JAYA PERMAI ENTERPRISES (INDIA) PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER, WARD 15(2)(2), MUMBAI

ITA 394/MUM/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4855 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2012-2013
• Appeal Filed On: 18-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV GUBGOTRA
• Assessee Lawyers: KHUSHIRAM D JADHWANI
• Keywords: Unexplained cash credit; Opportunity of being heard; Bonafide belief; Condonation of delay; TDS
• Section: 68; 271(1)(c); 43B; 40(a)(ia)

Judgement Text

M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 1 OF 15 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH F MUMBAI BEFORE SHRI C.N. PRASAD , JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER I.T.A. NO. 394 / MUM / 20 18 : ASSESSMENT YEAR : 20 12 - 13 M/S. JA YA PER M AI ENTERPRISE (INDIA) PVT. LTD. , OFFICE NO. 234, 2 ND FLOOR , SAI CHAMBERS PLOT NO. 44 SECTO R - 11, CBD BELAPUR, NAVI MUMBAI, 400614 PAN:AABCJ7150J VS . INCOME TAX OFFICER, WARD - 15(2)(2) MUMBAI APPELLANT RESPONDENT ASSESSEE BY SHRI KHUSHIRAM D. JADHWANI, ADVOCATE REVENUE BY SHRI RAJIV G UBG O TRA, SR. D.R. DATE OF HEARING 11.02.2019 DATE OF PRONOUNCEMENT 13. 02.20 19 ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) - 24 , MUMBAI (IN SHORT THE CIT ( A)) DATED 15.09.2017 WHICH IN TURN HAS ARISEN FROM THE PENALTY ORDER UNDER SECTION 271(1)(C) OF INCOME TAX ACT,1961 ( IN SHORT OF THE ACT) PASSED BY THE INCOME TAX OFFICER , WARD - 15(2)(2) (IN SHORT THE AO). 2. CONDONATION OF DELAY IN FILING OF APPEAL BEFORE TRIBUNAL. 3. AT THE OUTSET, THE LEARNED COUNSEL SUBMITTED THAT THERE WAS A DELAY OF 41 DAYS IN FILING OF THE APPEAL. AS THE APPEAL, ORDER WAS RECEIVED ON 09. 10.2017, AGAINST WHICH THE APPEAL WAS TO BE FILED ON OR BEFORE 08.12.2017 AS PER LIMITATION ACT, WHER EAS THE ASSESSEE HAS FILED APPEAL ON 1 8 .01.2018 BY DELAY OF M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 2 OF 15 41 DAYS. THE ASSESSEE IN ITS PETITION FOR CONDONATION OF DELAY HAS STATED THAT THE ASSESSEE COMPANY HAS CLOSED DOWN ITS OPERATION IN INDIA AND WAS THEREFORE, SEEKING LEGAL REMEDY. IT WAS INITIALLY CONSIDERED THAT THE DEMAND RAISED UNDER PENALTY ORDER BE CLEARED TO SETTLE THE CASE UNDER INCOME TAX ACT, 1961. HOWEVER, ON CONSULTATION THE LEGAL EXPERTS, THE ASSESSEE COMPANY WAS ADVISED ABOUT THE REPERCUSSIONS OF PAYING OFF OUTSTANDING DEMAND FOR PENALTY AND POSSIBILITY OF LAUNCHING OF PROSECUTION. THEREFORE, THE APPELLANT COMPANY WAS CONVINCED THAT IT WOULD BE IN THE BEST INTEREST OF THE ASSESSEE COMPANY TO APPEAL AGAINST THE ORDER OF CIT (A) - 24, MUMBAI. THEREFORE, THE DELAY WAS CAUSED. THE ASSESSEE HAS SUPPORTED ITS VIEW BY PLACING RELIANCE ON THE JUDGEMENT OF HON`BLE SUPREME COURT IN THE CASE OF COLLECTOR, LAND ACQUISITION V. MST. KATIJI & OF RS. 1987 AIR SC1353: 167 ITR 471 (SC) ., N. BALAKRISHNAN V. KRISHNAMURTHY (1998) 7 SC 124 (SC) AND OTHERS AS PER HIS PETITION . THE ASSESSEE COMPANY HAS FILED AN AFFIDAVIT DATED 03.01.2018 FROM ITS DIRECTOR SHRI SAYAJI KAKA RAKSHE, IN WHICH HE HAS DEPOSED THAT THE DELAY HAS OCCURRED DUE TO FACTS MENTIONED IN PETITION FOR CONDO NATION OF DELAY. THEREFORE, IT WAS CONTENDED THAT DELAY WAS NOT DELIBERATE OR INTE NTIONAL HENCE, MAY PLEASE BE CONDONED. 4. THE LEARNED SENIOR D.R. DID NOT OPPOSE THE CONDONATION OF SMALL DELAY. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. AS FAR AS THE ISSUE OF CONDONATION OF DELAY IS CONCERNED, IT IS SETTLED LAW THAT THE COURT AS QUASI - JUDICIAL BODIES ARE M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 3 OF 15 EMPOWERED TO CONDONE THE DEL AY IF THE LITIGANT SATISFIES THE COURT THAT THERE WERE SUFFICIENT REASONS FOR THE AVAILING THE REMEDY AFTER THE EXPIRY OF THE LIMITATION. SUCH A REASONING SHOULD BE TO THE SATISFACTION OF THE COURT. THE EXPRESSION SUFFICIENT CAUSE OR REASON AS PROVIDED IN SUBSECTION (5) OF SECTION 253, SUBSECTION (3) OF SECTION 249 OF THE INCOME TAX ACT 1961 IS USED IN IDENTICAL TERMS IN THE LIMITATION ACT AND THE CPC. SUCH EXPRESSION HAS ALSO BEEN USED IN UNDER SECTION 4 OF THE INCOME TAX ACT 1961 SUCH AS SECTIONS 274, 273 , ETC. THE EXPRESSION SUFFICIENT CAUSE WITHIN THE MEANING OF SECTION 5 OF LIMITATION ACT AS WELL AS A SIMILAR OTHER PROVISIONS AND THE AMBIT OF EXERCISE OF POWERS THEREUNDER HAVE BEEN SUBJECT MATTER OF CONSIDERATION BEFORE THE HONOURABLE APEX COURT ON V ARIOUS OCCASIONS. WE FIND THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS THE ONLY CRITERIA FOR CONDONING THE DELAY. IN A GIVEN CASE , THE DELAY OF THE SHORTEST PERIOD MAY BE UN - CONDONABLE DUE TO UNACCEPTABLE EXPLANATION, WHEREAS IN CERTAIN OTHER CASES, DEL AY OF A LONG PERIOD CAN BE CONDONED, IF THE EXPLANATION IS SATISFACTORY. IN EVERY CASE OF DELAY, THERE MIGHT BE SOME OMISSIONS OF NEGLIGENCE ON THE PART OF THE ASSESSEE AND SUCH OMISSIONS/NEGLIGENCE HAS TO BE WEIGHED IN THE LIGHT OF EXISTING CIRCUMSTANCES OF EACH CASE. IT WOULD BE THE NEGLIGENCE OF COMMISSION WHICH IS A BYPRODUCT OF A DELIBERATE ATTEMPT WITH MALA - FIDE INTENTION FOR DELAY IN THE PROCESS OF THE LITIGATION WHICH COULD GIVE SOME BENEFIT TO THE LITIGANT, THEN PROBABLY PROCESS OF LITIGATION WHIC H WOULD VIEW SOME BENEFIT WITH THE LITIGANT THEN PROBABLY THAT DELAY WOULD NOT DESERVED M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 4 OF 15 TO BE CONDONED. HOWEVER, IF NO MALA - FIDE CAN BE ATTRIBUTED TO DELAY, AND THAT DELAY WILL BE CONDONABLE. THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACED RELIANCE IN THE CASE OF COLLECTOR, LAND ACQUISITION V. MST. KATIJI & OF RS. 1987 AIR SC1353: 167 ITR 471 (SC) WHEREIN THE SUPREME COURT HELD THAT ORDINARILY DELAY OF EACH DAY TO BE EXPLAINED BUT EVERY DAY DELAY MUST BE EXPLAINED DOES NOT EMPLOY A PEDANTIC APPROACH. THE DO CTRINE MUST BE APPLIED IS RATIONAL, COMMON SENSE AND WITH PRAGMATIC APPROACH. WHEN SUBSTANTIAL JUSTICE AND TECHNICAL CONSIDERATIONS ARE PITTED AGAINST EACH OTHER, BECAUSE OF SUBSTANTIAL JUSTICE IS TO BE PREFERRED, FOR THE OTHER SIDE CANNOT CLAIM TO HAVE A VESTED RIGHT IS INJUSTICE BEING DONE BECAUSE OF NON - DELIBERATE DELAY. IN THE CASE OF N. BALAKRISHNAN VS. M. KRISHNAMURTHY AIR 1998 SC 3222; THERE WAS A DELAY OF 883 DAYS IN FILING OF APPLICATION IN SETTING ASIDE THE EX - PARTE DECREE FOR WHICH APPLICATION FOR CONDONATION OF DELAY WAS FILED. WE FIND THAT THE EXPLANATION OFFERED BY THE ASSESSEE IS THE ONLY CRITERIA FOR CONDONING THE DELAY. THEREFORE, ON THE FACTS OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSE SSEE HAS BEEN ABLE TO DEMONSTRATE SUFFICIENT REASONS IN THE SHAPE OF CLOSURE OF BUSINESS BY WHICH IT WAS APPROACHING FOR SETTLEMENT OF TAX CASE. THEREFORE, WE DEEM IT FIT TO CONDONE THE DELAY OF 41 DAYS AND ADMIT THE APPEAL. 6. NOW WE PROCEED WITH THE APPEAL ON MERITS. M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 5 OF 15 7. GROUND NO. 1 TO 2 STATES THAT LD. CIT (A) WAS ERRED IN LAW AND ON FACTS IN CONFIRMING LEVY OF PENALTY OF RS. 9 , 18,395 THAT IS DEVOID OF MERITS AND WITHOUT APPRECIATING THE SUBMISSIONS OF THE ASSESSEE PLACED ON RECORD AT THE TIME OF ASSESSMENT PROCEEDINGS. 8. GROUND NO. 3 TO 6 STATES THAT LD. CIT (A) HAS ERRED IN LAW AND ON FACTS BECAUSE PAYMENT MADE BY THE APPELLANT DID NOT ATTR ACT TDS PROVISIONS AND THEREFORE, THE DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT WAS UNJUSTIFIED. BECAUSE THE DISALLOWANCE OF EXPENSES OF RS.17,99,640 WAS MADE UNDER SECTION 43B WAS BASELESS WHEN THE SAME EVEN NOT CLAIMED AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT. BECAUSE PENALTY ON ADDITION OF RS. 10,90,000 AS UNEXPLAINED CASH CREDIT ON CASH DEPOSITS UNDER SECTION 68 OF THE ACT . DURING ASSESSMENT PROCEEDINGS, THE ASSESSEE COULD NOT GIVE SATISFACTORY EXPLANATION EVEN THOUGH THERE IS OBSERVATION N TH E ASSESSMENT ORDER FROM THE DATES OF WITHDRAWAL OF CASH AND DATES OF DEPOSITS OF CASH THAT THERE IS A GAP OF AROUND 2/15 DAYS. THEREFORE, THE LD. CIT (A) HAS ERRED IN LAW AND FACTS IN ACKNOWLEDGING THE FACTS THAT THE ORDER PASSED B Y THE AO IS BAD - IN - LAW AND THE AO HAS INITIATED THE PENALTY PROCEEDING WITH MAKING SPECIFIC AVERMENTS THAT THE APPELLANT HAS FURNISHED INACCURATE PARTICULARS OF INCOME OF CONCEALMENT OF INCOME BUT BOTH THE CHARGES. M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 6 OF 15 9. THE ABOVE GROUND NO. 1 TO 6 ARE IN SUM AND SUBSTA NCE RELATES TO LEVY OF PENALTY ON VARIOUS DISALLOWANCE ARE INTER CONNECTED. HENCE, BEING CONSIDERED TOGETHER FOR THE SAKE OF BREVITY AND CONVENIENCE. 10. B RIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS FILED RETURN OF INCOME ON 1 9.09 .2012 DECLARING TOTAL INCO ME OF RS. NIL WHICH WAS ASSESSED UNDER SECTION 143 (3) AT NIL AFTER ALLOWING SET - OFF BUSINESS LOSS BROUGHT FORWARD AND MAKING ADDITION /DISALLOWANCE OF RS. 29,74,078 . THE AO HAS MADE ADDITION /DISALLOWANCE OF RS. 84,438 UNDER SECTION 40(A)(IA) OF THE ACT BE ING PAYMENT ON ACCOUNT OF LABOUR AND CONSULTANCY CHARGES AS THE ASSESSEE HAS FAILED TO DEDUCT TDS THEREON. SIMILARLY , AN AMOUNT OF RS. 13,65,724 WAS BEING SERVICE TAX LIABILITY, WHICH WAS PAID IN MARCH 2013, AND RS. 4,33,916 BEING MVAT WAS PAID IN JANUARY MARCH 2013 BEING LIABILITY OF A.Y. 20011 - 12. H ENCE, THESE DISALLOWANCE S OF RS.1 7,99,640 WERE DISALLOWED UNDER SECTION 43B OF THE ACT. FURTHER , THE ASSESSEE HAS FAILED TO PROVE SOURCE OF CASH DEPOSITS OF RS. 10,90,000 IN BANK ACCOUNT HENCE, SAME WERE TREATED AS UNEXPLAINED CASH CRED IT UNDER SECTION 68 OF THE ACT . THE AO HAS ALSO INITIATED PENALTY PROCEEDINGS ON THESE ADDITIONS/ DISALLOWANCES. SINCE THE RESULTANT INCOME WAS AT NIL. T HE ASSESSEE HAS NOT FILED A NY APPEAL AGAINST QUANTUM ADDITION. ACCORDINGLY, THE AO HAS ALLOWED THE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE DURING PENALTY PROCEEDINGS , BUT THE ASSESSEE HAS FAILED TO FURNISH ANY REPLY OF PENALTY SHOW - CAUSE NOTICE . UNDER THE CIRCUMSTANCES, THE AO OBSERVED THAT THE ASSESSEE HAS NOT FURNISHED ANY SORT OF REPLY WHICH MEANS THAT M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 7 OF 15 THE ASSESSEE HAS FAILED TO FURNISH BASIC DETAILS AS TO WHY THE PAYMENTS WAS MADE WITHOUT DEDUCTION OF TDS AND PAYMENT OF SERVICE TAX LIABILITY AND MVAT WAS PAID LATE WHICH WAS DISALLOWABLE UNDER SECTION 43B FOR WHICH THE ASSESSEE HAS NO OBJECTION. THE ASSESSEE HAS FAILED TO FURNISH SOURCE OF CASH DEPOSITS IN BANK ACCOUNT. FURTHER , NO APPEAL WAS FILED AGAINST THESE ADDITIONS NOR PREFERRED TO FILE ANY EXPLANATION. THEREFORE, BY IN VOKING THE EXPLANATION 1 TO SECTION 271(1)(C) , THE AO LEVIED A PENALTY UNDER SECTION 271(1)(C) RS.9,18,395 BEING 100% OF TAX SOUGHT TO BE EVADED ON ABOVE DISALLOWANCES OF RS. 29,74,078 . 11. BEING, AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE LD. CIT (A) . BEFORE WHOM DETAILED SUBMISSIONS WERE MADE WHICH THE LD. CIT (A) AT PAGE NO. 3 TO 6 HAS REPRODUCED IN APPELLATE ORDER . HOWEVER, LD. CIT (A) BY APPLYING THE RA TIO OF DECISION IN THE CASE OF M/S. DHARMENDRA TEXTILE PROCESSORS AND OTHERS 166 TAXMAN 65(SC) AND OTHERS OBSERVED THAT THE ASSESSEE HAS TO PROVE AS TO WHY THE PARTICULAR CLAIM OR DEDUCTION WAS MADE AND BONA FIDE . THE PENALTY IS A CIVIL LIABILITY AS HELD BY THE HON`BLE SUPREME COURT IN ABOVE. IN VIEW OF THE FACTS AND CIRCUMSTANCES , THE CIT (A) HAS CONFIRMED THE LEVY OF PENALTY LEVIED UNDER SECTION 271(1)(C) OF THE ACT . 12. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LD. COUNSEL FOR THE ASSESSEE REFERRING PAPER BOOK PAGE NO. 63, WHICH IS COPY OF LEDGER ACCOUNT OF PAYMENT S OF RS. 51,738 MADE TO M/S. ATHARVA LANDSCAPE , WHICH INCLUDED RS.3 , 738 FOR M ATERIAL AND RS. 48,000 FOR LABOUR CHARGES, HENCE, M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 8 OF 15 TDS WAS NOT REQUIRED TO BE MADE . SIMILARLY , PAYMENT OF RS. 32,700 MADE TO M/S. N IRMAN PROJECTS AS CONSULTANCY CHARGES, THIS AMOUNT INCLUDED REIMBURSEMENT OF EXPENSES FOR TRAVELLING AS A PPEARING PAPER BOOK P AGE NO. 59 . TOTAL PAYMENT OF CONSULTANCY CHARGES IS AT RS. 29,700 AND TRAVELLING CHARGES AT RS.2,700 , HENCE, THERE WAS NO REQUIREMENT OF DEDUCTION OF TDS HOWEVER, THE AO HAS DISALLOWED THE SAME UNDER SECTION 40(A)(IA) OF THE ACT. THE LEARNED COUNSEL FOR TH E ASSESSEE ARGUED THAT E VEN DISALLOWANCE UNDER SECTION 40(A)(IA) DOES NOT AMOUNT TO CONCEALMENT OF INCOME AS HELD BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ACIT V. M/S. MEDERCITY ONLINE PVT. LTD. 145 TTJ 398 (HYDERABAD) WHEREIN IT WAS HELD THAT WHERE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND EXPLANATION HAS BEEN OFFERED RELATING TO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT , NO PENALTY CAN BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. 13. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER DRAW OUR ATTENTION TO PAPER BOOK PAGE NO. 67 TO 92 BEING A LEDGER ACCOUNT OF PAYMENTS RELATING TO SERVICE TAX AND M VAT AND SUBMITTED THAT THE ASSESSEE HAS FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING WHERE THE TAX LIABILITY WAS TREATED AS CAPITAL TRANSACTION AND REFLE CTED IN BALANCE SHEET. THE ASSESSEE HAS NOT CLAIMED THE SERVICE TAX AND M VAT AS EXPENSES AND DELAY WAS NOT DELIBERATE , THEREFORE, THERE IS NO QUESTION OF ANY DISALLOWANCE UNDER SECTION 43B OF THE ACT. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT SECTION 43B IS NOT APPLICABLE TO SERVICE TAX AS HELD IN PHARMA SEARCH V. ACIT [2012] 21 TAXMANN.COM 44 (MUMBAI - TRIB ) . FURTHER M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 9 OF 15 RELIANCE WAS PLACED IN THE CASE OF DCIT V. M/S. M C RETAIL PVT. LTD. I.T.A.NO. 419/MUM/2017 DT D. 28.09.2018(PB - 103) IN WHICH IT WAS HELD THAT UN PAID VAT AND SERVICE TAX LIABILITY ARE NOT BEING DEBITED TO PROFIT & LOSS ACCOUNT WERE NOT CLAIMED AS EXPENDITURE , HENCE, CANNOT BE ADDED BACK UNDER SECTION 43B OF THE ACT. THEREFORE, THERE WAS NO QUESTION OF ANY CONCEALMENT OF INCOME O R FURNISHING OF INACCURATE PARTICULARS OF INCOME. 14. WITH REGARD TO ADDITION OF RS. 10,90,000 AS UNEXPLAINED CASH CREDIT UNDER SECTION 68 OF THE ACT, THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED A CHART SHOWING (PAPER BOOK PAGE NO. 123 ) AND EXTRACT OF BANK STATEMENT (PB - 124 - 144) REFLECTING THAT THERE ARE CASH WITHDRAWALS OF EQUAL AMOUNT BEFORE 2 TO 15 DAYS OF DEPOSITING CASH IN THE BANK ACCOUNT ON VARIOUS DATES . THESE FACTS EVIDENCED THAT CASH DEPOSITS IN BANK ACCOUNT ARE OUT OF CASH WITHDRAWALS MAD E BEFORE IN THE SAME VERY BANK ACCOUNT. THIS FACT IS ALSO REFLECTED IN CASHBOOK MAINTAINED BY THE ASSESSEE. HOWEVER, THE AO HAS DISBELIEVED THIS CONTENTION OF THE ASSESSEE BY OBSERVING THAT THERE IS GAP BETWEEN CASH WITHDRAWALS AND CASH DEPOSITS AND MADE ADDITION OF THE SAME. IN SUPPORT OF HIS CONTENTIONS, THE LEARNED COUNSEL FOR THE ASSESSEE HAS PLACE RELIANCE IN THE CASE OF GORDHAN V. ITO [I.T.A.NO. 811/DEL/2015 DT D. 19.10.15 COPY FILED - PB - 146 ] WHEREIN IT WAS HELD THAT NO ADDITION COULD BE MADE MERELY BECAUSE THERE WAS TIME GAP BETWEEN CASH WITHDRAWALS AND CASH RE - DEPOSITS. SIMILARLY , IN THE CASE OF JASBIR SINGH SAINI V. ITO [2015] 61 TAXMANN.COM 230 (C HANDIGARH) IT WAS HELD THAT WHERE IN QUANTUM M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 10 OF 15 APPEAL TRIBUNAL HAS ACCEPTED ASSESSEE` S EXPLANATION IN RESPECT OF PART OF DEPOSIT AND PARTLY CONFIRMED ADDITION STATING THAT EXPLANATION GIVEN BY THE ASSESSEE WAS NOT CONVINCING, IT COULD NOT BE SAID THAT THE ASSESSEE HAS CONCEALED HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WARRANT ING OF LEVY OF PENALTY UNDER SECTION 271(1)(C). 15. THE LD. COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT NO SPECIFIC CHARGE HAS BEEN SPECIFIED IN THE SHOW - CAUSE NOTICE AND IT WAS MENTIONED THAT HAVE CONCEALED THE PARTICULAR OF YOUR INCOME OR FURNISHED INA CCURATE PARTICULARS OF INCOME . THUS, NO SPECIFIC CHARGE HAS BEEN LEVIED FOR IMPOSING PENALTY, THEREFORE, INITIATION OF PENALTY PROCEEDING ARE BAD IN LAW . THE LD. COUNSEL FOR THE ASSESSEE ALSO PLACED RELIANCE IN THE CASE OF CIT V. SSA`S EMERALD MEADOWS [20 16] 73 TAXMANN.COM 248 (SC) [2016] 8 TMI 1145(SC ), CIT V. SMT. KAUSHALAYA [1994] 75 TAXMAN 549 (BOMBAY ), ASHOK PAI V . CIT [2007] 292 ITR 11 (SC) REMAX PHARMACEUTICALS V. ACIT I.T.A.NO. 2234/MUM/2013 MUMBAI TRIB , MEHERJEE CASSINATH HOLDINGS (P) LTD. V. ACIT CIRCLE 4(2) MUMBAI [2017 88 TAXMANN.COM 777 (MUMBAI), AND PRINCE CONSULTANCY (P) LTD. V. DCIT [2017] 88 TAXMANN.COM 795 ((MUM - TRIB) AND OTHERS AS PER HIS WRITTEN SUBMISSIONS IN SUPPORT OF HIS SUBMISSIONS. IN VIEW OF ABOVE, SUBMISSIONS, THE LEARNED COUNSEL FOR THE ASSESSEE CONTENDED THAT PENALTY LEVIED BY THE AO MAY PLEASE BE DELETED. 16. PER CONTRA, THE LD. SR. D.R. RELIED ON THE ORDERS OF LOWER AUTHORITIES. M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 11 OF 15 17. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE ASSESSMENT AND PENALTY ORDER REVEALS THAT THE AO HAS REJECTED THE CONTENTIONS OF THE ASSESSEE ON THE BASIS THAT THE ASSESSEE HAS NOT DEDU CTED TDS, NOT PAID THE AMOUNT OF SERVICE TAX AND M VAT WITHIN TIME AND EXPLANATION OF CASH DEPOSITS WAS NOT CONVINCING. THE PERUSAL OF THE ASSESSMENT ORDER REVEALS THAT THE AO HAS MADE ADDITION ON THE BASIS OF FACTS AS DISCLOSED BY THE ASSESSEE IN THE RETUR N OF INCOME AND DURING THE COURSE OF ASSESSMENT PROCEEDINGS. WE FIND THAT THE ASSESSEE HAS FURNISHED ALL RELEVANT FACTS; THEREFORE, THE PENALTY CANNOT BE LEVIED MERELY BECAUSE THAT IT WAS NOT ACCEPTABLE TO THE AO. WHERE THE EXPLANATION IS BONAFIDE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS NOT LEVIABLE. IT IS TRITE LAW THAT PENALTY PROCEEDINGS ARE DISTINCT AND SEPARATE PROCEEDINGS FROM ASSESSMENT PROCEEDINGS. THE FINDING RECORDED IN THE ASSESSMENT ORDER IS NOT CONCLUSIVE FOR DECI DING THE IMPOSITION OF PENALTY. IT ONLY HAS A PERSUASIVE VALUE. ANY FINDING RECORDED IN THE ASSESSMENT ORDER DOES NOT MEAN THAT THE PENALTY HAS TO BE IMPOSED AUTOMATICALLY. EXPLANATION 1 TO SECTION 271 (L) (C) PROVIDES THAT THE PENALTY WOULD BE DEEMED TO A TTRACT WHERE IN RESPECT OF A FACT MATERIAL TO THE COMPUTATION OF INCOME EITHER NO EXPLANATION IS OFFERED, OR EXPLANATION OFFERED IS FOUND TO BE FALSE. IN THIS CASE, THE ASSESSEE HAS OFFERED EXPLANATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS ITSELF THA T THERE WAS NO REQUIREMENT FOR TAX DEDUCTION AND THE ASSESSEE HAS NOT CLAIMED THE LIABILITY OF SERVICE TAX M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 12 OF 15 AND MVAT AS EXPENDITURE IN THE PROFIT & LOSS ACCOUNT THEREFORE, DISALLOWANCE UNDER SECTION 43B ARE NOT CALLED FOR. THE ASSESSEE HAS GIVEN THE DETAILS THAT CASH DEPOSITS WERE OUT OF CASH WITHDRAWALS MADE BEFORE TWO TO FIFTEEN DAYS PRIOR TO CASH DEPOSITS IN BANK ACCOUNT . HOWEVER, EVEN AFTER MAKING ADDITION THERE WAS STILL INCOME COMPUTED WAS NIL ON ACCOUNT OF SET - OFF OF BROUGHT FORWARD BUSINESS LO SS OF EARLIER YEARS. WE FIND THAT PAYMENT OF RS. 51,738 MADE TO M/S. ATHARVA LANDSCAPE INCLUDED RS.3,738 FOR MATERIAL AND RS. 48,000 FOR LABOUR CHARGES, HENCE, TDS WAS NOT REQUIRED TO BE MADE. SIMILARLY , PAYMENT OF RS. 32,700 MADE TO M/S. NIRMAN PROJECTS AS CONSULTANCY CHARGES, THIS AMOUNT INCLUDED REIMBURSEMENT EXPENSES FOR TRAVELLING AS APPEARING PAPER BOOK PAGE NO. 59. TOTAL PAYMENT OF CONSULTANCY CHARGES IS AT RS. 29,700 AND TRAVELLING CHARGES AT RS.2,700, HENCE, THERE WAS NO REQUIREMENT OF DEDUCTION OF TDS HOWEVER; THE AO HAS DISALLOWED THE SAME UNDER SECTION 40(A)(IA) OF THE ACT. EVEN DISALLOWANCE UNDER SECTION 40(A)(IA) , DOES NOT AMOUNT TO CONCEALMENT OF INCOME AS HELD BY THE CO - ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ACIT V. M/S. MEDERCITY ONLINE PV T. LTD. 145 TTJ 398 (HYDERABAD) WHEREIN IT WAS HELD THAT WHERE ACCOUNTS OF THE ASSESSEE ARE AUDITED AND EXPLANATION HAS BEEN OFFERED RELATING TO DISALLOWANCE UNDER SECTION 40(A)(IA) OF THE ACT, NO PENALTY CAN BE LEVIED UNDER SECTION 271(1)(C) OF THE ACT. S IMILARLY , THE ASSESSEE HAS NOT CLAIMED THE SERVICE TAX AND M VAT AS EXPENSES AND DELAY IN DEPOSIT WITH GOVERNMENT ACCOUNT WAS NOT DELIBERATE THEREFORE, THERE IS NO QUESTION OF ANY DISALLOWANCE UNDER SECTION 43B M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 13 OF 15 OF THE ACT. HOWEVER, THE AO HAS NOT ACCEPTED T HIS EXPLANATION. THOUGH PROVISIONS OF S ECTION 43B IS NOT APPLICABLE TO SERVICE TAX AS HELD IN PHARMA SEARCH V. ACIT [2012] 21 TAXMANN.COM 44 (MUMBAI). FURTHER RELIANCE WAS PLACED IN THE CASE OF DCIT V. M/S. M C RETAIL PVT. LTD. I.T.A.NO. 419/MUM/2017 DTD. IN WHICH IT WAS HELD THAT UNPAID VAT AN D SERVICE TAX LIABILITY ARE NOT BEING DEBITED TO PROFIT & LOSS ACCOUNT WHICH WERE NOT CLAIMED AS EXPENDITURE , HENCE, CANNOT BE ADDED BACK UNDER SECTION 43B OF THE ACT. THEREFORE, THERE WAS NO QUESTION OF ANY CONCEALMENT OF INCOME OR FURNISHING OF INACCURAT E PARTICULARS OF INCOME. WITH REGARD CASH DEPOSITS , W E FIND THAT THE AO HAS DISBELIEVED THIS CONTENTION OF THE ASSESSEE BY OBSERVING THAT THERE IS GAP BETWEEN CASH WITHDRAWALS AND CASH DEPOSITS AND MADE ADDITION OF THE SAME. HOWEVER, THIS CANNOT BE GROUND FOR ADDITION AS HELD IN THE CASE OF GORDHAN V. ITO [I.T.A.NO. 811/DEL/2015 DTD. 19.10.15 COPY FILED] WHEREIN IT WAS HELD THAT NO ADDITION CAN BE MADE MERELY BECAUSE THERE WAS TIME GAP BETWEEN CASH WITHDRAWALS AND CASH RE - DEPOSITS. SIMILARLY , IN THE CASE OF JASBIR SINGH SAINI V. ITO [2015] 61 TAXMANN.COM 230 (CHANDIGARH) IT WAS HELD THAT WHERE IN QUANTUM APPEAL TRIBUNAL HAS ACCEPTED ASSESSEE`S EXPLANATION IN RESPECT OF PART OF DEPOSIT AND PARTLY CONFIRMED ADDITION STATING THAT EXPLANATION GIVEN BY THE AS SESSEE WHICH WAS NOT CONVINCING, IT COULD NOT BE SAID THAT THE ASSESSEE HAS CONCEALED THE HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME WARRANTING OF LEVY OF PENALTY UNDER SECTION 271(1)(C). NON - FILING OF APPEAL AGAINST QUANTUM ADDITION DOES NOT MEAN THAT THE M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 14 OF 15 ASSESSEE HAS CONCEALED INCOME OF FURNISHED INACCURATE PARTICULARS OF INCOME . THE ASSESSMENT WAS MADE AT NIL HENCE; THE ASSESSEE HAS CHOOSE NOT TO FILE APPEAL. HOWEVER, THAT DOES NOT MEAN THAT THE ASSESSEE HAS CONCEALMENT OF INCOME OF HIS INCOME OR FURNISHED INACCURATE PARTICULARS OF INCOME . THE ASSESSEE HAD OFFERED EXPLANATION AND THE SAID EXPLANATION OFFERED WAS NOT FOUND TO BE FALSE , ACCORDINGLY ITS CASE IS NOT COVE RED BY CLAUSE (A) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT. CLAUSE (B) OF EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT PROVIDES THAT WHERE THE ASSESSEE IS NOT ABLE TO SUBSTANTIATE ITS EXPLANATION AND FAILS TO PROVE THAT SUCH EXPLANATION IS BONAFI DE AND ALL THE FACTS RELATING TO THE SAME HAVE BEEN DISCLOSED, PENALTY IS LEVIABLE. AS THE CLAIM OF THE ASSESSEE HAS BEEN FOUND TO BE CONVINCING. THIS BEING THE FACTUAL POSITION, THEREFORE PENALTY UNDER SECTION 271(1) (C) IS NOT LEVIABLE. JUST BECAUSE APPE LLANTS EXPLANATION WAS NOT FOUND ACCEPTABLE BY THE AO, IT DOES NOT FOLLOW THAT THAT THE APPELLANT WAS UNABLE TO SUBSTANTIATE HIS EXPLANATION BY PROVIDING VARIOUS EVIDENCES AND JUDICIAL OPINIONS. EXPLANATION 1 TO SECTION 271(1)(C) OF THE ACT DOES NOT THERE FORE COVER THE CASE OF THE ASSESSEE. BASED ON THE ABOVE FACTS OF THE CASE; IT CAN BE HELD THAT THE ASSESSEE HAD MADE ALL THE NECESSARY DISCLOSURES ON A BONAFIDE BELIEF, WHICH IS NOT AGREEABLE TO THE AO, IT WILL NOT AUTOMATICALLY LEAD TO A CASE FOR PENALTY UNDER SECTION 271(1)(C) OF THE IT ACT, 1961. THE LEARNED COUNSEL HAS RELYING IN THE CASE OF CIT V. SSA`S EMERALD MEADOWS [2016] 73 TAXMANN.COM 248 (SC) [2016] 8 TMI 1145(SC) AND MEHERJEE CASSINATH HOLDINGS (P) LTD. V. ACIT M/S. JAI PERAMAI ENTERPRISE (INDIA) PVT. LTD. V. ITO WD - 15(2)(2) MUMBAI /I.T.A. NO. 394 / MUM /201 8 /A.Y. 12 - 13 PAGE 15 OF 15 CIRCLE 4(2) MUMBAI [2017 88 TA XMANN.COM 777 (MUMBAI) SUBMITTED THAT THERE WAS NO SPECIFIC CHARGES LEVIED IN PENALTY SHOW - CAUSE NOTICE , HENCE, PENALTY LEVIED WAS BAD - IN - LAW. IN THE LIGHT OF ABOVE DISCUSSION, THE PENALTY LEVIED AT RS.9 ,18,395 IS DELETED. THEREFORE, GROUND NO. 1 TO 6 OF APPEAL IS THEREFORE, ALLOWED. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 19. THE ORDER PRONOUNCED IN THE OPEN COURT ON 13.0 2.2019 SD/ - SD/ - (C.N. PRASAD) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: DATED: FEBRUARY, 2019/OPM COPY OF ORDER SENT TO - ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER ASSISTANT REGISTRAR, MUMBAI