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TMI Blog2016 (11) TMI 887X X X X Extracts X X X X X X X X Extracts X X X X ..... - Shri Rajpal Yadav, Judicial Member And Shri Pradipkumar Kedia, Accountant Member Assessee by : None Revenue by : Ms. Anita Hardasani, Sr. DR ORDER Per Shri Rajpal Yadav, Judicial Member Assessee is in appeal before the Tribunal against the order of the ld.CIT(A)-II, Baroda dated 31.1.2013 passed for the Asstt.Year 2002-03. 2. Solitary grievance of the assessee is that the ld.CIT(A) has erred in confirming the penalty of ₹ 5,11,500/- imposed by the AO under section 271(1)(c) of the Income Tax Act, 1961. 3. Brief facts of the case are that the assessee has filed its return of income on 17.10.2002 declaring an income of ₹ 1,05,18,050/-. The case of the assessee was selected for scrutiny assessment and notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee had made purchases of ₹ 14,32,750/- from two concerns viz. M/s.Girnar Sales Corporation and Shiv Metal Corporation respectively. The AO has observed that during the course of assessment proceedings of M/s.Prakash Marbles Engineering Co., it came to the notice of the department that proprietor of M/s.Gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant submitted the quantitative tally and also the details of payments from GMDC Ltd. g. It was stated that the material purchased from the above two parties was used in executing a contract from GMDC Ltd. for Akrimota Thermal Power Station at Village Chher, Tal, Lakhpat, Dist. Kutchh. h. Further, it was stated that the Appellant had made payments by cheque and the money has not come back to the Appellant. i. However, the AO relying the papers filed by M/s. Girnar Sales Corporation and M/s. Shiv Metal Corporation made the addition. j. The order of the AO was confirmed by CIT(A). k. As of now the Appellant has preferred an appeal before the IT AT, And which is pending disposal. We most respectfully submit that despite the addition has been confirmed by the CIT(A) no penalty can be levied. The AO has used material in some other case for making addition in the case of the Appellant. On the perusal of the assessment order attached in the paper book your kind office would notice that the AO has used the assessment records of M/s. Prakash Marbles and Engineering Company for making addition in the case of the Appellant. There is no direct evidence found ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceived further payment. We therefore submit that despite the addition made the penalty levied may please be deleted. Order of ITAT, Ahd 5. It may be mentioned that in similar type of cases the AO had made identical addition. One such case is of M/s. First Industries. The ITAT, Ahd in the case of M/s. First Industries has held that under such situations disallowance of entire purchases is not called for. The ITAT, Ahd vide para 8 (refer page 83 to 85) has restricted the addition to 10 % of such purchases. In view of the same we submit that penalty cannot be levied on the addition made by the AO and confirmed by the CIT(A). We may also like to put on record that the facts in the case of M/s. First Industries and in the case of the Appellant are similar. Therefore there are all chances that similar view may be taken by the Ahmedabad Tribunal in the case of the Appellant also. 6. In view of direct decision of ITAT, Ahd on similar facts, we submit that penalty levied by the AO may please be deleted. No material supplied to the Appellant: 7. There is yet another reason why penalty cannot be levied in the case of the Appellant. We have already mentioned that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ile concluding we may like to mention that the penalty levied by the AO is required to be deleted on the ground: a. That no material was supplied to the Appellant before making the addition. b. That on identical facts the IT AT, Ahd has deleted the addition and has held that only 10 % of total purchases can at the most be considered to be disallowable. c. The Appellant has produced all the evidences to prove that the purchases made by it are genuine and also confirmed the same by filing a counter affidavit. d. The onus cast on the Appellant to prove that the purchases are genuine has been discharged by the Appellant. 12. Considering the above we request your kind office to delete the levy of penalty. 13. Should you require any further information or explanation we shall be pleased to submit the same on hearing from your kind office to do so. 6. Section 271(1)(c) of the Act has a direct bearing on the controversy which reads as under: 271. Failure to furnish returns, comply with notices, concealment of income, etc.- (1) The Assessing Officer or the Commissioner (Appeals) or the CIT in the course of any proceedings under this Act, is sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eeming fiction, by way of Explanation-1 to section 271(1)(c) postulates two situations; (a) first whether in respect of any facts material to the computation of the total income under the provisions of the Act, the assessee fails to offer an explanation or the explanation offered by the assessee is found to be false by the Assessing Officer or Learned CIT(Appeal); and, (b) where in respect of any fact, material to the computation of total income under the provisions of the Act, the assessee is not able to substantiate the explanation and the assessee fails, to prove that such explanation is bona fide and that the assessee had disclosed all the facts relating to the same and material to the computation of the total income. Under first situation, the deeming fiction would come to play if the assessee failed to give any explanation with respect to any fact material to the computation of total income or by action of the Assessing Officer or the Learned CIT(Appeals) by giving a categorical finding to the effect that explanation given by the assessee is false. In the second situation, the deeming fiction would come to play by the failure of the assessee to substantiate his explanation in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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