Vikas Bhalchandra Patharkar, Mumbai vs Assessee

ी जी.एस. प न,ू लेखा सद य एवं ी अ मत शु ला, या यक सद य के सम ।

BEFORE SHRI G. S. PANNU, AM AND SHRI AMIT SHUKLA, JM

आयकर अपील सं./I.T.A. No. 441/Mum/2013 ( नधारण वष / Assessment Year: 2002-03)

Vikas Bhalchandra Patharkar Asst. CIT-23(3), B-44, Chembur Blue Diamond CHS, बनाम/ Pratyakshakar Bhavan, B.K.C., Chembur, Mumbai-400 071 Vs. Bandra, Mumbai-400 051

थायी ले खा सं . /जीआइआर सं . /PAN/GIR No. AGVPP 9259 M (अपीलाथ /Appellant) : ( यथ / Respondent)

अपीलाथ क ओर से / Appellant by : Shri C. N. Vaze यथ क ओर से/Respondent by : Shri Pawan Kumar Beerla

सुनवाई क तार ख / : 16.04.2015 Date of Hearing घोषणा क तार ख / : 24.04.2015 Date of Pronouncement

आदे श / O R D E R Per G. S. Pannu, A. M.:

This is an appeal by the assessee directed against the order of the Commissioner of Income Tax (Appeals)-34, Mumbai ('CIT(A)' for short) dated 29.10.2012, which in turn has arisen from the order passed by the Assessing Officer (A.O.) dated 24.03.2008 u/s.271(1)(c) of the Income Tax Act, 1961 ('the Act' hereinafter) pertaining to the assessment year (A.Y.) 2002-03.

2. At the outset, the ld. Representative for the assessee pointed out that there was a delay of 6 days in filing of appeal. He made a reference to an affidavit filed by the assessee in support of the reasons for the delay. The bonafides of the reasons have not 2 ITA No. 441/Mum/2013 (A.Y. 2002-03) Vikas Bhalchandra Patharkar vs. Asst. CIT

been challenged by the Revenue, and as a consequence the delay was condoned, as announced at the time of hearing.

3. In this appeal, the only grievance of the assessee is against the sustenance of penalty of Rs.3,23,224/- imposed u/s.271(1)(c) of the Act on account of disallowances of Rs.8,65,104/- and Rs.1,70,630/-, representing unproved sundry creditors and adhoc disallowance respectively.

4. Briefly put, the relevant facts are that the assessee is an individual and is engaged in the business of electrical contracting in three proprietary concerns, namely M/s. Lustre Engg. Corporation, Trafotek Electricals and Diamond Electricals. For the A.Y. 2002-03, assessee filed his return of income declaring a total income of Rs.18,84,520/-, which was subject to scrutiny assessment u/s.143(3) of the Act dated 31.01.2005. In the assessment, the total income was assessed at Rs.32,80,780/-, which inter-alia, included two additions relating to unproved sundry creditors and non-verifiable and personal expenses of Rs.8,65,104/- and Rs.1,72,630/- respectively. Subsequently, assessee has been found guilty for concealment of income qua the afore-said additions within the meaning of section 271(1)(c) of the Act, by way of an order dated 24.03.2008. Accordingly, the A.O. levied penalty u/s. 271(1)(c) of the Act to the extent of Rs.3,22,224/-, being 100% of the tax sought to be evaded with respect to the impugned two disallowances. The CIT(A) has also affirmed the stand of the A.O., against which the assessee is in appeal before us.

5. Before us, the ld. Representative of the assessee vehemently pointed out that though the two additions have become final because the appeal of the assessee in the quantum proceedings has also been dismissed by the CIT(A), however, the same does not invite penalty u/s.271(1)(c) of the Act, having regard to the facts and circumstances of the case. It has been pointed out that the adhoc disallowance was made on mere surmise and conjectures and not on the basis of any particular evidence of the assessee having claimed any non-business expenditure. Even with regard to the addition on account of unproved sundry creditors, our attention were invited to the discussion in the assessment order to 3 ITA No. 441/Mum/2013 (A.Y. 2002-03) Vikas Bhalchandra Patharkar vs. Asst. CIT

point out that no falsity was established by the A.O. with regard to the balance of the impugned sundry creditors.

6. The ld. Representative pointed out that in the course of quantum proceedings before the CIT(A), the assessee had duly submitted all the details and supportings and that in the remand proceedings, the assessee had produced various parties also for cross verification. Necessary confirmations were also filed during the stage of the remand proceedings, though assessee could not furnish the same in course of the assessment proceedings before the A.O. on account of medical ailments. The ld. Representative pointed out that such submissions had been dismissed by the CIT(A) in the quantum proceedings in the routine manner.

7. On the other hand, the ld. Departmental Representative (DR) submitted that the assessee had failed to establish the genuineness of the creditors and, therefore, the penalty u/s.271(1)(c) of the Act has been rightly sustained by the CIT(A). The ld. DR also referred to the discussion in the impugned order of the CIT(A) which showed that the confirmation letters furnished by the assessee indicated either bogus or non-existing PANs and, therefore, the CIT(A) has made no mistake in sustaining the penalty u/s.271(1)(c) of the Act.

8. We have carefully considered the rival submissions. Insofar as the adhoc disallowance of Rs.1,72,630/- is concerned, we find that in the course of assessment proceedings, the A.O. treated certain percentage of expenses incurred on telephone, vehicle, etc. as relatable to personal use and, therefore, disallowed a sum of Rs.1,72,630/- in an adhoc manner. The discussion in the assessment order reveals that it is a pure adhoc disallowance without any specific evidence brought out by the A.O. In our considered opinion, such an addition does not ipso facto lead to a conclusion of concealment of income or furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. Accordingly, we set aside the order of the CIT(A) on this aspect and direct the A.O. to delete the penalty with respect to the said addition. Even with regard to 4 ITA No. 441/Mum/2013 (A.Y. 2002-03) Vikas Bhalchandra Patharkar vs. Asst. CIT

the addition made on account of unproved sundry creditors, the discussion in the assessment order reveals that it is a case, where the assessee failed to substantiate the balance lying to the credit of the sundry creditors, and it is not a case where the credit balances have been found to be false or bogus. Though the A.O. held that in the absence of requisite confirmations from the respective creditors, the amounts were to be treated as income. So, however, mere non-furnishing of confirmation by a creditor cannot be taken to mean that the credit balance represented bogus liability. While, non-furnishing of confirmations may be a good ground for making an addition, so however it cannot be taken as concealment or furnishing of inaccurate particulars of income within the meaning of section 271(1)(c) of the Act. With regard to the observations of the CIT(A) in the quantum proceedings that the assessee had furnished non-genuine PANs, the same in our view is not justified. We find that the CIT(A) inferred so, merely on the basis of perusal of the PANs and not on the basis of any verification exercise. In fact, assessee explained that the CIT(A) was under an impression that the PAN number belonged to a partnership firm, whereas it was a case of an individual/proprietorship and obviously the PAN number would be reflective of the status of the person as that of an individual. Be that as it may, we find that the CIT(A) misdirected himself in concluding that the PAN numbers were bogus and non-existing without carrying out the necessary verification exercise. Therefore, in our view, having regard to the entire conspectus of the facts and circumstances of the case, it cannot be said that the sundry creditors in question were found to be bogus so as to justify the imposition of penalty u/s.271(1)(c) of the Act. In fact, it is merely a case where the assessee failed to substantiate the sundry creditors and it is not a case where the sundry creditors were found to be bogus or representing a non- existing liability. Thus, the addition of Rs.8,65,104/- on account of unproved creditors does not attract the provision of section 271(1)(c) of the Act, having regard to the facts and circumstances of the case.

9. As a consequence, we set aside the order of the CIT(A) and direct the A.O. to delete the penalty levied at Rs.3,23,224/- u/s.271(1)(c) of the Act.

5 ITA No. 441/Mum/2013 (A.Y. 2002-03) Vikas Bhalchandra Patharkar vs. Asst. CIT

10. In the result, the assessee's appeal is allowed.

प रणामतः नधा रती क अपील वीकृत क जाती है ।

Order pronounced in the open court on April 24th, 2015

Sd/- Sd/-

(Amit Shukla) (G. S. Pannu) या यक सद य / Judicial Member लेखा सद य / Accountant Member मंब ु ई Mumbai; दनांक Dated : 24.04.2015 व. न.स./Roshani, Sr. PS आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent 3. आयकर आयु त(अपील) / The CIT(A) 4. आयकर आयु त / CIT - concerned 5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड फाईल / Guard File आदे शानुसार/ BY ORDER,

उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai