2003 (9) TMI 7 - HC - Income Tax

Penalty - Whether, the statutory provisions of section 271(1)(c) as existing during the relevant year were correctly applied by the Tribunal in arriving at the findings and upholding the penalty in relation to trade advances of Rs. 3,20,000 received from various traders, against supply of goods and in pursuance of which goods were duly supplied to them? appellant has not produced any evidence to establish these credits as genuine. It is the case of the assessee that confirmation of these deposits is produced but GIR or PAN are not given nor anybody has been examined nor an affidavit has been filed further contention of assessee relying on the provisions of sub-section (4A) of section 132, is not acceptable as after going through the provisions of section 132(4A), we find that it is a rule of evidence with regard to the entries in the account books which will not relieve of the assessee to prove the genuineness of the transactions, i.e., of the cash receipts in this case.- assessee s appeal is dismissed

Issues Involved:
1. Application of Section 271(1)(c) of the Income-tax Act, 1961.
2. Assessment of income and penalty proceedings.
3. Genuineness of trade advances and cash credits.
4. Burden of proof and evidence of transactions.
5. Relevance of Section 132(4A) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Application of Section 271(1)(c) of the Income-tax Act, 1961:
The primary issue was whether the statutory provisions of Section 271(1)(c) were correctly applied by the Tribunal in upholding the penalty related to trade advances of Rs. 3,20,000. The court examined if the assessee had concealed income or furnished inaccurate particulars of income. The Tribunal found that the assessee had concealed income and furnished wrong particulars deliberately concerning the income of Rs. 5,06,782, thus attracting the penalty under Section 271(1)(c).

2. Assessment of Income and Penalty Proceedings:
The assessee's income was assessed at Rs. 7,76,600, and after appeals, it was finally determined at Rs. 6,45,518. Penalty proceedings were initiated under Section 271(1)(c), leading to a penalty of Rs. 3,13,562. The appellate authority confirmed the penalty except for an amount of Rs. 40,883 related to interest on loans for property investment, where the charge of concealment was not established. The Tribunal partly allowed the appeal, accepting the explanation for Rs. 1,00,000 but upheld the penalty for the remaining Rs. 3,20,000.

3. Genuineness of Trade Advances and Cash Credits:
The assessee claimed that Rs. 3,20,000 was received as trade advances from various traders. However, the Tribunal found that the assessee failed to prove the genuineness of these advances. The assessee did not produce any of the four persons from whom the advances were allegedly received, nor was there evidence of actual delivery of goods. The Tribunal noted that the sales tax numbers provided were not genuine, and the explanation furnished by the assessee was not bona fide.

4. Burden of Proof and Evidence of Transactions:
The court emphasized that the burden of proof lay on the assessee to establish the genuineness of the transactions. The Tribunal found that the assessee failed to provide sufficient evidence, such as delivery of goods or credible testimony from the alleged creditors. The Tribunal upheld the penalty as the assessee could not substantiate the claims of trade advances or loans.

5. Relevance of Section 132(4A) of the Income-tax Act, 1961:
The assessee invoked Section 132(4A), which pertains to the presumption of correctness of entries in account books found during a search. However, the court noted that this provision does not relieve the assessee from proving the genuineness of transactions. The court did not frame any question on this point, and thus, it was not considered relevant to the appeal.

Conclusion:
The appeal was dismissed, with the court concluding that the assessee failed to prove the genuineness of the trade advances and had concealed income, justifying the penalty under Section 271(1)(c). The Tribunal's decision to uphold the penalty for Rs. 3,20,000 was found to be correct, while the acceptance of Rs. 1,00,000 as genuine was based on sufficient evidence. The court affirmed the importance of substantial proof in establishing the legitimacy of financial transactions.

← Previous Next →