M/s. Bhandari Construction Company, Pune V. Deputy Commissioner of Income-tax,

ITA 22/PUN/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93802 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 08-06-2015
• Assessment Year: 1998-1999
• Appeal Filed On: 06-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR
• Assessee Lawyers: K N BORA
• Keywords: Unexplained cash credit; Document seized; Proportionate interest; Documents seized
• Section: 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.22/PN/2014 (ASSESSMENT YEAR : 1998-99) M/S. BHANDARI CONSTRUCTION COMPANY, BHANDARI APARTMENTS, 373, SOMWAR PETH, PUNE 411001 PAN NO.AABFB2298N .. APPELLANT VS. DY.CIT, CIRCLE-2, PUNE .. RESPONDENT APPELLANT BY : SHRI SUNIL GANOO & SHRI K.N. BORA DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 08-06-2015 DATE OF PRONOUNCEMENT : 17-06-2015 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 22-08-2013 OF THE CIT(A)-II, PUNE RELATING T O ASSESSMENT YEAR 1998-99. 2. AT THE TIME OF HEARING THE LD. COUNSEL FOR THE ASSESSE E DID NOT PRESS GROUNDS OF APPEAL NO.1 & 5 FOR WHICH THE LD. DEPARTMENTAL REPRESENTATIVE HAS NO OBJECTION. ACCORDING LY, THE ABOVE 2 GROUNDS ARE DISMISSED AS NOT PRESSED. GROUN D OF APPEAL NO.6 BEING GENERAL IN NATURE IS DISMISSED. 3. GROUNDS OF APPEAL NO.2, 3 AND 4 BY THE ASSESSEE READ AS UNDER : 2 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE ASSESSMENT ORDER FOR A.Y. 1998-99 AS FRAMED BY THE LEARN ED ASSESSING OFFICER U/S.153 C R.W.S.153 A OF THE I.T. ACT 1 961 VIDE ORDER DT.28/12/2007 BEING BAD IN LAW, CONSEQUEN TLY THE IMPUGNED PENALTY IS ALSO BAD IN LAW AND VOID AB I NITIO AND HENCE THE SAME MAY PLEASE BE DELETED. 3. THE LEARNED C.I.T.[A] HAS ERRED IN CONFIRMING THE PENALTY ON ALLEGED UNPROVED LOAN OF RS.11,50,000.00. THE ORD ER OF THE LEANED C.I.T.[A] BEING ARBITRARY, PERVERSE AND D EVOID OF MERITS AND BASED ON PRESUMPTIONS AND SURMISES THE SAME MAY PLEASE BE DELETED. 4. THE LEARNED C.I.T.[A] HAS ERRED IN CONFIRMING THE PENALTY ON INTEREST OF RS.2,53,000.00 ON ALLEGED UNPROVED LOA N OF RS.11,50,000.00. THE ORDER OF THE LEARNED C.I.T.[A] BEING ARBITRARY, PERVERSE AND DEVOID OF MERITS AND BASED ON PRESUMPTIONS AND SURMISES THE SAME MAY PLEASE BE DELETED. 4. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF BUILDERS AND DEVELOPERS. A SEARCH U/S.132(1) OF THE I.T. ACT WAS CARRIE D OUT IN THE CASE OF SHRI SHREERAM H. SONI ON 29-07-2003. DURIN G THE COURSE OF SEARCH A LARGE NUMBER OF SEIZED DOCUMENTS RE LATING TO THE MONEY LENDING BUSINESS WERE FOUND AND SEIZED. THESE DOCUMENTS ARE MOSTLY IN THE FORM OF BLANK PROMISSORY NO TES (SIGNED BY THE BORROWERS), BLANK UNDATED CHEQUES DULY SIGNED BY THE BORROWERS. SOME OF THE DOCUMENTS FOUND DURING THE COURSE OF SEARCH, I.E. PROMISSORY NOTE ALONG WITH BLANK CHEQUE OF RS. 5 LAKHS ARE RELATED TO THE ASSESSEE FIRM. WHILE PASSING THE ORDER U/S.153A IN THE CASE OF SHRI SHREERAM H. SONI THE FACT OF BORROWING CASH LOAN AND PAYMENT OF INTEREST AS MENTIONE D IN THE SEIZED DOCUMENT WAS PROVED. ON THE BASIS OF SUCH S EIZED MATERIAL AND ASSESSMENT ORDER PASSED U/S.153A IN THE CA SE OF SHRI SHREERAM H. SONI, THE ADDL.CIT, CENTRAL RANGE-2, PUNE FORWARDED SATISFACTION NOTE TO THE AO HAVING JURISDICTION O VER THE ASSESSEE FIRM NOTE FOR ISSUE OF NOTICE U/S.153C. IN R ESPONSE 3 TO NOTICE U/S.153C R.W.S. 153A THE ASSESSEE FILED ITS RETUR N OF INCOME FOR A.Y. 1998-99. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE HAS SHOWN OUTSTANDING UNSECURED LOANS TAKEN FROM VARIOUS PARTIES A S ON 31-03-1998 AT RS.1,07,17,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER ASKED THE ASSESSEE TO FURNISH LOAN CONFIRMATIONS FROM THOSE PARTIES . THE ASSESSEE FAILED TO FURNISH LOAN CONFIRMATIONS OF RS.5 LAKHS TAK EN FROM SHRI SHREERAM H. SONI. SO FAR AS THE CONFIRMATIONS FILED FO R THE REMAINING LOANS, THE AO NOTED THAT ALTHOUGH THE ASSE SSEE HAS FILED THE CONFIRMATIONS WHICH ARE NEW LOANS BUT THESE A RE WITHOUT PAN NUMBERS AND ADDRESSES. THE DETAILS OF SUCH LO ANS AS MENTIONED BY THE AO AT PAGE 3 OF HIS ORDER ARE AS UNDER : SL.NO. NAME OF THE PARTY AMOUNT 1 SMT. SANGITA A. LUNKAD 4,00,000/- 2 ASHOK S. BEHRE (HUF) 1,00,000/- 3 SMT. SHARMILA V. SHAH 50,000/- 4 ANIL B. LUNKAD 2,00,000/- 5 SMT. JYOTI P. CHORDIYA 1,15,000/- 6 L.B. BAMB 1,25,000/- 7 RAMANLAL B. CHORDIYA (HUF) 1,30,000/- 8 SMT. RAJASHREE N. RAJSTHA 2,00,000/- 9 SMT. SWAPNA YOGESH SHAH 50,000/- 10 SMT. SUSHILA B. LUNKAD 2,00,000/- 11 SANTOKCHAND SURANA 2,00,000/- 12 YOGESH B. SHAH 50,000/- 13 MITESH H. PATEL 2,00,000/- 14 TANNA ENTERPRISES 50,000/- 15 PERFECT TRADING CO. 50,000/- TOTAL RS.21,20,000/- 5. THE ASSESSING OFFICER ASKED THE ASSESSEE TO PROVE TH E GENUINENESS OF THE ABOVE LOAN TRANSACTIONS BY GIVING THE IR PAN NUMBERS, BANK ACCOUNT EXTRACTS ETC. IN ABSENCE OF ANY COMPLIANCE OF THE ABOVE TO THE SATISFACTION OF THE ASSES SING OFFICER, THE ASSESSING OFFICER HELD THAT ASSESSEE FAILED TO PR OVE 4 THE GENUINENESS AND CREDIT WORTHINESS OF THE LENDERS OF THESE LOANS. HE THEREFORE MADE ADDITION OF RS.21,20,000/- U/S.68 O F THE I.T. ACT. FURTHER, HE ALSO MADE ADDITION OF RS.5 LAKHS OBTAINED FROM SHRI SHREERAM H. SONI U/S.68 OF THE I.T. ACT . THUS IN EFFECT HE MADE ADDITION OF RS.26,20,000/- TO THE TO TAL INCOME OF THE ASSESSEE U/S.68 OF THE I.T. ACT. SINCE THE ASSESSEE COULD NOT PROVE THE GENUINENESS OF THE LOAN CREDITORS T HE CORRESPONDING INTEREST AMOUNTING TO RS.5,76,400/- WAS ALSO DISALLOWED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER ALSO MADE CERTAIN OTHER ADDITIONS TO THE TOTAL INCOME OF THE A SSESSEE SUCH AS INTEREST ON DEBIT BALANCE OF PARTNERS AMOUNTIN G TO RS.8,16,977/- AND ESTIMATED PROFIT ON SALES AT RS.13,55,816/- . HE ALSO DISALLOWED DONATION OF RS.35,052/-. AFTER SETTING OFF THE BROUGHT FORWARD LOSSES OF THE PRECEDING ASSESSMENT YEAR S AMOUNTING TO RS.48,79,680/-, THE ASSESSING OFFICER DETERMINED THE TOTAL INCOME AT RS.19,28,545/-. 6. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) CONTESTING THE ADDITION OF RS.21,20,000/- MADE U/S.68 OF THE I.T. ACT. THE ASSESSEE DID NOT CONTEST THE ADDITION OF RS.5,00,000/- U/S.68 BEING THE LOAN FROM SHREERAM H.SONI. BASED ON THE REMAND REPORT OF THE ASSESSING OFFICER THE LD.CIT(A) ALLOWED A RELIEF OF RS.14,70,000/- ADDED U/S.68 OF TH E I.T. ACT. HE ALSO ALLOWED PROPORTIONATE INTEREST TO THE EXTENT OF RS.3,23,400/- AND SUSTAINED ADDITION OF RS.2,53,000/-. HE HOWEVER UPHELD THE PROPORTIONATE DISALLOWANCE OF INTEREST ON THE OVERDRAWN BALANCE OF THE PARTNERS AND THE ESTIMATION OF PROFIT AT 8%. THE REVENUE PREFERRED AN APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL UPHELD THE VIEW OF THE CIT(A) AND DISMISSED TH E APPEAL FILED BY THE REVENUE. 5 7. SUBSEQUENTLY, THE ASSESSING OFFICER INITIATED PENALTY PROCEEDINGS U/S.271(1)(C) OF THE I.T. ACT. REJECTING THE VAR IOUS EXPLANATIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER LE VIED PENALTY OF RS.12,51,530/- ON ACCOUNT OF THE FOLLOWING ADDITION S SUSTAINED : 8. IN APPEAL THE LD.CIT(A) DELETED THE PENALTY LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF LAST 2 ITEMS, I.E., PROPORTIONA TE INTEREST ON THE LOANS DIVERTED FOR PERSONAL USE AMOUNTIN G TO RS.8,16,977/- AND ESTIMATED PROFIT AMOUNTING TO RS. 13,55,816/-. HE HOWEVER SUSTAINED THE PENALTY LEVIED BY T HE ASSESSING OFFICER ON ACCOUNT OF THE ADDITION OF UNEXPLAINED CASH CREDIT OF RS.11,50,000/- AND PROPORTIONATE INTEREST ON UNEXPLAINED LOANS OF RS.2,53,000/-. WHILE DOING SO, HE OBSERVED THAT THE ASSESSEE ON ITS OWN HAS ACCEPTED T HE ADDITION OF RS.5 LAKHS OBTAINED FROM SHRI SHREERAM H. SONI. SIMILARLY, THE CIT(A) IN THE APPELLATE ORDER HAS CONFIRMED THE ADDITION OF RS.6,50,000/- BEING LOAN OBTAINED FROM 2 PERSONS. THE CONFIRMATORY LETTERS FILED BY THE ASSESSEE DURING APPELLATE PROCEEDINGS WITH RESPECT TO SHRI SANTOKCHANDA SURANA A ND SHRI MITESH PATEL WERE WITHDRAWN IN THE LIGHT OF THE EXAMINATION CARRIED OUT BY THE ASSESSING OFFICER DURING THE ASSESSMEN T PROCEEDINGS AS THE PAN NUMBERS MENTIONED ON THE CONFIRM ATION LETTERS WERE IN THE NAME OF SOME OTHER PERSONS. RELYING ON UNEXPLAINED CASH CREDIT U/S.68 (6,50,000 + 5,00,000) 11,50,000/ - DISALLOWANCE OF PROPORTIONATE INTEREST ON THE UNEXPLAINED LOANS 2,53,000/ - DISALLOWANCE OF PROPORTIONATE INTEREST ON THE LOANS DIVERTED FOR PERSONAL USE BY THE PARTNERS OF THE FIRM 8,16,977/ - ESTIMATED PROFIT 13,55,816/ - 6 VARIOUS DECISIONS THE LD.CIT(A) NOTED THAT ASSESSEE WAS U NABLE TO EXPLAIN THE SOURCE OF RS.5 LAKHS AND RS.2.50 LAKHS AND R S.4 LAKHS RESPECTIVELY. ACCORDING TO HIM WHERE NO EXPLANATION WHATSOEVER IS FURNISHED FOR CASH CREDITS IN THE BOOKS O F THE ASSESSEE, PENALTY IS LEVIABLE U/S.271(1)(C) OF THE I.T. ACT. 9. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE ASSESSEE IS IN APPEAL BEFORE US. 10. THE LD. COUNSEL FOR THE ASSESSEE MADE TWO FOLD ARGUMENTS. HE SUBMITTED THAT THE ASSESSEE HAD FILED THE ORIGINAL RETURN DISCLOSING THE LOAN CREDITORS. IN RESPONSE TO NOTICE U/S.153C THE ASSESSEE FILED THE RETURN. THE ISSUE OF NOTICE U/S.153C WAS BASED ON SOME PROMISSORY NOTES OF R S.5 LAKHS FOUND FROM THE RESIDENCE OF SHRI SHREERAM H. SONI. HE SUBMITTED THAT NO INCRIMINATING MATERIALS WERE FOUND, THEREF ORE, IN ABSENCE OF ANY INCRIMINATING MATERIALS FOUND, NO PENALTY U/S.271(1)(C) OF THE I.T. ACT CAN BE LEVIED. HE SUBMITTED THA T ASSESSMENT PROCEEDINGS AND PENALTY PROCEEDINGS ARE SEP ARATE AND DISTINCT. MERELY BECAUSE SOME ADDITION HAS BEEN MAD E THE SAME DOES NOT CALL FOR AUTOMATIC LEVY OF PENALTY U/S.271(1)(C ) OF THE I.T. ACT. THE ASSESSEE CAN RELY ON FRESH MATERIALS DURING PENALTY PROCEEDINGS. HE SUBMITTED THAT DUE TO SOME REASONS THE ASSESSEE COULD NOT CHALLENGE THE VALIDITY OF THE ASSESSME NT U/S.153C IN ABSENCE OF ANY INCRIMINATING MATERIALS. BUT THE FACT REMAINS THAT BASED ON THE CREDITORS APPEARING IN TH E BALANCE SHEET PRIOR TO THE DATE OF SEARCH PENALTY HAS BEEN LEVIED. 10.1 REFERRING TO THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. CONTINENTAL WAREHOUSING CORPORATION VIDE ITA NO.523/2013 ORDER DATED 21-04-2015 HE SUBMITTED T HAT THE 7 HONBLE HIGH COURT IN THE SAID DECISION AFTER CONSIDERING TH E DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF ANIL KUMAR BHATIA HAS UPHELD THE DECISION OF THE SPECIAL BENCH OF TH E TRIBUNAL IN THE CASE OF ALL CARGO GLOBAL LOGISTICS LTD. WHERE IT HAS BEEN HELD THAT THE ASSESSMENT U/S.153A WILL BE MADE ON THE BASIS OF THE INCRIMINATING MATERIAL WHICH IN THE CONTEXT OF RELEVANT PROVISIONS MEANS (1) BOOKS OF ACCOUNT OR OTHER DOCUMENTS FOUND IN THE COURSE OF SEARCH BUT NOT PRODU CED IN THE COURSE OF ORIGINAL ASSESSMENT AND (2) UNDISCLOSED INCOM E OR UNDISCLOSED PROPERTY DISCOVERED IN THE COURSE OF SEARCH. 10.2 REFERRING TO THE COPY OF THE AUDITED PROFIT AND LOSS A CCOUNT AND BALANCE SHEET FILED ALONG WITH THE ORIGINAL RETURN THE LD. COUNSEL FOR THE ASSESSEE DREW THE ATTENTION OF THE BENC H TO PAGES 11 AND 12 OF THE AUDITED ACCOUNTS WHICH GIVES THE DETAILS OF LOANS AND ADVANCES. HE SUBMITTED THAT ALL THE CASH CR EDITS ADDED BY THE ASSESSING OFFICER APPEAR IN THE LOANS AND AD VANCES ACCOUNT FILED ALONG WITH THE ORIGINAL RETURN OF INCOME. THEREFORE, NO PENALTY U/S.271(1)(C) OF THE I.T. ACT IS LEVIABLE SINCE THE ADDITION IS NOT BASED ON ANY INCRIMINATING MATERIAL FOUND DURING THE COURSE OF SEARCH IN THE CASE OF SHREERAM H. SONI. 10.3 IN HIS ALTERNATE ARGUMENT THE LD. COUNSEL FOR THE AS SESSEE DREW THE ATTENTION OF THE BENCH TO PAGE 4 OF THE ASSES SMENT ORDER AND SUBMITTED THAT THE ASSESSING OFFICER HAS MADE THE ADDITION ON THE GROUND THAT THE ASSESSEE WAS NOT ABLE TO PRODUCE THE PAN, BANK ACCOUNT DETAILS OF THE LOAN CREDITO RS. HE HAS NOT PROVED THE LOANS TO BE BOGUS. REFERRING TO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. UPENDRA V. MITHANI VIDE ITA NO.1860 OF 2009 THE LD. COUNSE L FOR THE ASSESSEE DREW THE ATTENTION OF THE BENCH TO THE FOLLOWING: 8 THE ISSUE INVOLVED IN THE APPEAL REVOLVES AROUND DELE TION OF PENALTY U/S.271(1)(C) OF THE I.T. ACT. THE TRIBUNAL HAS CONCURRED WITH THE VIEW TAKEN BY THE COMMISSIONER OF INCOME TAX (A). THE COMMISSIONER OF INCOME TAX (A) HAS RIGHTLY TAKEN A VIE W THAT NO PENALTY CAN BE IMPOSED IF THE FACTS AND CIRCUMSTANCES A RE EQUALLY CONSISTENT WITH THE HYPOTHESIS THAT THE AMOUNT DOES NOT REPRESENT CONCEALED INCOME AS WITH THE HYPOTHESIS THAT IT DOES. IF THE ASSESSEE GIVES AN EXPLANATION WHICH IS UNPROVED BUT NOT D ISPROVED, I.E. IT IS NOT ACCEPTED BUT CIRCUMSTANCES DO NOT LEAD TO THE REASONABLE AND POSITIVE INFERENCE THAT THE ASSESSEES CASE IS FALSE. THE VIEW TAKEN BY THE TRIBUNAL IS A REASONABLE AND PO SSIBLE VIEW. THE APPEAL IS WITHOUT ANY SUBSTANCE. THE SAME IS DISMISSE D IN LIMINE WITH NO ORDER AS TO COSTS. HE ACCORDINGLY SUBMITTED THAT IN ABSENCE OF ANY CATEGOR ICAL FINDING BY THE ASSESSING OFFICER THAT THE LOAN CREDITORS ARE BOGUS NO PENALTY U/S.271(1)(C) CAN BE LEVIED. 11. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HA ND HEAVILY RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED T HAT THE ASSESSEE WAS UNABLE TO PROVE THE IDENTITY AND CREDIT WO RTHINESS OF THE LOAN CREDITORS AND THE GENUINENESS OF THE TRANSAC TIONS. THEREFORE, PENALTY LEVIED U/S.271(1)(C) WAS CORRECTLY UPHELD BY THE CIT(A) ON THE AMOUNT OF RS.11,50,000/- AND THE PROPORTIONATE INTEREST THEREON. 12. THE LD. COUNSEL FOR THE ASSESSEE IN HIS REJOINDER SUBMITTED THAT THE ARGUMENTS OF THE LD. DEPARTMENTAL REPRESENTATIVE ARE APPLICABLE TO A NORMAL ASSESSMENT. HO WEVER, THIS IS AN ASSESSMENT U/S.143(3) R.W.S. 153C. THEREFORE, IN ABSENCE OF ANY INCRIMINATING MATERIAL, PENALTY U/S.271(1)(C) OF THE I.T. ACT IS NOT LEVIABLE. 13. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFICER AND TH E CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HA VE ALSO CONSIDERED THE VARIOUS DECISIONS CITED BEFORE US. WE FIND DURING 9 THE COURSE OF SEARCH AT THE PREMISES OF ONE SHRI SHREER AM H. SONI BLANK PROMISSORY NOTES (SINGED BY THE BORROWER) AND BLANK UNDATED CHEQUES DULY SIGNED BY THE BORROWERS WERE FOUND WHICH CONTAIN THE PROMISSORY NOTE ALONG WITH THE BLANK CHEQUE OF RS.5 LAKHS RELATING TO THE ASSESSEE. ON THE BASIS OF THE SAME , THE ASSESSING OFFICER ISSUED NOTICE U/S.153C R.W.S.153A. ALTHOUGH VARIOUS ADDITIONS WERE MADE WE ARE CONFINED TO THE PENALT Y LEVIED ON ADDITION OF RS.11,50,000/- MADE BY THE ASSESSING OFFICER U/S.68 OF THE I.T. ACT AND PROPORTIONATE INTEREST T HEREON AMOUNTING TO RS.2,53,000/-. 13.1 SO FAR AS THE ADDITION OF RS.5 LAKHS IS CONCERNED BEIN G LOAN OBTAINED FROM SHRI SHREERAM H. SONI IT IS A FACT THAT T HE ASSESSEE HAS ADMITTED AND NOT CONTESTED THE ADDITION IN THE QUANTUM APPEAL. HOWEVER, THE FACT OF OBTAINING LOAN FROM S HRI SHREERAM H. SONI WAS FOUND FROM THE PREMISES OF MR. SONI IN SHAPE OF BLANK CHEQUE OF RS.5,00,000/- AND BLANK PROMISSORY NOTE AND BASED ON THE SEIZED DOCUMENTS/PAPERS NOTICE U/S.153C R.W.S. 153A WAS ISSUED TO THE ASSESSEE. THE LO AN OBTAINED FROM MR. SONI WAS ALREADY REFLECTED IN THE BALANCE SHEET FILED ALONGWITH THE ORIGINAL RETURN OF INCOME WHICH WAS FILED PRIOR TO THE DATA OF SEARCH. MERELY BECAUSE THE ASSESSEE DID NOT CONTEST THE ADDITION AND ACCEPTED THE SAME, PENALTY U/S.271(1)(C) OF THE I.T. ACT, IN OUR OPINION, IN THE GIVEN FACT S AND CIRCUMSTANCES OF THE CASE IS NOT LEVIABLE. WE THEREFOR E DIRECT THE AO TO CANCEL THE PENALTY ON RS.5,00,000/- AND PROPORTIONATE INTEREST THEREON. 13.2 SO FAR AS THE REMAINING AMOUNT OF RS.6,50,000/- IS CONCERNED, I.E. LOANS OBTAINED FROM 2 OTHER PERSONS NAMELY SHRI SANTOKCHANDA SURANA AND SHRI MITESH PATEL AMOUNTING TO 10 RS.2,50,000/- AND RS.4 LAKHS RESPECTIVELY, IT IS THE ARGUMEN T OF THE LD. COUNSEL FOR THE ASSESSEE THAT THESE LOAN CREDITO RS WERE ALREADY SHOWN IN THE BALANCE SHEET AS ON 31-03-1998 AN D NO INCRIMINATING MATERIAL WAS FOUND DURING THE COURSE OF SEARCH RELATING TO THE ABOVE LOAN CREDITORS. 13.3 WE FIND SOME FORCE IN THE ABOVE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE. ADMITTEDLY, APART FROM THE ADD ITION OF RS.5 LAKHS NO OTHER ADDITION HAS BEEN MADE ON THE BASIS OF INCRIMINATING MATERIAL FOUND AND SEIZED FROM THE PREMISES OF SHRI SHREERAM H. SONI WHICH RELATES TO THE ASSESSEE. TH E LOAN AMOUNT OF RS.6,50,000/- OBTAINED FROM DIFFERENT PERSONS ARE ALREADY APPEARING IN THE BALANCE SHEET FILED IN THE ORIGINAL RETURN OF INCOME AND NOTHING WAS DETECTED DUE TO THE S EARCH. FURTHER, THE ASSESSING OFFICER IN THE ASSESSMENT ORDER HA S MADE ADDITION ON THE GROUND THAT ALTHOUGH THE ASSESSEE FILED T HE CONFIRMATION LETTERS, HOWEVER, THE ASSESSEE COULD NOT FILE TH E PAN NUMBERS, AND ADDRESSES OF THE CONCERNED LOAN CREDIT ORS. THIS IN OUR OPINION MAY BE SUFFICIENT FOR MAKING ADDITION IN THE QUANTUM PROCEEDINGS BUT CERTAINLY NOT IN THE PENALTY PROCEEDINGS FOR LEVY OF PENALTY U/S.271(1)(C) OF THE I.T. ACT IN AN ASSESSMENT FRAMED U/S.153C R.W.S. 153A. IN THIS VIEW OF T HE MATTER WE HOLD THAT THE ASSESSEE IS NOT LIABLE TO PENALTY U/S.271(1)(C) OF THE I.T. ACT ON THE AMOUNT OF RS.6.50 LAKHS SINCE THE SAME WAS NOT BASED ON ANY INCRIMINATING MATERIAL FOUN D DURING THE COURSE OF SEARCH AND THE ADDITION WAS BASED ON THE BASIS OF LOAN CREDITORS FOUND FROM THE BALANCE SHEET ALREAD Y FILED PRIOR TO THE SEARCH ALONG WITH THE ORIGINAL RETURN OF INCO ME. WE ACCORDINGLY SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO CANCEL THE PENALTY LEVIED ON ADDITION OF RS.11,50,000/- AND 11 PROPORTIONATE INTEREST THEREON. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED. 14. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PART LY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 17-06-2015. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED: 17 TH JUNE, 2015 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-II, PUNE 4. CIT-II, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY ITAT, PUNE BENCHES, PUNE