2015 (2) TMI 1105 - AT - Income Tax

Penalty u/s. 271(1)(c) - unexplained cash credit under section 68 - Held that - It is undisputed facts that on the addition of ₹ 15 lacs made u/s. 68 by A.O. penalty u/s. 271(1)(c) has been levied by A.O., which has also been confirmed by CIT(A). It is also a fact that assessee has disclosed all the material facts before the A.O. and has also submitted the explanation which has not been found to be false. It is a well settled law that penalty proceedings are entirely distinct from assessment proceedings and however relevant and good, the findings in assessment proceedings may not be conclusive so far as penalty proceedings are concerned. It is well settled that the parameters of judging the justification for addition made in the assessment proceedings is different from the penalty imposed on account of concealment of income or filing of inaccurate particulars of income and that certain disallowance/additions could legally be made in the assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s.271(1)(c) of the Act on preponderance of probability and the Revenue has to prove that the claim of the assessee was not genuine or was inflated its tax liability. Further merely because additions have confirmed in appeal or no appeal has been filed by assessee against additions made, it cannot be the sole ground for coming to the conclusion that assessee has concealed any income. Considering the aforesaid and peculiar facts of the case, we are of the view that in the present case, no case for penalty has been made - Decided in favour of assessee

Summary

Issues:
Levy of penalty under section 271(1)(c) for unexplained cash credit.

Detailed Analysis:

1. Background and Assessment Details:
The appellant, a company engaged in manufacturing bulk drugs and fine chemicals, filed its return of income for the assessment year 2004-05. The assessment was framed under section 143(3), resulting in the determination of total income at Rs. 8,38,88,973. The additions included dividend income, disallowance of travel expenses, and unexplained cash credit. The penalty of Rs. 5,96,176 was levied under section 271(1)(c) by the Assessing Officer (A.O.), which was confirmed by the Commissioner of Income Tax (CIT) (Appeals).

2. Grounds of Appeal:
The appellant challenged the penalty before the Appellate Tribunal on various grounds, primarily focusing on the unexplained cash credit of Rs. 15,00,000. The appellant argued that the penalty was unsustainable, lacked jurisdiction, was time-barred, and the quantification was erroneous and excessive. Additionally, it was contended that the penalty was initiated without the mandatory satisfaction as required under the Act.

3. Arguments and Submissions:
During the hearing, the appellant's representative argued that the amounts in question were trade credits, not cash credits, as payments were made on behalf of the appellant for raw materials. It was emphasized that the purchases were not doubted, and full details of the transactions were provided, fulfilling the initial burden of proof. The appellant also highlighted the distinction between quantum proceedings and penalty proceedings, citing legal precedents to support the argument that the penalty should be deleted.

4. Tribunal's Decision:
After considering the submissions and the facts of the case, the Tribunal observed that penalty proceedings are distinct from assessment proceedings. It noted that while additions could be made in assessment based on probabilities, penalty under section 271(1)(c) required the Revenue to prove concealment or filing inaccurate particulars of income. The Tribunal found that in this case, no justification for the penalty was established, as the appellant had disclosed all material facts and provided explanations that were not found false. Therefore, the Tribunal directed the deletion of the penalty.

5. Conclusion:
The appeal of the assessee was allowed, and the penalty under section 271(1)(c) was deleted. The Tribunal's decision emphasized the need for the Revenue to prove concealment of income for imposing penalties, highlighting the distinction between assessment and penalty proceedings.

This detailed analysis provides a comprehensive overview of the judgment, addressing the issues raised, arguments presented, and the Tribunal's decision in the matter.