IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH `C' : NEW DELHI)
BEFORE SHRI I.C. SUDHIR, JUDICIAL MEMBER
SHRI B.C. MEENA, ACCOUNTANT MEMBER
(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)
Assessee by : Shri G.N. Gupta, I.T.P.
Revenue by : Shri Satpal Singh, Senior DR
PER B.C. MEENA, ACCOUNTANT MEMBER :
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)
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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
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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.
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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.
(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