Income Tax Appellate Tribunal - ChennaiR.Bhujangan, Chennai vs Department Of Income Tax on 30 April, 2008IN THE INCOME TAX APPELLATE TRIBUNAL
                      BENCH "B" CHENNAI
        (Before Shri Abraham P. George, Accountant Member
           and Shri George Mathan, Judicial Member)
                                .....

                       I.T.A. Nos. 1352/Mds/2009
                        Assessment Year: 2006-07

The D.C.I.T,                             Shri R. Bhujangan
Business Circle X,                       New No. 298, Old No. 101
Kannammal Building                  v.   M.S. Kovil Street, Royapuram
3rd Floor, 611 Anna Salai                Chennai 600 013.
Chennai 600 006
                                         PAN : AAPR 6287 N
         (Appellant)
                                                   (Respondent)

                Assessee by :       Shri V. Kaman
               Department by :      Shri P.B. Sekaran


                             O R D E R

PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER :This appeal filed by the Revenue is against the order of the ld.

CIT(A) for the impugned Assessment Year 2006-07, deleting penalty

of Rs. 5,33,632/- levied on assessee by the Assessing Officeru/s

271(1)(c)of the Income-tax Act, 1961 [in short, the Act].2.   Short facts giving rise to this penalty are that assessee, who

was doing business as clearing agent at Chennai Port Trust, had filed2              I.T.A. Nos. 1352/Mds/2009return of income admitting total income of Rs. 16,24,891/-. During

the course of assessment, it was noted that Assessing Officer issued

noticeu/s 133(6)of the Act to various sundry creditors of the

assessee.     Assessee was required to furnish details of sundry

creditors by Assessing Officer. Vide its letter dated 30.4.2008,

assessee explained the position regarding sundry creditors as under:"The position with regard to Sundry Creditors is as follows for

       the Asst. Year 2006-07


Name                       Opening         Offered as         Balance

                           Balance       income for the

                                          A.Y. 2007-08

Balu & Co.                  689844-75      94602-42          585242-33

Jayalakshmi                 470000-00         Nil            470000-00
Transport
Leadking     Airservices    520770-50         Nil            520770-50
Pvt. Ltd.R.S. Nathan & Bros          790307-65      790307-65              Nil

S.M.    Kesavaram     &     300397-58      300397-58              Nil
Co.
         Total             2771320-48     1185307-65        1586012-833            I.T.A. Nos. 1352/Mds/2009The above Creditors were our clients and the credits arose in

the normal course of business. The amount was held back by

us due to certain difference of opinion with regard to

business transactions.   We wished to continue the business

and adjust the ultimate amounts against the future business.

The parties were not available due to change of address etc.

We could not return the amounts to the parties for the

various reasons as there were disputes in the business

transactions.   The parties were free to make the demands

against us at any time. Hence, we could not write back the

amounts as income. Considering the dates of transaction and

also the lapse of time, we had offered a portion of the dues

as income in the assessment for the year 2007-08 as above as

the amounts due in the names of R.S. Nathan & Bros, S.M.

Kesavaraman & Co and also a part of amount in the name of

Balu & Co. Since there is no demand from the creditors we

had already offered the balance amounts in the Asst. Year

2008-09.4              I.T.A. Nos. 1352/Mds/2009I was asked to file confirmation letters with regard to the

above creditors. Since they have shifted their addresses I am

unable to contact them. Hence in order to purchase peace

and give a quietes to the whole issue and to carry on the

business smoothly, I come forward to offer these amounts for

2006-07 a.y. under consideration.I wish to submit that I have already offered a portion of

creditors on my own in the return for the Assessment 2007-08. I am also voluntarily offering the balance of creditors for

assessment for Assessment Year 2006-07. I have also fully co-

operated in the matter of enquiry and completion of

assessment.   I undertake to pay the resultant taxes also

immediately. Considering all these above and the fact that I

had already offered the amount in the Asst. Year 2008-09, I

request you not to initiate any penalty proceedings. In case

the amounts in question is added as income of this year, I

may be permitted to exclude the same in the asst, for 2008-09."5             I.T.A. Nos. 1352/Mds/20093.   Assessing Officer considering assessee's offer of income for

Assessment Year 2007-08 at Rs. 11,85,307.65, limited himself to the

balance sum of Rs. 15,86,012.83 out of total opening balance of

sundry creditors at Rs. 27,71,320.48 for the impugned Assessment

Year and completed the assessment. Notice initiating penalty

proceedings was issued.    Reply of the assessee was that these

credits were long time balances, which were carried forward from

year to year and was not settled due to various difference of

opinion with concerned creditors.     According to the assessee,

confirmations could not be obtained from these creditors for this

reason. However, Assessing Officer was of the opinion that but for

the scrutiny, assessee would not have admitted credits to the

extent mentioned above and hence there was clear case of

furnishing inaccurate particulars of income. He, therefore, levied

penalty at Rs. 5,33,632/- being the tax sought to be levied on the

amount of Rs. 15,86,012.83.4.   In its appeal before the ld. CIT(A), argument of the assessee

was that creditors were genuine and it was only because of its

difficulty in obtaining confirmation that the amount was offered as6              I.T.A. Nos. 1352/Mds/2009income. According to the assessee, such additional income offered

was in good faith and to buy peace and there was no false

explanation given by it nor any inaccurate particulars furnished.

Ld. CIT(A) held that this was not a fit case for levy of penalty and

deleted it.5.   Now before us, the ld. D.R. submitted that there was no

credible explanation offered by assessee as to why the amount was

not disclosed in the original return. According to ld. D.R., assessee

was not able to substantiate the explanation nor able to prove that

the explanation was bonafide and, therefore, it was deemed

concealment, liable for penaltyu/s 271(1)(c)of the Act. Ld. D.R.

further argued that once there was admission of concealment and

voluntary offer, the onus was on the assessee to disprove

concealment. Reliance was placed on the decision of the Hon'ble

Apex Court in the case ofK.P. Madhusudanan Vs. CIT251ITR 99

and UOI Vs. Dharmendra Textile Processors & Others306 ITR 277.6.   Per contra, the ld. A.R. strongly supported the order of the ld.

CIT(A).7              I.T.A. Nos. 1352/Mds/20097.   We have heard the rival submissions and perused the orders.

Let the facts speak for themselves. We will move to the periphery.

Balance of sundry creditors as on 1.4.2005 was Rs. 27,71,320.05 in

assessee's account. Out of this, assessee offered Rs. 11,85,307.65

in its assessment for previous year relevant to Assessment Year

2007-08. The difference, on which penalty was levied was offered

by it during course of assessment of the impugned Assessment Year.

The question now is, do these facts lead to a conclusion that there

was any concealment or furnishing of inaccurate particulars? Sundry

creditors pertained to earlier years. In such earlier years, sundry

creditors would have come into existence, might be through

genuine trading operations or might be through inflation of

purchases. But, nevertheless, these credits, undoubtedly pertained

to earlier years and income if any, therefrom also pertained to such

earlier years. Just because assessee offered a part thereof in the

impugned Assessment Year and / or later Assessment Year, would

not convert the offered amount, its income for such years. The

income, if any, pertained to earlier years in which the credits came

about. Now moving from periphery to the crux, when there is no8              I.T.A. Nos. 1352/Mds/2009actual income but only an addition coming out through an offer

made by the assessee, can we say that there is concealment? Can

we say that there is furnishing of inaccurate particulars?          Even

supposing that assessee could not produce any evidence for credit

balances, as mentioned by us, it would relate back to the earlier

years only. No doubt, where the assessee fails to substantiate an

explanation given by it as bonafide, it is liable for penalty u//s

271(1)(c) of the Act. As aforesaid, here the question is one not on

substantiation.Fact of the matter is that there was not any

concealment or furnishing of any inaccurate particulars with regard

to any income which arose to the assessee, in the previous year

relevant to the Assessment Year.      Assessee had offered it, not

because it could not support the claim, but because it wanted to

avoid litigation. Assessee had also not admitted at any point that

demands of the creditors got abated.        No doubt, in the caseDharmendra Textile Processors Limited[supra], it was held by the

Hon'ble Apex Court that strict interpretation of penal provisions are

called for, in favour of the Revenue. But this cannot be extended

to mean that even when there is no income which could be

considered as concealed or no particulars which could be considered9             I.T.A. Nos. 1352/Mds/2009inaccurately furnished, even then a levy of penalty should be made

u/s 271(1)(c) of the Act. In this view of the matter, we are of the

considered opinion that the ld. CIT(A) was well justified in deleting

the penalty levied on the assessee. No interference is called for.8.    In the result, appeal of the Revenue stands dismissed.The order was pronounced in the Court on 13.08.2010.sd/-                                  sd/-
      (George Mathan)                         (Abraham P. George)
      Judicial Member                         Accountant Member


Chennai,
Dated the 13th August, 2010.


VL/



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