2014 (10) TMI 867 - AT - Income Tax

Penalty u/s.271(1)(c) - Held that - We find that the assessee has filed a detailed explanation regarding source of acquisition of jewellery found at the lime of survey. The assessee has also made a disclosure at the time of search proceedings, taking into consideration the on-money received on sale of land and certain other investment, and has disclosed an amount in its return of income filed in response to the notice under section 153A of the Act in the name of the assessee or his family members. We find that merely because the explanation of the assessee with regard to the acquisition of some part of the jewellery not accepted by the taxing authorities, it does not follow that the assessee was guilty of concealment of income or filing of inaccurate particulars of income. There is no material brought on record on behalf of the Revenue to suggest that the explanation of the assessee regarding source for acquisition of jewellery was not bond fide. In these facts of the case, we are of the view that it is not a fit case for imposition of penalty under section 271(l)(c) of the Act which is accordingly cancelled - Decided in favour of assessee.

Summary

Issues: Validity of penalty under section 271(l)(c) of the IT Act for the assessment year 2005-2006

Analysis:
The appeal pertains to the validity of a penalty under section 271(l)(c) of the IT Act for the assessment year 2005-2006. The assessee contested the penalty imposed by the Assessing Officer (AO) amounting to Rs. 97,133. The main contention was regarding the explanation provided by the assessee concerning the source of acquisition of jewellery found during a search. The assessee claimed that a portion of the jewellery belonged to the wife and some was gifted by the mother, but the AO treated a specific weight of jewellery as income from undisclosed sources. The assessee argued that the explanation was genuine and bona fide, emphasizing that the disclosure made during the search proceedings was substantial, including details of on-money received from land sale and other investments.

The Departmental Representative (DR) opposed the assessee's submissions, highlighting that the disclosure made by the assessee during the search proceedings was incomplete and not entirely fair. The DR supported the AO's decision to add a certain weight of jewellery to the assessee's income. However, the Tribunal examined all submissions, including those of the AO and the CIT(A), along with the assessment and quantum appeal orders. It noted that the assessee had provided a detailed explanation about the jewellery's source and had disclosed Rs. 1.65 crores during the search proceedings, considering various financial aspects.

The Tribunal emphasized that the mere non-acceptance of a part of the assessee's explanation by the tax authorities did not automatically imply guilt of concealment or inaccurate income particulars. There was no evidence to suggest that the assessee's explanation regarding the jewellery's acquisition source was not made in good faith. Consequently, the Tribunal concluded that the case did not warrant a penalty under section 271(l)(c) of the IT Act. Therefore, the penalty was canceled, and the appeal of the assessee was allowed. The Tribunal's decision was based on the lack of material to support the imposition of the penalty, indicating that the assessee's explanation was genuine and not indicative of intentional wrongdoing.

In conclusion, the Tribunal's judgment revolved around the validity of the penalty imposed under section 271(l)(c) of the IT Act for the assessment year 2005-2006. The decision favored the assessee, emphasizing the importance of a bona fide explanation and substantial disclosure made during the search proceedings. The Tribunal's analysis highlighted the necessity of evidence to support penalty imposition and the significance of good faith in explanations provided by taxpayers.