2015 (10) TMI 2476 - AT - Income Tax

Penalty u/s 271(1)(c) - cash credit taken from the sister concern - Held that - Relying upon the decisions of Hon ble Jurisdictional High Court in case of National Textile vs. CIT (2000 (10) TMI 19 - GUJARAT High Court ) and CIT vs. Jalaram Oil Mills (2001 (6) TMI 15 - GUJARAT High Court) as well as to discussions made it is of the confirmed view that proceedings u/s. 271(1)(c) of the Act are separate proceedings and the observations and findings made during the original assessment proceedings should not shadow over the proceedings u/s.271(1)(c) of the Act and the A.O. ought to have analyzed the evidences and supporting documents furnished before him during the penalty proceedings u/s.271(1)(c) and examined them in consonance to the provisions of Section 271(1)(c) and only if he is not satisfied with them then only he should initiate the penalty against the assessee. We therefore remit back the issue to the file of A.O. with clear directions to examine on merit the evidences and supporting documents to be submitted by assessee before him for proving the identity creditworthiness and genuineness of the cash credit taken from its sister concern M/s Poonam Dyeing & Printing Mills Pvt. Ltd. and accordingly should decide the issue of imposing penalty u/s.271(1)(c) of the Act. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Imposition of penalty under Section 271(1)(c) of the Income-tax Act, 1961 for concealment of income by furnishing inaccurate particulars.
2. Assessment of unsecured loan of Rs. 12,00,000/- as unexplained cash credit under Section 68 of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Imposition of Penalty under Section 271(1)(c):
The primary issue in this appeal is the imposition of a penalty of Rs. 4,03,920/- under Section 271(1)(c) of the Income-tax Act, 1961 by the Assessing Officer (A.O.) and its confirmation by the Commissioner of Income Tax (Appeal) [CIT(A)]. The penalty was imposed due to the alleged concealment of income by furnishing inaccurate particulars concerning an unsecured loan of Rs. 12,00,000/- received from the assessee's sister concern, M/s Poonam Dyeing & Printing Mills Pvt. Ltd.

The assessee argued that the loan was taken via account payee cheque and provided necessary details during the penalty proceedings. However, the A.O. and CIT(A) did not consider these submissions and supporting documents, maintaining the penalty based on the initial assessment proceedings where the assessee failed to prove the identity, creditworthiness, and genuineness of the loan.

The Tribunal emphasized that assessment proceedings under Section 143(3) and penalty proceedings under Section 271(1)(c) are separate. The A.O. should have independently examined the evidence provided during the penalty proceedings rather than relying on the findings from the assessment proceedings. The Tribunal referred to the decisions in National Textile vs. CIT (249 ITR 125) and CIT vs. Jalaram Oil Mills (253 ITR 192), which highlight that the mere addition of income does not automatically justify the imposition of penalty unless there is evidence of conscious concealment or furnishing of inaccurate particulars by the assessee.

2. Assessment of Unsecured Loan as Unexplained Cash Credit:
The second issue pertains to the addition of Rs. 12,00,000/- as unexplained cash credit under Section 68 of the Income-tax Act, 1961. The A.O. made this addition during the assessment proceedings under Section 144 due to the assessee's failure to provide necessary details to establish the identity, creditworthiness, and genuineness of the loan. The assessee contended that the loan was taken from its group company through an account payee cheque and attributed the non-submission of details during the assessment to business closure and staff shortage.

Despite these explanations, the CIT(A) upheld the addition, and the penalty proceedings were initiated based on this addition. The Tribunal noted that during the penalty proceedings, the assessee furnished complete details to explain the cash credit, but the A.O. and CIT(A) did not consider these documents.

The Tribunal reiterated that for imposing a penalty under Section 271(1)(c), there must be material or circumstances leading to the reasonable conclusion that the amount represents the assessee's income and that there was conscious concealment or furnishing of inaccurate particulars. The Tribunal found that the A.O. and CIT(A) failed to independently analyze the evidence provided during the penalty proceedings and instead relied on the assessment proceedings' findings.

Conclusion:
The Tribunal allowed the appeal for statistical purposes, remitting the issue back to the A.O. with directions to examine the evidence and supporting documents submitted by the assessee during the penalty proceedings. The A.O. is instructed to decide on the imposition of penalty under Section 271(1)(c) based on the merits of the evidence provided, rather than the findings from the assessment proceedings.

Order:
The appeal is allowed for statistical purposes, and the issue is remitted back to the A.O. for a fresh examination of the evidence and supporting documents. The order was pronounced in the open Court on 23/10/2015.

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