proper satisfaction recorded by the Assessing Officer (AO) and without passing the appellant effect order under Section 250 of the Income Tax Act. The Tribunal found that the AO had indeed recorded satisfaction in the assessment order under Section 143(3) by mentioning that the penalty notice was issued for furnishing inaccurate particulars of income, thereby concealing taxable income. Thus, the Tribunal rejected the technical grounds raised by the assessee regarding the legality of the penalty order. 2. Applicability of Section 43B on Service Tax Payable: The AO added back ?3,12,959 to the income of the assessee, stating that this amount was statutory due to be paid by the due date of filing the return under Section 43B. The Commissioner of Income Tax (Appeals) [CIT(A)] confirmed this addition. The Tribunal noted that the assessee had collected service tax worth ?20,21,750 but paid only ?17,08,150, leaving a balance of ?3,12,959. The CIT(A) upheld the AO’s decision, stating that the assessee failed to pay the remaining service tax and did not credit it to the Profit & Loss account, thereby attracting the provisions of Section 271(1)(c) for furnishing inaccurate particulars of income. 3. Interest Disallowance on Advances to Related Parties: The AO noted that the assessee made advances to related parties without charging any interest, totaling ?18,68,543. The AO disallowed interest at 12% on this amount, adding ?2,24,225 to the total income. The CIT(A) restricted this disallowance to ?24,000, stating that the loan amount raised from HDFC by Shri Dilip J Patel could not be treated as an interest-free advance from the assessee against the credit balance in the current account. The Tribunal found that the assessee had disclosed all particulars of the service tax paid/payable and details of loan transactions with related parties, and the AO failed to substantiate his findings with supporting material and evidence. 4. Adequacy of the Assessing Officer's Satisfaction for Initiating Penalty Proceedings: The assessee argued that the AO did not record satisfaction of concealment as required under the law. The Tribunal observed that the AO mentioned in the assessment order that the penalty notice was issued for furnishing inaccurate particulars of income, thereby concealing taxable income. The Tribunal found this sufficient for invoking penalty action and rejected the assessee’s technical grounds. 5. Validity of the Show-Cause Notice Issued Along with the Assessment Order: The assessee contended that the show-cause notice was vague and capable of two views, making the penalty levied bad in law and void. The Tribunal found that the assessee did not specifically explain why the show-cause notice was vague and capable of two views. The Tribunal rejected this ground, stating that the submission was of a general nature and not specific. Conclusion: The Tribunal concluded that the CIT(A) was not justified in sustaining the penalty levied by the AO. The Tribunal found that the assessee had disclosed all particulars related to the service tax and loan transactions and that there was no case of furnishing inaccurate particulars of income. Consequently, the Tribunal allowed the appeal of the assessee and ordered the deletion of the penalty of ?1,13,430 levied under Section 271(1)(c) of the Income Tax Act. Order Pronounced: The appeal of the assessee was allowed, and the order was pronounced in the open court on 20-12-2016.
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