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TMI Blog2018 (4) TMI 312X X X X Extracts X X X X X X X X Extracts X X X X ..... n record. But this aspect also needs to be considered. Therefore, we are inclined remit the matter back to the file of AO for fresh adjudication - Decided in favour of assessee for statistical purposes. Penalty u/s 271(1)(c) - Held that:- Addition has been made by the AO on account of unexplained money and cessation of liability on basis of lack of evidence. Though the assessee’s explanation in respect of the credit card transactions and cessation of liability in the absence of sufficient proof was not accepted, that would not mean that the assessee made any deliberate attempt towards concealment of particulars of income. Mere sustaining of addition on the basis of entries in the credit card account would not warrant a conclusion that the assessee had concealed certain particulars of income. It was lack of sufficient evidence for which the addition was sustained in part. We are of the considered opinion that this is not a fit case for levy of penalty u/s 271(1)(c) of the Act, we therefore, set aside the order of Ld. CIT(A) and direct the Assessing Officer to delete the penalty. - Decided in favour of assessee - ITA No. 599-600/Kol/2016 - - - Dated:- 7-2-2018 - Shri N. V. Vasu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Rs.1,82,000/- Total undisclosed cash deposits Rs.17,01,100 On being confronted about the source of cash deposits in the aforesaid bank accounts, the assessee submitted that the cash was withdrawn from the credit cards which were deposited in the saving bank accounts for the purpose of payment. The assessee also filed the details of outstanding balance of the credit card stood as on 31.03.2009 as detailed under:- Out standing loan i) ABN Amro Bank No.5425051700985681 (RBS), credit card Rs.1,87,160 ii) ABN Amro Bank (RS), Credit card No.5425051702802041 ₹ 99,869 iii) Standard Charter Bank, Credit card No.4129057681733687 [opening bal- closing Bal = ₹ 53,235 ₹ 300] ₹ 52,935 iii) ICICI Bank, Credit card No.4132890000 [opening Bal Closing Bal = ₹ 79,962 Rs.77,476] ₹ 2,486 iii) CITI Bank, credit card No.5546379574793004 [opening Bal Closing Ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on various date cash in financial year 2008-09 has been deposited to the tune of ₹ 170110/- in different Bank. The assessee during the course of assessment proceeding submitted that the cash deposit was made from his credit card withdrawal and he further stated that he made personal expenditure through credit card the appellant that cash deposits were made out of ATM card withdrawals. It gives an understandings that in the appellant made personal expenses by withdrawing from ATM cards and then spend on other many ATM cards and after withdrawals deposits were made in those account, which TDM has been use by the ape. The AO worked out total ₹ 599551/- being withdrawal from his undisclosed cash deposit and reduced it from the total cash deposit of ₹ 1701100/-. The above reduction from total cash deposit was allowed to the assessee on his demand accepting his contention that he had outstanding credit card loan by which he deposited cash by sweeping the credit card. The same has been mentioned in the assessment order credit card wise total loan which has been withdrawn and deposited in another credit card account. The appellant made contention before the under signed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is found that he has done his business mainly through credit card system on taking credit facilities in his personal name against those cards. The appellant took credit facility against one card but he repaid to that loan on taking loan from another card and so on. The Assessing Officer contended those loans as his undisclosed cash deposit on resumption and added to income as undisclosed without considering the source of cash deposits as credit taken from different credit cards facilities. As such the Assessing Officer is erred in not realizing / considering the fact of circulation of money from ne credit card to another credit card account and added to income on revenue mind in spite of having all the statements of those credit cards were available with the Assessing Officer he has not discussed in the assessment order without putting his opinion on the system such. (b) Since the addition of ₹ 11,01,549/- was made as undisclosed on presumption basis without applying the presumption rate u/s 44AD even. Kindly refer the age 6 and page 7 of the CIT(A) s order since the money was circulated from one credit card through another credit card account and also routed through is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hus in our considered view the AO has applied contradictory approach in determining and treating the amount of cash deposit in the bank as unexplained cash credit. 6.1 As per assessee the amount withdrawn from one credit card account was deposited in other credit card liability. Thus, the same amount of money was in circulation. In such a situation, Ld. AR also argued that the peak credit theory should be applied. Similarly the addition should have been made after adjusting the withdrawal made from the bank account. In view of above we are of the opinion that the AO has not applied his mind judiciously and as per the accounting principles. Accordingly the order of the AO suffers from the infirmities as discussed above. 6.2 It was also observed that the AO also detected the cheque deposits in the undisclosed bank accounts which were treated as business receipt of assessee. Accordingly, gross profit rate was applied to determine the undisclosed income of the assessee. As per the assessee the impugned cash deposits should also be treated as business receipts and accordingly the GP rate should be applied. But the AO has wrongly treated the cash deposit as unexplained cash credit. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid addition made in the course of assessment proceedings, the AO initiated penalty proceedings u/s 271(1)(c) of the Act. 4. In the penalty proceedings the assessee agreed for the penalty on interest income as it was not disclosed. Regarding unexplained money addition of ₹ 8,03,002 it was submitted that the amount was in-fact representing the loan on credit cards but the addition of the same was not challenged to buy the peace of mind. Moreover, the addition was made on estimated basis. Thus, no penalty on this count can be initiated u/s 271(1)(c) of the Act. 9.1 However the assessee failed to provide any explanation with regard to the addition made on account of cessation of liability during the assessment proceedings. Accordingly penalty u/s 271(1)(c) of the Act was imposed on the assessee by the AO for ₹ 2,81,550.00 being @ 100% of tax sought to be evaded by the assessee. The order of AO was confirmed by CIT(A). 10. Aggrieved by the order of CIT(A) the assessee has filed the present appeal before the Tribunal. 11. The ld. Counsel for the assessee before us filed written submission which is reproduced below:- Your appellant submits before your ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the following decisions for your consideration in respect of applicability of the penalty proceedings when the appellant agreed to make additions to income - (a) CIT -vs- Sankaran(S) - 241 ITR 825(Mad) The Madras High COUl1 in the above Case held that- Mere addition to income of the instance of the assesse can not lead to the conclusion of concealment of income and penalty U/s 271 (1)( c) can not be levied. a-I) In CIT -vs- Gururam Dass Fruit and Vegetable Agency- reported in 244 ITR(AT) 146(Chan) held that surrender of amount would not prove Concealment and Penalty U/s 271(1)(c) can not be levied on that basis. (b) Your appellant submits that very often a discrepancy is noticed between certain entries in one set of books of the assessee and the position emerging from another set of documents. For instance, a discrepancy may be clearly noticed between the assessee's balance sheet and the information supplied by the Bank. This does not necessarily attract a Penalty, particularly where there is a plausible explanation which excludes an intention to conceal, as happened in CIT vs. Mohamed Haneef (N A) reported in 83 ITR 2015(SC). (c) Your appellant further submi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s added the sum of ₹ 31,0411/- on his own presumption on account of cessation of liability u/s 41(1). In this respect your appellant submits that the Assessing Officer has himself considered that liability to creditors are extinguished because of its period of limitation. The appellant has not considered the sum of ₹ 31,0411- as remission or cessation of liability and no entry passed in its accounts. There is no transfer entry in the accounts passed by the appellant but only difference in their respective general ledger balances between the creditor and the appellants which can be reconciled. Even the entry is passed but the liability is not extinguished since the appellants shall pay in future. Therefore it cannot be treated as income and consequently the provisions of section 41 (1) cannot be applied. Therefore the penalty cannot be imposed on such amount of tax as determined. Please consider that liability subsisting but not legally enforceable cannot amount to cessation of liability. Kindly consider the decision of the Supreme Court in CIT vs. Sugauli Sugar Works (P) Ltd. - reported in 236 ITR 518. Accordingly the unilateral presumption of the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X
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