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M/s. Gatti & Piccolo India Pvt. Ltd., C/o Kailash Sushil & Associates,1A (K-429/135), Adarsh Nagar Extn., G.T. Karnal Road, DELHI 110 033. Vs. ITO, Co. Ward 12 (1), New Delhi.
September, 19th 2014
              (DELHI BENCH `C' : NEW DELHI)


                       ITA No.1573/Del./2012
                     (Assessment Year : 2006-07)

M/s. Gatti & Piccolo India Pvt. Ltd.,      vs.   ITO, Co. Ward 12 (1),
C/o Kailash Sushil & Associates,                 New Delhi.
1A (K-429/135), Adarsh Nagar Extn.,
G.T. Karnal Road,
DELHI ­ 110 033.

      (PAN : AACCG3318E)

      (Appellant)                                (Respondent)

                 Assessee by : Shri G.N. Gupta, I.T.P.
               Revenue by : Shri Satpal Singh, Senior DR



      This appeal filed by the assessee emanates from the order of CIT

(Appeals)-VIII, New Delhi dated 31.05.2012.

2.    The assessee company is incorporated on 17.05.2005.       It is a

manufacturing company engaged in the business of manufacture, design,

moulds and dies for footwear industry. The assessee filed return of

income declaring loss of Rs.23,16,095/- on 16.11.2006. The same was

processed u/s 143(1) of the Income-tax Act, 1961 on 24.07.2007.

Subsequently, the case was selected for scrutiny and notices u/s 143(2)
                                      2                  ITA No.1573/Del/2013

and 142(1) were issued. The Assessing Officer while making order u/s

143(3) disallowed Rs.51,810/- from share capital, Rs.35,521/- from

unsecured loans and addition of Rs.40,082/- was made on account of

customs duty and also disallowance of Rs.1,69,524/- u/s 40(a)(ia) for

non-deduction of TDS on freight & cartage. Thus, the additions and

disallowance are made on the following counts :-

      (i)     Addition u/s 68 on account of unexplained
              Share capital and unsecured loan (Rs.51,810/- &
              Rs.35,521/- respectively)                           Rs. 87,321/-

      (ii)    Disallowance out of custom duty expenses            Rs. 40,082/-

      (iii)   Disallowance u/s 40(1)(ia) on account of
              Non-deduction of tax at source                      Rs.1,69,524/-

Penalty proceedings u/s 271(1)(c) were initiated on account of the above

additions and disallowances.       The Assessing Officer relying on the

decisions of Hon'ble Delhi High Court in the case of CIT vs. Gurbachan

Lal (250 ITR 157) and Hon'ble Supreme Court in the case of UOI vs.

Dharmendra Textile Processors (306 ITR 277) levied a penalty of

Rs.99,949/- u/s 271(1)(c) of the Act. Against this order, the assessee filed

an appeal before the CIT (A). The CIT (A) proceeded to decide the

appeal ex-parte and upheld the penalty order of the Assessing Officer

relying on the decisions of Hon'ble Supreme Court in the cases of K.P.

Madhusudan vs. CIT (251 ITR 99), Dharmendra Textiles Processors &
                                    3                ITA No.1573/Del/2013

Ors. (306 ITR 277 and Atul Mohan Bindal (317 ITR 1). Now, the

assessee is in appeal before us.

3.    Ground No.1 in the assessee's appeal read as under :-

      "1. That on the facts and in the circumstances of the case,
      the learned Commissioner of Income Tax (Appeals)-VIII,
      New Delhi (hereinafter called the CIT (A) for short) erred in
      passing an ex-parte order dismissing the appeal.

4.    We have heard both the sides on the issue. During the course of

appellate proceedings, notice was issued on 17.10.2011 fixing the date for

hearing on 31.10.2011 but none attended.          Further, notices dated

02.03.2012 and 25.05.2012 were issued fixing the date for hearing on

21.03.2012 and 30.05.2012 respectively, however, these dates were also

remained uncomplied with. In view of these facts, the CIT (A) has no

other alternative but to decide the appeal ex-parte on merits. In view of

this, we uphold the order of CIT (A) and dismiss this ground of assessee's


5.    Ground Nos.2 & 3 of the assessee's appeal read as under :-
      "2. That on the facts and circumstances of the case, the
      learned CIT (A) erred in upholding the penalty of
      Rs.99,949/- imposed by Income Tax Officer.

      3.    That on the facts and in the circumstances of the case
      and without prejudice to ground of appeal no.2 above,
      penalty of Rs.99,949/- imposed u/s 271(1)(c) of the Income-
      tax Act, 1961 is excessive."

6.    We have heard both the sides on the issue. Ld. AR submitted that

the assessee has not preferred an appeal against the quantum order as
                                     4                 ITA No.1573/Del/2013

there was net loss of Rs.23,16,095/- and even after the additions, loss was

reduced to Rs.20,19,158/-. He submitted that the assessee was under the

impression that there is no tax implication & hence there is no need to file

an appeal against the order. On the additions related to Rs.87,321/- u/s 68

on account of unconfirmed share capital and unsecured loan, the ld. AR

pleaded that confirmations for only a miniscule part of the share capital

and unsecured loan could not be submitted merely because the copies of

FIRCs from the bank could not be procured due to paucity of time. He

also submitted that there was no mens rea on assessee's part, hence the

penalty proceedings deserves to be dropped on these additions. We find

that confirmation/evidence with regard to the share capital of Rs.51,810/-

against total share capital of Rs.24,48,100/- and unsecured loans of

Rs.35,521/- against total loan of Rs.35,23,925/- could not be filed due to

paucity of time to procure the same. In view of these facts, we hold that

only on meager amount, the assessee was not able to file the

confirmations due to paucity of time. Therefore, in our considered view,

no penalty u/s 271(1)(c) of the Act could be levied on such additions

made to the income of the assessee, hence we order to delete the same.

6.1   However, with regard to the addition made out of customs duty

expenses claimed to have been paid, we hold that no evidences of

payment of such duty were furnished by the assessee. It was the duty of

assessee to furnish necessary evidence in support of such claim.
                                     5                  ITA No.1573/Del/2013

Similarly, with regard to disallowance out of freight and cartage expenses

for not deducing TDS, we hold that assessee was under statutorily

obligation to deduct tax at source as per expressed provision of Section

194C of the Act as these were contractual payments. Assessee had not

done so and claimed these expenses which are not deductible as per

expressed provisions of Section 40(ia) of the Act. Assessee had claimed

ex-facie not deductible expenses. In view of these findings, we hold that

assessee is liable to levy penalty for claiming ex-facie not allowing

expenses. By holding so, we find no fault in the levy of penalty on these

additions. We uphold the same up to that extent.

6.2   In view of our above findings, the Assessing Officer is directed to

work out the minimum penalty on these additions and make order


7.    In the result, the appeal of the assessee is partly allowed.

Order pronounced in open court on this 15th day of September, 2014.

              Sd/-                                     sd/-
        (I.C. SUDHIR)                            (B.C. MEENA)
      JUDICIAL MEMBER                       ACCOUNTANT MEMBER

Dated the 15th day of September, 2014
                                 6   ITA No.1573/Del/2013

Copy forwarded to:
     4.CIT(A)-VIII, New Delhi.
     5.CIT(ITAT), New Delhi.                   AR/ITAT
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