M/s. Mahendrakumar N. Shah, Ahmedabad V. The ACIT ,Circle-3, Ahmedabad

ITA 1804/AHD/2015

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 9618 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 18-06-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: S N DIVATIA
• Keywords: Proportionate interest; TDS
• Section: 271(1)(c)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL , C BENCH, AHMEDABAD BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER AND SHRI WASEEM AHMED , ACCOUNTANT MEMBER ./ ITA NO .1093 /AHD/2014 AND ./ ITA NO.1804/AHD/2015 / ASSTT. YEAR : 2007 - 2008 MAHENDRAKUMAR N SHAH 880/2, GPO ROAD , OPP. EMPIRE BAKERY , MIRZAPUR , AHMEDABAD PAN: AAEFM6795J VS . DCIT , CIRCLE - 3 , AHMEDABAD . (APPLICANT) ( RESPON D ENT ) ASSESSEE BY : SHRI S.N. DIVATIA, A.R REVENUE BY : SHRI L.P. JAIN , SR. DR / DATE OF HEARING : 28 / 11 / 201 8 / DATE OF PRONOUNCEMENT: 12 /12 /2 01 8 / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE ABOVE TWO APPEALS ARE FILED BY THE ASSESSEE AGAI NST TWO SEPARATE ORDERS OF THE L D. CIT(A) PASSED FOR THE ASS ESSMENT YEAR 2007 - 08. ITA NO.1093/AHD/2014 IS AGAINST QUANTUM ADDITION , AND ITA NO.1804/AHD/2015 IS AGAINST THE IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF THE INCOME TAX ACT, 1961. THESE TWO APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE . 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 2 THE ORDER OF THE LEARNED CIT .( APPEALS) XVI, A'BAD IS BAD IN LAW AND ON FACTS SO FAR FOLLOWING CLAIM OF EXPS . OF THE APPELLANTNOT ALLOWED BY THE CIT (A) - XVI, BY UPHOLDING THE ORDER OFD.C.I.T. CIRCLE3, AHMEDABAD. I) RS. 11,68,759/ - OUT OF CLAIM OF INTEREST EXPENSES. II) RS. 3,39,456/ - BEING THE AMOUNT OF DIFFERENCE AS PER TDS CERTIFICATE & AS PER A/C. BY HOLDING ASUNDISCLOSED INCOME. 2. THE LEARNED CIT .( APPEALS) XVI, OUGHT TO HAVE CONSIDERED THE WRITTEN SUBMISSIONS MADE BY THE APPELLANT BEFORE DCIT, CIRCLE - 3 AND ALSO BEFORE HIM VIDE OUR WRITTEN SUBMISSION DT . 08 - 02 - 14 WITH ENCLOSURES AND ALSO BY CALLING RECORDS AS WELL AS OUGHT TO HAVE CONSIDERED THE SUBMISSION MADE FROM TIME TO TIME BY THE APPELLANT AND OUGHT NOT TO HAVE UPHOLD THE ORDER OF THE DCITCIRCLE - 3, A'BAD AND OUGHT TO HAVE ALLOWED THE CLAIM OF EXPS . MADE BY THE APPELLANT. 3. THE LEARNED CIT. (APPEALS) XVI, OUGHT TO HAVE CONSIDERED THE WRITTEN SUBMISSIONS MADE BY THE APPELLANT BEFORE DCIT CIRCLE - 3 FROM TIME TO TIME AND SUBMISSION M ADE BEFORE HIM VIDE OUR SUBMISSION DT.08 - 02 - 2014 WITH ITS ENCLOSURES. 4. YOUR APPELLANT RESPECTFULLY SUBMITS THAT THE DISALLOWANCES MADEBY THE D.C.I.T., CIRCLE - 3, BE ALLOWED IN FULL WHILE COMPUTINGTHE TOTAL INCOME / LOSS OF THE APPELLANT WHILE PASSING THE ORDER U/S.143 (3). YOUR APPELLANT CRAVES FOR LEAVE TO ADD AND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE FINAL HEARING OF OUR APPEAL. 3. THE 1 ST ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 11,68,759/ - BEING THE AMOUNT OF INTEREST ON ACCOUNT OF DIVERSION OF THE FUND . 3.1 THE FACTS OF THE CASE ARE THAT THE ASSESSEE IN THE PRESENT CASE IS A PARTNE RSHIP FIRM AND ENGAGED IN THE BUSINESS OF FABRICATION CONTRACTS. THE ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS. 42,62,462/ - IN ITS PROFIT AND LOSS ACCOUNT. OUT OF SUCH INTEREST EXPENSES, A SUM OF RS. 23,70,314/ - WAS PAID TO THE PERSONS AS SPECIFIED UNDE R SECTION 40A(2)(B) OF THE ACT. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 3 3.2 THE ASSESSEE IN ITS BALANCE SHEET AS ON 31 MARCH 2007 HAS SHOWN ADVANCES IN THE NAME OF 15 PARTIES AMOUNTING TO RS . 52,30,661 / - ONLY. AS PER THE ASSESSEE, THE ADVANCES WERE GIVEN TO THE PARTIES AS AN ADVANCE FOR THE BU SINESS TRANSACTIONS. THEREFORE NO INTEREST WAS CHARGED ON SUCH ADVANCES. THE ASSESSEE IN SUPPORT OF HIS CLAIM HAS FILED THE LEDGER COPIES OF THE 15 PARTIES AS DISCUSSED ABOVE. 3.3 THE ASSESSEE HAS ALSO TAKEN A LOAN OF RS. 45,09,000/ - IN JANUARY 2007 TO B UY THE MACHINERY . BUT THE ASSESSEE CLAIMED THAT IT DID NOT PURCHASE ANY MACHINERY, BUT THE AMOUNT OF LOAN WAS UTILIZED FOR THE BUSINESS ACTIVITIES. 4. HOWEVER, THE AO WAS NOT SATISFIED WITH THE CONTENTIONS OF THE ASSESSEE BECAUSE I N SOME OF THE CASES, THE ADVANCES CLAIMED BY THE ASSESSEE WERE ADJUSTED AT THE END OF THE YEAR. THERE WAS NO EVIDENCE FILED BY THE ASSESSEE SUGGESTING THAT THE LOAN TAKEN FOR THE PURCHASE OF MACHINERY WAS UTILIZED FOR THE BUSINESS. 4.1 IN VIEW OF THE ABOVE, THE AO HELD THAT THE ASSESSEE, ON THE ONE HAND , IS CLAIMING INTEREST EXPENSES ON LOAN TAKEN BY IT AND ON THE OTHER HAND IT HAS DIVERTED THE LOAN FOR THE NON - BUSINESS TRANSACTION. ACCORDINGLY THE AMOUNT OF PROPORTIONATE INTEREST AT RS. 11,68,759/ - BEING 12% OF RS. 97,39,661 / - ( 52,30,661 +45,09,000) WAS WORKED OUT AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT ADVANCE GIVEN TO 15 PARTIES ARE REPRESENTING THE BUSINESS TRANSACTIONS. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 4 5.1 SIMILARLY, THE LOAN TAKEN FOR THE PURCHASE OF MACHINERYWAS NOT UTILIZED FOR THE PURCHASE OF MACHINERY AS THE PARTNERS OF THE FIRM DROPPED THE IDEA TO PURCHASE THE SAME. HOWEVER, THE MONEY BORR OWED WAS UTILIZEDFOR THE PURPOSE OF THE BUSINESS ONLY. 5.2 HOWEVER THE LD. CIT(A) DIS - AGREED WITH THE SUBMISSION OF THE ASSESSEE BY OBSERVING THAT THE ADVANCES CLAIMED TO HAVE BEEN GIVEN TO 15 PARTIES FOR THE PURPOSE OF THE BUSINESS WERE NOT CLASSIFIED AS TRADE ADVANCES IN THE BALANCE SHEET. 5.3 THERE WAS NO MATERIAL / GOODS SUPPLIED BY THE PARTIES WHO HAVE TAKEN ADVANCE FROM THE ASSESSEE EITHER DURING THE YEAR UNDER CONSIDERATION OR IN ANY SUBSEQUENT YEAR. 5.4 THERE WAS NO DOCUMENT FILED BY THE ASSESSE E EVIDENCING THAT THE MONEY BORROWED FOR THE PURCHASE OF MACHINERY WAS UTILIZEDFOR THE PURPOSE OF THE BUSINESS. 5.5 IN VIEW OF THE ABOVE THE LD. CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE AND CONFIRMED THE ORDER OF THE AO. 6. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. 7. THE LD. AR BEFORE US FILED A PAPER BOOK RUNNING FROM PAGES 1 TO 107 AND SUBMITTED THAT ALL THE LOANS GIVEN TO 15 PARTIES ARE THE TRADE ADVANCES. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 5 THESE ADVANCES HAVE BEEN ADJUSTED DURING THE YEAR OR IN THE SUBSEQUENT YEAR . THERE WAS ALSO DEDUCTED THE TDS UNDER THE RELEVANT PROVISIONS OF THE ACT ON THE EXPENSES CLAIMED AGAINST SUCH ADVANCES . THE LD. AR IN SUPPORT OF HIS CLAIM DR E W OUR ATTENTION ON THE COPIES OF THE LEDGERS WHICH ARE PLACED ON P AGES 8 TO 50 OF THE PAPER BOOK. 7 .1 THE LD. AR ALSO SUBMITTED THAT THE ADVANCES GIVEN TO 15 PARTIES WERE SHOWN IN ITS BALANCE SHEET, AND HE DREW OUR ATTENTION ON PAGE 94 OF THE PAPER BOOK WHERE THE BALANCE SHEET OF THE ASSESSEE WAS PLACED . THE LD. AR ALS O DREW OUR ATTENTION ON PAGE 102 OF THE PAPER BOOK WHERE THE SCHEDULE 10 OF THE BALANCE SHEET WAS PLACED WHERE IN THE NAMES OF THE PARTIES TO WH OM THE ADVANCES WERE GIVEN WERE SHOWN . 7 .2 SIMILARLY THE LD. AR SUBMITTED THAT THE LOAN TAKEN FOR THE PURCHASE OF THE MACHINERY WAS UTILIZ ED BY MAKING PAYMENT TO THE SYNDICATE BANK IN ORDER TO REDUCE THE INTEREST EXPENSES. THERE WAS OVERDRAFT FACILITY IN THE BANK ACCOUNT MAINTAINED WITH THE SYNDICA TE BANK. 8 . ON THE OTHER HAND THE LD. DR SUBMITTED THAT THE ADVANCES GIVEN BY THE ASSESSEE ARE NOT REPRESENTING THE BUSINESS TRANSACTIONS. T HE LD. DR VEHEMENTLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 8.1 WE HAVE HEARD THE RIVAL CONTENTIONS AND PE RUSED THE MATERIALS AVAILABLE ON RECORD. THE ISSUE IN THE INSTANT CASE RELATES TO THE ADVANCES MADE BY THE ASSESSEE TO 15 PARTIES. AS PER THE AO, THE ADVANCES WERE NOT MADE FOR THE PURPOSE OF THE BUSINESS. ACCORDINGLY THE AO WAS OF THE VIEW THAT THE BORROW ED FUNDS HAVE BEEN DIVERTED FOR A NON BUSINESS TRANSACTION. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 6 8.2 SIMILARLY, THE AO FOUND THAT THE MONEY BORROWED BY THE ASSESSEE FOR THE PURCHASE OF MACHINERY WAS NOT UTILIZED FOR THE PURPOSE OF THE BUSINESS ACTIVITIES. 8.3 THEREFORE THE AO MADE THE DISALLOWANCE OF THE PROPORTIONATE INTEREST PERTAINING TO SUCH ADVANCES. THE VIEW TAKEN BY THE AO WAS SUBSEQUENTLY CONFIRMED BY THE LD . CIT(A). 8.4 NOW THE CONTROVERSY ARISES FOR OUR ADJUDICATION WHETHER THE LOAN AND ADVANCES WER E GIVEN BY THE ASSESSEE TO 15 PARTIES ARE FOR THE PURPOSE OF THE BUSINESS. ON THE PERUSAL OF THE LEDGERS ACCOUNT FILED BY THE ASSESSEE OF THE PARTIES WHO HAVE TAKEN ADVANCES FROM THE ASSESSEE, WE NOTE THAT IN MOST OF THE CASES THE ASSESSEE HAS CLAIMED EXPE NSES AT THE END OF THE YEAR BY MAKING AN ADJUSTMENT ENTRY . THERE WAS NO DISALLOWANCE OF SUCH EXPENSES CLAIMED BY THE ASSESSEE AGAINST SUCH ADVANCES. THUS IT IS CLEAR THAT THE REVENUE DID NOT DISPUTE THE EXPENSES CLAIMED /ADJUSTED BY THE ASSESSEE AGAINST SUC H ADVANCES. 8.5 BESIDES THE ABOVE, WE ALSO NOTE THAT THE ASSESSEE HAS DEDUCTED THE TDS IN MOST OF THE CASES IN RESPECT OF THE EXPENSES WHICH WERE ADJUSTED AGAINST THE ADVANCES AS DISCUSSED ABOVE. IN THE GIVEN FACTS AND CIRCUMSTANCES WE ARE OF THE VIEW ON CE THE REVENUE HAS NOT DISPUTED THE EXPENSES AGAINST SUCH ADVANCES THEN THE QUESTION OF TREATING THE ADVANCES AS NON - TRADE DOES NOT ARISE. 8.6 THUS, WE ARE OF THE VIEW THAT NO DISALLOWANCE OF INTEREST CAN BE MADE IN RESPECT OF THE ADVANCES WHICH HAVE BEE N ADJUSTED BY THE ASSESSEE BY WAY ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 7 OF CLAIMING THE EXPENSES AGAINST SUCH ADVANCES IN THE YEAR UNDER CONSIDERATION OR THE SUBSEQUENT YEAR. 8.7 HOWEVER WE NOTE THAT THERE WERE CERTAIN PARTIES TO WHOM THE ADVANCES WAS GIVEN BY THE ASSESSEE AND WHICH WERE NOT ADJUSTED AGAINST ANY EXPENSE T ILL THE END OF THE RELEVANT FINANCIAL YEAR OR IN THE SUBSEQUENT YEAR. THESE PARTIES ARE AS UNDER: PARTIES NAME AMOUNT 1) D K ENGINEERS 3,23,720/ - 2) HARDWARE TOOLS & M/C SYNDICA 2,35,000/ - 3) M N SHAH - HUF 88,000/ - 4) AMIT TUBE 14,30,397/ - 5) NIRAV SHAH 5,50000/ - 6) PARESH M SHAH 10000/ - 7) PRATIK M SHAH (PROPRIETOR OF 5,65,262/ - PARSHAWNATH ENTERPRISES) NET DEBIT AMOUNT AFTER ADJUSTMENT OF CREDIT BALANCE OF PARSHAVNATH ENTERPRISES.( 11,16,929. 49 5,65,262.84) 8.8 IN RESPECT TO THE ABOVE PARTIES THE LD. AR FOR THE ASSESSEE HAS NOT BROUGHT ANY EVIDENCE SUGGESTING THAT THESE ADVANCES WERE ADJUSTED AGAINST ANY EXPENSE EITHER IN THE YEAR UNDER CONSIDERATION OR IN THE SUBSEQUENT YEAR . 8.9 HOWEVER THE LD. AR AT THE TIME OF HEARING REQUESTED BEFORE US TO RESTORE THE MATTER TO THE FILE OF AO FOR FRESH ADJUDICATION AND ASSURED US TO FIL E THE NECESSARY DOCUMENTS. THE L D. DR DID NOT OBJECT IF THE MATTER IS ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 8 RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDI CATION AS PER THE PROVISIONS OF LAW. 9. ON PERUSAL OF THE LEDGERS OF THE PARTIES AS DISCUSSED ABOVE, WE NOTE THAT IN SOME OF THE CASES THERE WERE REGULAR FINANCIAL TRANSACTIONS BETWEEN THE ASSESSEE AND THE PARTIES. SOMETIME THE ASSESSEE HAS SHOWN CREDIT BALANCE OF THE PARTIES DURING THE YEAR AND SOMETIME THE ASSESSEE HAS SHOWN DEBIT BALANCE DURING THE YEAR. BUT THE AO HAS WORKED OUT THE AMOUNT OF PROPORTIONATE INTEREST ON THE CLOSING BALANCE AS APPEARING AT THE END OF THE FINANCIAL YEAR. IN OUR CONSIDERED VIEW THE INTEREST IF AT ALL NEEDS TO BE DISALLOWED ON ACCOUNT OF DIVERSION OF FUNDS THE N THE PERIOD FOR WHICH THE ASSESSEE HAS GIVEN THE ADVANCE TO THESE PARTIES SHOULD BE TAKEN INTO CONSIDERATION BY THE AO. 9.1 IN VIEW OF ABOVE AND AFTER CONSIDERING T HE FACTS IN TOTALITY, AS WELL AS IN THE INTEREST OF JUSTICE WE ARE INCLINED TO RESTORE THE ISSUE TO THE AO FOR FRESH ADJUDICATION AS PER THE PROVISIONS OF LAW AND IN THE LIGHT OF ABOVE - STATED DISCUSSION. 10 . REGARDING THE LOAN TAKEN FROM MAGMA LEASING LTD FOR THE PURCHASE OF MACHINERY RS. 45,09,000/ - WE NOTE THAT THERE WAS NO INTEREST PAID BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. THIS FACT CAN BE VERIFIED FROM THE COPIES OF THE LEDGER OF MAGMA LEASING LTD IN THE BOOKS OF THE ASSESSEE WHICH IS PLACED ON PAGE 60 OF THE PAPER BOOK. 10 .1 BESIDES THE ABOVE, WE ALSO NOTE THAT THE ASSESSEE HAS RECEIVED A SUM OF RS. 45,09,000 / - FROM M/S SHRI OSH IYA E NGINEERING COMPANY AS EVIDENT FROM THE COPY OF THE LEDGER PL ACED ON PAGE 52 OF THE PAPER BOOK. THE AMOUNT ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 9 RECEIVED WAS DEPOSITED IN THE SYNDICATE BANK ACCOUNT (SOD) AND INDIAN OVERSEAS BANK OF THE ASSESSEE AS EVIDENT FROM THE BANK BOOK PLACED ON PAGES 53 TO 57 OF THE PAPER BOOK. SUCH DEPOSITS HAVE RESULTED IN THE R EDUCTION OF THE LOAN AMOUNT FROM THE SYNDICATE BANK AND INDIAN OVERSEAS BANK. 10.2 WE ALSO FIND THE ASSESSEE SUBSEQUENTLY HAS SQUARED UP THE ACCOUNT OF SHRI OSHIYA E NGINEERING COMPANY WITH THE AMOUNT OF LOAN TAKEN FROM MAGMA LEASING LTD. ALL THESE ACCOUNTING ADJUSTMENTS SHOW THAT THE AMOUNT OF LOAN TAKEN BY THE ASSESSEE FROM MAGMA LEASING COMPANY LTD FOR THE PURCHASE OF MACHINERY WAS ULTIMATELY UTILIZED FOR THE PURPOS E OF THE BUSINESS. THEREFORE IN OUR CONSIDERED VIEW, NO SUCH DISALLOWANCE CAN BE MADE IN THE YEAR UNDER CONSIDERATION. 10.3 THE LEARNED DR HAS ALSO NOT BROUGHT ANYTHING ON RECORD EVIDENCING THAT THE MONEY BORROWED FOR THE PURCHASE OF THE MACHINERY WAS UTILIZED FOR NON - BUSINESS PURPOSES. THEREFORE WE HAVE NO ALTERNATE EXCEPT TO REVERSE THE FINDING OF THE LOWER AUTHORITIES IN THE GIVEN FACTS AND CIRCUMSTANCES. THUS THE GROUND OF APPEAL OF THE ASSES SEE IS PARTLY ALLOWED FOR THE STATISTICAL PURPOSES. 11 . THE 2 ND ISSUE RAISED BY THE ASSESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO BY TREATING THE AMOUNT OF RS. 3,39,456/ - AS UNDISCLOSED INCOME OF THE ASSESSEE. 11 .1 THE ASSESSE E IN THE YEAR UNDER CONSIDERATION HAS SHOWN AN INCOME OF RS. 12,03,620/ - RECEIVED FROM THE V ARKS E NGINEERS PVT . LTD. HOWEVER, THE TDS CERTIFICATE ISSUED BY V A RKS E NGINEERS PRIVATE LTD SHOWS TOTAL AMOUNT CREDITED TO THE ASSESSEE IS O F RS. 16,09,044/ - ONLY AGAINST WHICH THERE WAS A ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 10 DEDUCTION OF THE TDS AT RS. 18,053/ - ONLY . THE ASSESSEE HAS CLAIMED THE CREDIT OF THE TDS BY THE FULL AMOUNT OF RS. 18,053/ - ONLY IN ITS INCOME TAX RETURN . 11 .2 IN VIEW OF THE ABOVE, THE AO FOUND A DIFFERENCE OF RS. 3,39,456/ - WHICH WAS NOT RECORDED BY THE ASSESSEE IN ITS BOOKS OF ACCOUNTS. ON CONF R ONTATION BY THE AO ABOUT THE SAID MISMATCH THE ASSESSEE FAILED TO MAKE ANY SATISFACTORY REPLY. THEREFORE THE SAME WAS TREATED AS UNDISCLO SED INCOME OF THE ASSESSEE. 12. AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A) THE ASSESSEE BEFORE THE LD. CIT(A) SUBMI TTED THAT V ARKS ENGINEERS PRIVATE LTD DID NOT PROVIDE THE REQUISITE TDS CERTIFICATE WELL IN TIME. AS SUCH THE TDS CERTIF ICATE WAS PROVIDED ONLY AT THE FAG END OF THE DUE DATE OF THE FILING OF THE RETURN . 12.1 THE ASSESSEE ALSO FILED THE CONFIRMATION FROM THE V A RKS E NGINEERS PRIVATE LTD FOR THE PAYMENT MADE TO THE ASSESSEE IN THE YEAR UNDER CONSIDERATION. 12.2 HOWEVER THE LD. CIT(A) DISREGARDED THE CONTENTION OF THE ASSESSEE BY OBSERVING THAT THE ASSESSEE SHOULD HAVE REVISED THE RETURN OF INCOME. 12.3 THE ASSESSEE HAS NOT FILED THE CONFIRMATION LETTER FROM V ARKS E NGINEERS BEFORE THE AO DURING THE ASSESSMENT PROCEEDING S. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 11 12.4 THERE WAS ALSO A CONFIRMATION FROM THE PARTY NAMELY THE V ARK E NGINEERS SHOWING THAT A PAYMENT WAS MADE TO THE ASSESSEE IN CASH RS. 2,94,000/ - 13. BEING AGGRIEVED BY THE ORDER OF THE LD. CIT(A) ASSESSEE IS IN APPEAL BEFORE US. THE LD AR BEFORE US SUBMITTED THAT THE ASSESSEE HAD NO INFORMATION ABOUT THE RECEIPT OF CASH OF RS. 2,94,000/ - . THEREFORE THE SAME CANNOT BE ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 14 . ON THE OTHER AND THE LD . DR VEHEMENTLY SUPPORTED THE ORDER OF THE AUTHORITIES BELO W. 15 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. ON PERUSAL OF THE LEDGER OF THE ASSESSEE IN THE BOOKS OF THE V ARKS ENGINEERS PRIVATE LTD WE NOTE THAT THE ASSESSEE HAS RAISED INVOICES FOR RS. 16,09,044/ - WHICH EV IDENCES THAT THE ASSESSEE HAS WORKED FOR V ARKS E NGIN E ERS PRIVATE LTD FOR RS. 16,09,044/ - IN THE YEAR UNDER CONSIDERATION. THE COPIES OF LEDGERS ARE PLACED ON PAGES 69 TO 73 OF THE PAPER BOOK. THEREFORE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A). HENCE THE GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 16 . IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 17 . NOW COMING TO THE ITA NO.1804/AHD/ 2015 FOR A.Y 2007 - 08. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 12 THE ORD ER OF THE LEARNED ACIT. CIR.3 LEVYING PENALTY U/S. 271(L)(C) OF RS.5,07,665 AND UP HOLD BY C.I.T.(A) - 10,AHMEDABAD IS BA D IN LAW AND ON FACTS SO FAR AS (I) THE A.C.I.T,, CIR 3 HAD NOT KEEP THE PENAL PROCEEDINGS INITIATED BY HIM U/S. 274 R.W.S. 271. DESPITE OF THE FACT THAT A REQUEST WAS MADE BY THE APPELLANT TO KEEP THE PENAL PROCEEDINGS PENDING TILL THE DATE OF FINALISATION OF QUANTUM APPEAL LYING BEFORE HONOURABLE ITAT AHMED ABAD VIDE HIS LETTER DT. 14 - 07 - 2014 II) THE CIT( A - 10 HAS HOT KEEP THE PROCEEDINGS PENDING AS THE QUANTUM APP E A1 OF APPE11ANT IS PENDING BEFORE HONOUR ABLE ITAT 'C' BENCH AHMEDABAD. (2) THE LEARNED ACIT CIR - 3 AND CIT(A) 10 OUGHT TO HAVE CONSIDERED THE FACT THAT THE WORKING OF TAX EVADED AND OR APPLICATION OF EXPLANATION - L OF SECTION 271(1) (C) IS ONLY APPLICABLE AFTER THE FINA1ISATION OF QUANTUM OF INCOME OF THE APPELLANT AND WHICH WAS NO T FINALISED BY HONOURABLE ITAT C' BENCH AHMEDABAD AND O UGHT TO HAVE KEEP THE PROCEEDINGS IN ABEYANCE AS REQUESTED BY THE APPELLANT VIDE HIS LETTER DATED 14 - 07 - 2014 AND OUGHT NOT HAVE UPHOLD THE ORDER OF AC IT CIR - 3, & CIT (A) 10, AHMEDA BAD LEVYING THE PENALTY U/S. 27.1 (L)(C). 3) YOUR APPELLANT 'RESPECTFULLY SUBMITS THAT THE ORDER OF ACIT - CIR,3 LEVYING THE PENALTY U/S.271(1)(C) BE CANCELLED IN VIEW OF FACT THAT THE QUANTUM APPEAL IS B EING TILL PENDING BEFORE - HONOUR ABLE ITAT 'C' BENCH AHMEDABAD. YOUR APPELLANT, CRAVES FOR LEAVE TO ADD AND OR AL TER ALL OR ANY GROUNDS OF APPEAL BEFORE FINAL HEARING OF OUR APPEAL. 18 . THE ONLY ISSUE RAISED BY THE ASSES SEE IN THIS APPEAL IS THAT THE LD. CIT (A) ERRED IN CONFIRMING THE PENALTY IMPOSED BY THE AO UNDER SECTION 271 ( 1 )(C) OF THE ACT. 18 .1 THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION HAS FILED HIS RETURN OF INCOME DECLARING LOSS OF RS. 38 , 36 , 499 / - ONLY. THE CASE OF THE ASSESSEE WAS SELECTED UNDER SCRUTINY AND ACCORDINGLY THE ASSESSMENT WAS FRAMED UNDER SECTION 143 ( 3 ) OF THE ACT WIDE ORDER DATED 24 TH OF DECEMBER 2009 AFTER MAKING THE ADDITION OF THE FOLLOWING EXPENSES 1. D ISALLOWANCE OF INTEREST EXPENSES RS. 11 , 68 , 759 / - ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 13 2. U NACCOUNTED INCOME RS. 3 , 39 , 456 / - 19 . T HE AO IN THE ASSESSMENT ORDER INITIATED THE PENALTY PROCEEDINGS UNDER SECTION 271 ( 1 )(C) O F THE ACT IN RESPECT OF THE ADDITIONS AS DISCUSSED ABOVE. SUBSEQUENTLY THE ADDITION S WERE CONFIRMED BY THE LD. C IT ( A ) V IDE HIS ORDER DATED 14 - 02 - 2014. 19 .1 IN VIEW OF THE ABOVE THE AO ISSUED NOTICE UNDER SECTION 274 READ WITH SECTION 271 ( 1 )(C) OF THE ACT FOR LEVY THE PENALTY FOR THE ADDITIONS AS DISCUSSED ABOVE. 19 .2 THERE WAS NO RESPONSE BY THE ASSESSEE. THEREFORE THE AO LEVIED THE PENALTY OF RS. 5 , 07 , 665 / - BEING 100% OF THE AMOUNT OF THE TAX SOUGHT TO BE EVADED . 20 . AGGRIEVED ASSESSEE PREFERRED AN APPEAL TO LD. C IT ( A ). THE ASSESSEE BEFORE THE LD. CIT(A) SUBMITTED THAT THE QUANTUM APPEAL IS PENDING BEFORE THE HON BLE ITAT . T HEREFORE THE PENA LTY PROCEEDINGS SHOULD BE KEPT IN ABEYANCE TILL THE FINALIZ ATION OF THE ORDER. 21 . HOWEVER THE LD . CIT(A) DISAGREED WITH THE SUBMISSION OF THE ASSESSEE AND CONFIRMED THE PENALTY ORDER OF THE AO. 22 . B EING AGGRIEVED BY THE ORDER OF LD. C IT ( A ) ASSESSEE IS IN APPEAL BEFORE US. THE L D . AR BE FORE US SUBMITTED THAT THERE WERE NO INACCURATE PARTI CULARS OF INCOME OR CONCEALMENT OF INCOME IN THE INCOME TAX RETURN. THEREFORE THE PENALTY SHOULD NOT BE LEVIED UNDER SECTION 271 ( 1 )(C) OF THE ACT. ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 14 23. ON THE OTHER HAND THE LD. DR VEHEMENTLY SUPPORTED THE ORDER OF AUTHORITIES BELOW. 24 . WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL IS AVAILABLE ON RECORD. REGARDING THE PENALTY APPEAL, AT THE OUTSET, WE NOTE THAT THERE WAS NO REPRESENTATION MADE BY THE ASSESSEE ON MERIT. THEREFORE WE ARE OF THE VIEW THAT THE MATTER SHOULD BE RESTORED BACK TO THE F ILE OF AO IN THE INTERESTS OF JUSTICE AND FAIR PLAY. ACCORDINGLY WE REMIT THE ISSUE TO THE FILE OF AO WITH THE DIRECTION TO ADJUDICATE THE ISSUE OF FRESH IN THE LIGHT OF THE ORDER OF THIS T RIBUNAL IN RELATION TO THE QUANTUM APPEAL OF THE ASSESSEE. HENCE TH E GROUND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 25 . IN THE COMBINED RESULT THE QUANTUM APPEAL OF THE ASSESSEE BEARING NO.1093/AHD/2014 FOR A.Y. 2007 - 08 AND THE PENALTY APPEAL OF THE ASSESSEE BEARING NO.1805/AHD/2015 FOR A.Y. 2007 - 08 ARE ALLOWED FOR STATISTICAL PURPOSES. O RDER PRONOUNCED IN THE COURT ON 12 /12/ 2018 AT AHMEDABAD. - SD - - SD - ( MAHAVIR PRASAD ) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER A HMEDABAD; DATED 12 / 12 /2018 MANISH ITA NO S.1093/AHD/2014 & ITA NO.1804/AHD/2015 ASSTT. YEAR 2007 - 08 15 / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. , / DR, ITAT, 6. / GUARD FILE .