2019 (9) TMI 351 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Unexplained cash deposits - HELD THAT - Since the Datamation has already confirmed before the Assessing Officer during the remand proceedings that they are paying the maintenance charges to the assessee, therefore, the cash deposit in the bank account stands explained being the amount received from Datamation. Accordingly, the same is deleted. Ground of appeal No.2 by the assessee is allowed. Addition on account of electricity charges received from Datamation Consults Pvt. Ltd. - HELD THAT - Explanation of the assessee that he has debited the electricity bill from his bank account for electricity used by Datamation and other parties in the earlier years which were received by him in cash during the current financial year was rejected. In appeal, the ld.CIT(A) upheld the action of the Assessing Officer. As mentioned in the preceding paragraph, during the penalty appeal before the CIT(A) the assessee had filed certain details/confirmations which were sent by the CIT(A) to the Assessing Officer for the remand report. AO in the remand report had confirmed that Datamation has orally confirmed that they are paying maintenance and electricity charges to the assessee. Since the statement of the assessee has been corroborated by Datamation during the remand proceedings before the Assessing Officer, therefore, no addition is called for. Accordingly, ground of appeal No.3 by the assessee is allowed. Addition being loans and advances received - HELD THAT - A perusal of the various documents filed by the assessee before the lower authorities show that the assessee has filed sufficient details regarding the receipt of loans and advances given in the earlier years. The affidavits filed by the assessee from all the parties with confirmations and their PAN details had not been found to be false or untrue. Further, the amounts are very small. Considering all the addition made by the Assessing Officer and sustained by the CIT(A) is not justified. Accordingly the same is deleted and the ground raised by the assessee is allowed. Addition being the amount received from Mr. Deepak - assessee could not substantiate with evidence to his satisfaction that he has received cash from the office boy Deepak against which cheque was issued to him - HELD THAT - CIT(A) sustained the addition made by the Assessing Officer. The ld. counsel also could not substantiate with any evidence so as to take a contrary view than the view taken by the CIT(A) on this issue. Accordingly, Ground No.5 is dismissed.

Summary

Issues:
1. Challenge to various additions made by the Assessing Officer
2. Challenge to penalty levied under section 271(1)(c) of the Act

Issue 1: Challenge to Various Additions Made by the Assessing Officer

The appellant challenged the additions made by the Assessing Officer in two separate appeals. In ITA No.5447/Del/2012, the appellant contested the addition of ?3,73,459, explaining it as maintenance charges received from Datamation Consultants Pvt. Ltd. The Assessing Officer questioned the source of this deposit, deeming it unexplained. However, the appellant provided evidence, including demand notes, TDS certificates, and maintenance agreements, to support the receipt of the amount. The Tribunal found the explanation satisfactory and deleted the addition. In another challenge, the appellant contested additions related to electricity charges and loans/advances received, providing detailed documentation and confirming the transactions. The Tribunal ruled in favor of the appellant, overturning the Assessing Officer's decisions and deleting the additions.

Issue 2: Challenge to Penalty Levied under Section 271(1)(c) of the Act

In ITA No.3975/Del/2016, the appellant challenged the penalty imposed under section 271(1)(c) of the Act, linked to the addition of ?1,67,558 made by the Assessing Officer. The CIT(A) upheld the penalty, which was based on the disputed addition. However, since the Tribunal had already deleted the underlying addition, the penalty was deemed unjustified and subsequently canceled. The Tribunal set aside the CIT(A)'s decision on the penalty and directed the Assessing Officer to cancel it, as the basis for the penalty no longer existed post the deletion of the addition.

This judgment showcases the importance of providing detailed documentation and evidence to substantiate transactions during assessment proceedings. It highlights the Tribunal's role in scrutinizing the Assessing Officer's decisions and ensuring that penalties are justified based on valid additions. The appellant's successful challenges in both appeals underscore the significance of a robust defense supported by relevant paperwork and confirmations to establish the legitimacy of financial transactions.