2015 (2) TMI 1106 - AT - Income Tax

Penalty u/s. 271(1)(c) - additions made u/s 68 - Held that - For levy of penalty there has to be evidence or material to show that the Assessee has deliberately furnished inaccurate particulars of income. It also a settled law that penalty proceedings are entirely distinct from assessment proceedings and howsoever relevant and good the findings in assessment proceedings may be they are not conclusive as far as penalty proceedings are considered. It is also well settled that the parameters of judging the justification for addition made in assessment case of an assessee is different from the penalty imposed on account of concealment of income or filing inaccurate particular of income and that certain disallowances/additions could legally be made in assessment proceedings on the preponderance of probabilities but no penalty could be imposed u/s. 271(1)(c) of the Act on the preponderance of probabilities and the Revenue has to prove that the claim made by the Assessee was not genuine. In the present case LD. AR has placed on paper book the table of documentary evidence filed in respect of sundry creditors like ledger accounts purchase bills confirmations and has thus discharged the initial onus cast upon the Assessee. On such evidences furnished no inquiry was conducted by AO. The purchases from the creditors and the corresponding sales have not been doubted. Before us Revenue has not brought any material to controvert the submissions of Assessee. Considering the totality of the aforesaid facts we are of the view that in the present case penalty u/s. 271(1)(c) could not be levied - Decided in favour of assessee

Summary

Issues:
Appeal against CIT(A) order for A.Y. 2003-04 - Levy of penalty u/s. 271(1)(c) of the Act.

Detailed Analysis:

Issue 1: Appeal against CIT(A) Order
The appeal was filed by the Assessee against the order of CIT(A)-VI, Ahmedabad dated 01.02.2010 for A.Y. 2003-04. The Assessee, a partnership firm engaged in wholesale trading of grains and pulses, initially declared total income at Rs. Nil for A.Y. 2003-04. However, the assessment was reopened, and the total income was determined at &8377; 26,29,210/-, including an addition on account of unexplained cash credit u/s. 68 of &8377; 26,28,813/-. Subsequently, a penalty of &8377; 9,66,090/- u/s. 271(1)(c) of the Act was levied by the Assessing Officer (A.O). The Assessee appealed to CIT(A), who dismissed the appeal, leading to the current appeal before the Appellate Tribunal.

Issue 2: Levy of Penalty u/s. 271(1)(c)
The primary contention raised by the Assessee was against the imposition of penalty u/s. 271(1)(c) of the Act. The Assessee argued that the penalty was levied on the addition made u/s. 68 in relation to sundry creditors outstanding at the end of the year. The Assessee had filed a revised return of income before the Department detected the issue, indicating voluntary disclosure. The Assessee emphasized the distinction between concealment of income and furnishing inaccurate particulars of income, asserting that the penalty order should specify the grounds clearly. The Assessee provided documentary evidence regarding the sundry creditors, which was not adequately considered by the A.O. The Assessee also highlighted the separation of quantum proceedings and penalty proceedings, emphasizing that the mere addition under a legal fiction does not warrant penalty imposition.

Judgment:
The Appellate Tribunal emphasized that penalty u/s. 271(1)(c) cannot be levied solely based on additions made in the assessment. The Tribunal noted that the Assessee had provided substantial documentary evidence regarding the sundry creditors, discharging the initial burden. The A.O did not conduct further inquiries based on this evidence, and the Revenue failed to counter the Assessee's submissions. Consequently, the Tribunal ruled in favor of the Assessee, allowing the appeal and directing the deletion of the penalty u/s. 271(1)(c).

In conclusion, the Appellate Tribunal allowed the Assessee's appeal, emphasizing the necessity of concrete evidence for penalty imposition under section 271(1)(c) of the Act.