2014 (1) TMI 1626 - AT - Income Tax

Penalty u/s 271(1)(c) - Addition u/s 68 - Held that - Addition made by the Assessing Officer for which penalty is imposed is the addition on account of two unsecured loans and the addition was made under section 68 of the Act. We also find that both the persons have given confirmation which is available in the paper book. It is true that the unsecured loan claimed to have been received by the assessee was not accepted by the Revenue but present proceedings are penalty proceedings and therefore we have to see as to whether there is possibility of concealment or furnishing of inaccurate particulars of income or not. - assessee could not prove ingredients of section 68 in respect of these two loans but the explanation of the assessee could not be disproved also by the Revenue. Under these facts we are of the considered opinion that although the addition is finalised but penalty is not justified because the assessee has submitted explanation regarding these cash credits and the same could not be established to be not bona fide and therefore in our considered opinion the penalty is not justified - Decided against Assessee.

Summary

Issues:
Assessment of penalty under section 271(1)(c) of the Act for the assessment year 2005-06 based on addition of unsecured loans under section 68.

Detailed Analysis:
The appeal was against the penalty imposed by the Assessing Officer amounting to Rs. 3,65,548 under section 271(1)(c) of the Act for the assessment year 2005-06. The main contention of the assessee was the justification of the penalty imposed. The authorized representative of the assessee argued that the only addition made by the Assessing Officer was Rs. 10.86 lakhs under section 68 of the Act, and the assessee had provided confirmations for these loans. The representative cited a Tribunal decision to support the claim that penalty is not justified in such cases. The Revenue's representative supported the penalty order.

Upon considering the submissions, the Tribunal noted that the addition leading to the penalty was on account of two unsecured loans under section 68 of the Act. Confirmations for these loans were available in the paper book. The Tribunal emphasized that for penalty proceedings, the focus should be on whether there was concealment or furnishing of inaccurate particulars of income. Citing a previous Tribunal decision, the Tribunal highlighted that the mere fact that the loans were not accepted by the Revenue does not automatically indicate concealment. The Tribunal found that the assessee had submitted explanations and confirmations, and the Revenue could not disprove the genuineness of the explanations. Consequently, the Tribunal concluded that the penalty was not justified and deleted the same.

As the penalty was deemed unjustified, the Tribunal did not delve into the technical grounds raised by the assessee. The appeal was allowed based on the decision that the penalty was not warranted, and the technical aspects were not further discussed or adjudicated upon.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act for the assessment year 2005-06 was not justified due to the explanations and confirmations provided by the assessee regarding the unsecured loans under section 68, leading to the deletion of the penalty.