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TMI Blog2015 (9) TMI 320X X X X Extracts X X X X X X X X Extracts X X X X ..... penalty proceedings for levy of penalty u/s.271(1)(c) of the I.T. Act in an assessment framed u/s.153C r.w.s. 153A. In this view of the matter we hold that the assessee is not liable to penalty u/s.271(1)(c) of the I.T. Act on the amount of ₹ 6.50 lakhs since the same was not based on any incriminating material found during the course of search and the addition was based on the basis of loan creditors found from the balance sheet already filed prior to the search along with the original return of income. We accordingly set aside the order of the CIT(A) and direct the AO to cancel the penalty levied on addition of ₹ 11,50,000/- and proportionate interest thereon. The grounds raised by the assessee are accordingly allowed. - Decided partly in favour of assessee. - ITA No. 22/PN/2014 - - - Dated:- 17-6-2015 - R. K. Panda, AM And Vikas Awasthy, JM, JJ. For the Petitioner : Shri Sunil Ganoo Shri K N Bora For the Respondent : Shri B. C. Malakar ORDER Per R. K. Panda, AM. This appeal filed by the assessee is directed against the order dated 22-08-2013 of the CIT(A)-II, Pune relating to Assessment Year 1998-99. 2. At the time of hearing the Ld. Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e filed its return of income for A.Y. 1998-99. During the course of assessment proceedings the Assessing Officer noted that assessee has shown outstanding unsecured loans taken from various parties as on 31-03-1998 at ₹ 1,07,17,000/-. During the course of assessment proceedings the Assessing Officer asked the assessee to furnish loan confirmations from those parties. The assessee failed to furnish loan confirmations of ₹ 5 lakhs taken from Shri Shreeram H. Soni. So far as the confirmations filed for the remaining loans, the AO noted that although the assessee has filed the confirmations which are new loans but these are without PAN Numbers and addresses. The details of such loans as mentioned by the AO at page 3 of his order are as under : Sl.No. Name of the party Amount 1 Smt. Sangita A. Lunkad 4,00,000/- 2 Ashok S. Behre (HUF) 1,00,000/- 3 Smt. Sharmila V. Shah 50,000/- 4 Anil B. Lunkad 2,00,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the addition of ₹ 21,20,000/- made u/s.68 of the I.T. Act. The assessee did not contest the addition of ₹ 5,00,000/- u/s.68 being the loan from Shreeram H.Soni. Based on the remand report of the Assessing Officer the Ld.CIT(A) allowed a relief of ₹ 14,70,000/- added u/s.68 of the I.T. Act. He also allowed proportionate interest to the extent of ₹ 3,23,400/- and sustained addition of ₹ 2,53,000/-. He however upheld the proportionate disallowance of interest on the overdrawn balance of the partners and the estimation of profit at 8%. The Revenue preferred an appeal before the Tribunal and the Tribunal upheld the view of the CIT(A) and dismissed the appeal filed by the Revenue. 7. Subsequently, the Assessing Officer initiated penalty proceedings u/s.271(1)(c) of the I.T. Act. Rejecting the various explanations given by the assessee the Assessing Officer levied penalty of ₹ 12,51,530/- on account of the following additions sustained : Unexplained cash credit u/s.68 (6,50,000 + 5,00,000) 11,50,000/- Disallowance of proportionate interest on the unexplained loans 2,53,000/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has been made the same does not call for automatic levy of penalty u/s.271(1)(c) of the I.T. Act. The assessee can rely on fresh materials during penalty proceedings. He submitted that due to some reasons the assessee could not challenge the validity of the assessment u/s.153C in absence of any incriminating materials. But the fact remains that based on the creditors appearing in the balance sheet prior to the date of search penalty has been levied. 10.1 Referring to the decision of Hon'ble Bombay High Court in the case of CIT Vs. Continental Warehousing Corporation vide ITA No.523/2013 order dated 21-04-2015 he submitted that the Hon'ble High Court in the said decision after considering the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia has upheld the decision of the Special Bench of the Tribunal in the case of All Cargo Global Logistics Ltd. where it has been held 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 in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... identity and credit worthiness of the loan creditors and the genuineness of the transactions. Therefore, penalty levied u/s.271(1)(c) was correctly upheld by the CIT(A) on the amount of ₹ 11,50,000/- and the proportionate interest thereon. 12. The Ld. Counsel for the assessee in his rejoinder submitted that the arguments of the Ld. Departmental Representative are applicable to a normal assessment. However, this is an assessment u/s.143(3) r.w.s. 153C. Therefore, in absence of any incriminating material, penalty u/s.271(1)(c) of the I.T. Act is not leviable. 13. We have considered the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find during the course of search at the premises of one Shri Shreeram H. Soni blank promissory notes (singed by the borrower) and blank undated cheques duly signed by the borrowers were found which contain the promissory note along with the blank cheque of ₹ 5 lakhs relating to the assessee. On the basis of the same, the Assessing Officer issued notice u/s.153C r.w.s.153 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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