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TMI Blog2017 (2) TMI 1120X X X X Extracts X X X X X X X X Extracts X X X X ..... levy of penalty on such addition. Thus, we are of the considered view that levy of penalty u/s. 271(1)(c) of the Act on addition made u/s. 68 of the Act is liable to be set aside. One of the contention of the assessee before the First Appellate Authority was to grant the benefit of telescoping in penalty proceedings in respect of the additions made during assessment. The Commissioner of Income Tax (Appeals) rejecting the contentions of the assessee on merits and accepting the alternate submissions of the assessee granted the benefit of telescoping. Neither the ld. AR nor the ld. DR could substantiate the error in the findings of Commissioner of Income Tax (Appeals) in extending the benefit of telescoping. Thus, we uphold the benefit of telescoping granted by the Commissioner of Income Tax (Appeals). Accordingly, the solitary ground raised by the Department in appeal and the submissions of the assessee assailing penalty on addition made u/s. 69C are dismissed. -Decided in favour of assessee. - ITA No. 2439/PN/2012, ITA No. 2473/PN/2012 - - - Dated:- 30-12-2016 - SHRI R.K. PANDA, AM AND SHRI VIKAS AWASTHY, JM Assessee by : Shri Sharad Shah Revenue by : Shri Hitendra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng unaccounted income of assessment year under appeal, the Assessing Officer treated the figures available in the documents found from the premises of Shri Pandoo Naig, former director at Mumbai as separate from the papers found at Pune. The Assessing Officer completed the assessment for assessment year 2007-08 vide order dated 31-12-2010 passed u/s. 143(3) r.w.s. 153A of the Act. The Assessing Officer made addition of ₹ 65,62,669/- u/s. 69C of the Act on account of negative cash balance and ₹ 3,70,00,000/- u/s. 68 of the Act on account of undisclosed receipts. Against the said assessment order, the assessee did not prefer appeal and accepted the addition. The Assessing Officer initiated penalty proceedings u/s. 271(1)(c) of the Act. The Assessing Officer vide order dated 30-06-2011 levied penalty of ₹ 1,46,63,195/- for concealment of income of ₹ 4,35,62,669/-. Aggrieved by the order dated 30-06-2011 levying penalty u/s. 271(1)(c), the assessee preferred appeal before the Commissioner of Income Tax (Appeals). Before the Commissioner of Income Tax (Appeals), the assessee inter alia raised the ground that addition of ₹ 65,62,669/- has been made u/s. 6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t appellate authority should have deleted the penalty imposed by the AO in terms of provisions of sec, 271(1) (c) of the Act. The appellant be granted just and proper relief in this respect. 3. The appellant prays to be allowed to add, amend, modify, rectify, delete, raise any grounds of appeal at the time of hearing. 5. Shri Sharad Shah appearing on behalf of the assessee submitted that the authorities below have erred in levying penalty in respect of additions made u/s. 68 of the Act. The ld. AR pointed that though the assessee has not assailed the quantum addition and has accepted the addition but that would not mean that penalty would be attracted automatically on such additions. The ld. AR submitted that penalty proceedings are different and separate from assessment proceedings, therefore, the assessee can raise new plea during penalty proceedings. In support of his submissions the ld. AR placed reliance on the decision rendered by Hon ble Supreme Court of India in the case of Commissioner of Income Tax Vs. Khoday Eswarsa and Sons reported as 83 ITR 369 and in the case of Commissioner of Income Tax Vs. J.K. Synthetics Limited reported as 219 ITR 267. The ld. AR con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ramchand L. Shah reported as 204 ITR 462. 5.2 The ld. AR further submitted that in respect of addition made u/s. 69C the assessee has furnished detailed submissions before the authorities below but the same were brushed aside in an arbitrary and unjustified manner. The ld. AR pointed that ₹ 65,62,669/- represented cash deficit as worked out by the Assessing Officer being the difference between on-money received and expended. The Assessing Officer has worked out on-money received at ₹ 45,,00,000/- and spent ₹ 1,10,62,669/- and treated the said figures as authentic and made addition of the difference between two as deficit u/s. 69C of the Act. The ld. AR reiterated his submissions in respect of levy of penalty on additions made u/s. 69C of the Act. 6. On the other hand Shri Hitendra Ninawe representing the Department vehemently supported the findings of Commissioner of Income Tax (Appeals) in upholding the levy of penalty in respect of addition of ₹ 3.70 crores made u/s. 68 of the Act. The ld. DR further submitted that the Commissioner of Income Tax (Appeals) has erred in granting the benefit of telescoping with respect to additions made u/s. 69C and u/s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any valid explanation or the explanation furnished by the assessee in the opinion of Assessing Officer is not satisfactory. In the present case, we find that addition u/s. 68 has been made on the basis of entries in the diaries found during survey at the premises of one of the former Director of the assessee company. There is no evidence on record to show that any transfer of money either through cheque or cash during the year under consideration was recorded in the books of account of the assessee. Under such circumstances we are of the opinion that the addition u/s. 68 is not sustainable. The Hon ble Punjab and Haryana High Court in the case of Smt. Shanta Devi Vs. Commissioner of Income Tax (supra) deleted the addition u/s. 68 in the hands of assessee, where cash credit entries were found in the books of account of the partnership firm in which the assessee was partner. The relevant extract of the judgment of Hon ble Punjab and Haryana High Court in the case of Smt. Shanta Devi Vs. Commissioner of Income Tax (supra) is as under : 8. It is not in dispute that in case the books of account of the partnership firm are not to be treated as those of the individual partner, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the appellant has accepted the finding given in the assessment order by not filing any appeal, it is an admitted fact that application of sec.40A(3) and sec.40(a)(ia) are issues on which different Courts have different views and therefore it will be incorrect to include the impact of these disallowances for computing the penalty u/s 271(1)(c). Similarly the issue of granting telescopic benefit atleast in respect of the same assessee for the same assessment year has to be considered. The AO has not given any reason in the assessment order for not granting this benefit in a manner which can justify levy of penalty for denial of such benefits. In view of the above I am of the opinion that the computation of penalty is faulty. The income sought to be evaded on which the penalty has been levied @ 100% requires reworking. The appellant has submitted a computation as per which the net undisclosed income, which on the principle discussed above, can be accepted, for computing the penalty or the income sought to be evaded, has been shown at ₹ 1,90,91,256/-. I find the same to be acceptable. However, the AD is directed to verify this computation on the materials available on record ..... X X X X Extracts X X X X X X X X Extracts X X X X
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