2014 (8) TMI 1015 - HC - Income Tax

Penalty levied under section 271(1)(c) - addition u/s 68 - Held that - The assessee had not disclosed the bank account maintained with UTI Bank Sector 8 Chandigarh (now Axis Bank) during the assessment proceedings. On calling information from the said bank the Assessing Officer noticed that the assessee had deposited Rs. 1, 20, 00, 000/- in the said account on 19.4.2006 and 22.4.2006 which remained unexplained. On scrutiny of bank statement it was found that Rs. 1, 19, 90, 000/- was transferred from the account of Shri Pritam Singh on 19.4.2006 and 22.4.2006 and there was an entry of Rs. 1, 01, 000/- of cash deposited on 3.8.2006 in the said account of Pritam Singh. The explanation of the assessee was that he had received some advances from one Shri Pritam Singh for purchase of agricultural land on behalf of the company named M/s West Point Properties Pvt. Limited. It was claimed that as the assessee had failed to arrange agricultural land for West Point Properties Pvt. Limited therefore the entire amount of Rs. 1.20 crores was returned back to them. The assessee was not able to substantiate his version as he had failed to provide any material to show that amount was received by Pritam Singh from M/s West Point Properties Pvt. Limited. The Assessing Officer had thus added the aforesaid amount as unexplained income of the assessee. The revisional authority had confirmed the said addition under Section 264 of the Act. The reference to various documents as contended by learned counsel does not establish the genuineness or the capacity of Shri Pritam Singh or availability of funds with M/s West Point Properties Pvt. Limited. The self serving affidavits or memorandum of understanding compromise deed and statement of account of Pritam Singh from Axis Bank does not help the appellant as the assessee had failed to produce the alleged Shri Pritam Singh or furnish his address or PAN and establish the credentials of the company M/s West Point Properties Pvt. Limited. The Assessing Officer had thus rightly imposed penalty under Section 271(1)(c) of the Act for concealment of income.- This was affirmed by CIT(A) on an appeal by the assessee - Decided against assesee.

Summary

Issues involved:
1. Interpretation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Genuineness of transactions related to undisclosed income.
3. Burden of proof on the assessee to establish the identity, genuineness, and creditworthiness of transactions.

Detailed Analysis:
1. The appellant-assessee appealed against the order of the Income Tax Appellate Tribunal regarding the penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2007-08. The main question was whether the penalty was unreasonable given the interpretation of statutory law versus judicial decisions regarding section 68 of the Act. The appellant argued that the findings against them were perverse and no penalty should be imposed.

2. The case involved transactions related to the purchase of agricultural land and the transfer of significant amounts of money between parties. The appellant failed to disclose certain bank accounts during assessment proceedings, leading to suspicion regarding the source and legitimacy of the funds involved. The Assessing Officer found discrepancies in the explanations provided by the appellant, leading to the addition of a substantial amount as unexplained income. The revisional authority confirmed this addition, and subsequent appeals upheld the decision.

3. The burden of proof was on the assessee to establish the genuineness of the transactions and the credibility of the parties involved. Despite producing various documents such as bank statements, affidavits, and agreements, the appellant failed to substantiate their claims. The lack of concrete evidence, including the failure to provide PAN details and relevant addresses, hindered the verification process. The authorities concluded that the appellant did not meet the requirements of section 68 in proving the identity, genuineness, and creditworthiness of the transactions, leading to the imposition of the penalty under section 271(1)(c).

In conclusion, the High Court upheld the decision to impose the penalty on the appellant-assessee, as they failed to provide sufficient evidence to justify the transactions in question. The court found no merit in the appeal, as the authorities had reasonably assessed the situation based on the available evidence and legal requirements. The judgment emphasized the importance of meeting the burden of proof in establishing the legitimacy of financial transactions to avoid penalties under the Income Tax Act.