2011 (11) TMI 672 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - Held that - It is seen that there was a credit balance of ₹ 1,93,160/- in the name of Jagannath Traders as opening balance. The assessee surrendered this amount on account of difference in accounts of both the parties i.e. assessee and Jagannath Traders. To buy piece and to avoid litigation assessee surrendered this amount for taxation. It is further seen that the amount of difference has been paid by the assessee in subsequent year, partly by cheque and partly by cash. Copy of statement was produced during appellate proceeding. Therefore it can not be said that assessee has furnished in-accurate particular for concealing any income. Accordingly, hold that no penalty is leviable on this amount. It is also seen that the amount coming from early year as the same was shown as opening balance, therefore, for this reason also no penalty is leviable in the year considering. In view of the above facts and circumstances. Cancelled the levy of penalty.

Summary

Issues:
Levy of penalty under section 271(1)(c) for assessment year 2007-08 based on a credit balance discrepancy in the appellant's account with Jagannath Traders.

Analysis:
The appellant contested the penalty imposed under section 271(1)(c) for a credit balance of Rs. 1,93,160 in Jagannath Traders' name during assessment proceedings. The Assessing Officer (AO) initiated penalty proceedings after the appellant agreed to surrender and pay tax on the disputed amount. The Commissioner of Income Tax (Appeals) upheld the AO's decision. However, the Judicial Member found merit in the appellant's case upon reviewing the facts. The appellant had voluntarily surrendered the amount to avoid disputes and paid it in the subsequent year partly by cheque and partly by cash, supported by documentary evidence submitted during the appellate proceedings. The Judicial Member concluded that the appellant did not provide inaccurate particulars to conceal income, as the discrepancy was resolved transparently. Additionally, since the amount was part of the opening balance from a previous year, no penalty was justifiable for the current assessment year. Consequently, the Judicial Member ruled in favor of the appellant, canceling the penalty levy.

This judgment highlights the importance of transparency and intent in tax assessments, emphasizing that penalties under section 271(1)(c) should be imposed judiciously, especially when discrepancies are voluntarily rectified with proper documentation. The decision underscores the significance of factual evidence and the context of transactions in determining the applicability of penalties for alleged income concealment.