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2014 (8) TMI 1064 - AT - Income Tax


Issues Involved:
1. Validity of the penalty order under Section 271(1)(c) concerning the issue of limitation.
2. Addition of Rs. 1,17,50,000 as unexplained investment.
3. Addition of Rs. 25,00,000 as undisclosed additional investment.
4. Whether the penalty under Section 271(1)(c) is justified for the additions made.

Detailed Analysis:

Validity of the Penalty Order under Section 271(1)(c) Concerning the Issue of Limitation:
The assessee argued that the penalty order was passed beyond the time prescribed under the proviso to Section 275 of the Act, which mandates that the penalty order should be passed within one year from the end of the financial year in which the order of the CIT(A) is received. The CIT(A) clarified that the time limit for passing the penalty order is six months from the financial year in which the order of the CIT(A) or ITAT is received. In this case, the order of the ITAT was received on 25.01.2012, and the penalty order was passed on 27.09.2012, within the permissible time frame. Thus, the CIT(A) found no infirmity in the order of the AO, and the ground raised by the appellant regarding limitation was dismissed.

Addition of Rs. 1,17,50,000 as Unexplained Investment:
The assessee contended that the contributions for the investment were received from seven members, and the sources of these contributions were primarily agricultural income and the sale of agricultural land, all in cash. The AO disbelieved these contributions due to the lack of verifiable sources and treated the amount as unexplained investment. The CIT(A) upheld the addition, noting that the transactions were in cash and lacked written agreements or deeds. However, the CIT(A) observed that the AO's conclusion was based on the interpretation of available information and not on the complete lack of evidence. The CIT(A) concluded that the addition did not establish concealment of income, thus no penalty was leviable on the amount of Rs. 1,17,50,000.

Addition of Rs. 25,00,000 as Undisclosed Additional Investment:
The AO treated Rs. 25,00,000 as undisclosed additional investment based on impounded material during the survey proceedings, indicating a total payment of Rs. 5.90 crores against the assessee's claim of Rs. 4.90 crores. The AR argued that the AO had erroneously included an undated receipt of Rs. 1 crore twice. The CIT(A) initially granted relief on this addition in quantum proceedings, but the ITAT reversed it. The AR contended that where two views are possible, penalty is not leviable, citing judicial precedents supporting this stance.

Justification of Penalty under Section 271(1)(c):
The CIT(A) held that penalty is not leviable on the addition of Rs. 1,17,50,000 as the AO merely disbelieved the explanation of the assessee without proving concealment. The CIT(A) relied on judicial decisions indicating that disbelieving an explanation does not constitute concealment of income. For the addition of Rs. 25,00,000, the CIT(A) observed that the AO failed to establish concealment, and the penalty was not justified. The ITAT upheld the CIT(A)'s decision, emphasizing that penalty proceedings are distinct from assessment proceedings, and mere disbelieving of the assessee's explanation does not warrant penalty.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) is not justified for the addition of Rs. 1,17,50,000 as unexplained investment due to the lack of evidence of concealment. However, the penalty on the addition of Rs. 25,00,000 was deemed unjustified as the AO failed to establish concealment. The assessee's appeal was allowed, and the Revenue's appeal was dismissed. The Tribunal's decision was pronounced in the open court on 28th August 2014.

 

 

 

 

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