The Kolkata Bench of Income Tax Appellate Tribunal (ITAT) held that the documentary evidences have not been held as false either by the AO during the assessment proceeding or during penalty proceeding.
The assessee company Robbs Traders & Finance Pvt. Limited has filed its return of income electronically on declaring total income of Rs.1,06,120/-. The Assessing Officer (AO) thereafter received information from Dy. Director of Income Tax [DDIT (Investigation)], Unit-7(3), Mumbai exhibiting the fact that certain entry providers and hawala operators involved in providing entries of bogus Long Term Capital Gain (LTCG), Short Term Capital Gain (STCL) and bogus business loss.
The Assessing Officer (AO) thereafter issued notice under Section 148 of the Income Tax Act. In response to this show-cause notice, the assessee filed its return of income and a notice under Section 143(2) of the Income Tax Act was issued and served upon the assessee.
Accordingly the AO disallowed the claim of loss amounting to Rs.5,24,170/- and initiated penalty proceeding for furnishing inaccurate particulars.
In response to the notice received under Aection 274 read with section 271(1)(c) of the Income Tax Act, the assessee has filed written submission. It contended that it is engaged in the trading of shares and this investment was made through broker in a recognized Stock Exchange. Payment and receipt is through banking channel. Documentary evidences for transactions like contract note, demat statement and bank statement were filed.
The AO thereafter imposed a penalty of Rs.1,94,760/- for furnishing inaccurate particulars of income. Aggrieved by the order the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [CIT(A)], which confirmed the order of the AO.
Further aggrieved the assessee filed an appeal before the Tribunal.
The Bench comprising of Rajpal Yadav, Vice-President and Girish Agrawal, Accountant Member observed that AO has nowhere demonstrated as to how the loss claimed by the assessee is bogus. He only issued a show-cause notice and the Assessee withdrew its claim just in order to avoid litigation with Department.
It was further observed that the addition is only on the admission of the assessee that it withdrew its claim. Nowhere, it has been demonstrated that the claim of the assessee was false or bogus.
The Tribunal noted that Explanation 1 to Section 271(1)(c) of the Income Tax Act provides that, if the assessee fails to offer an explanation or offers an explanation which is found by the Assessing Officer to be false, but now in the present case, the assessee has an explanation and it has buttressed this explanation with documentary evidences.
The Bench held that the documentary evidences have not been held as false either by the AO during the assessment proceeding or during penalty proceeding. Therefore, the assessee does not deserve to be visited with penalty.
Hence, the appeal of the assessee was allowed.
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