2011 (1) TMI 156 - AT - Income Tax

Search and Seizure - Addition of unexplained cash deposits in the bank Rs. 6,20,000 and unexplained expenditure on marriage Rs. 1,50,665 - Penalty thereof - Decision of the full Bench of the High Court of Delhi in the case of CIT v. Rampur Engineering Co. Ltd. (2008 -TMI - 31782 - HIGH COURT DELHI) - recording a specific satisfaction - It was explained that the handwriting in the diary was of his father and that was in respect of the estimate of marriage expenditure of his two sisters. It was seen by the Assessing Officer on page 77 that the amount of Rs. 7,67,500 was written. It appears that as noted by the Assessing Officer that the assessee could explain the expenditure to the extent of Rs. 6,07,835. The assessee contended that the figures written by his father were estimation and not the actual expenditure but actual expenditure was Rs. 6,10,833 only. The Assessing Officer rejected the claim of the assessee and made the addition of Rs. 1,50,665 and also initiated the penalty proceedings. Held that - Admittedly, the assessee explained to the extent of Rs. 6,10,833 and that has been accepted by the Assessing Officer also. So far as the explanation of the difference of Rs. 1,56,665 is concerned, the same is not accepted by the Assessing Officer that the figure of Rs. 7,61,500 is only estimation. On the perusal of the assessment order as well as the appellate order, we find that without examining the father of the assessee the Assessing Officer has straight way made the addition. Before rejecting the explanation of the assessee s, the Assessing Officer should have at least recorded the statement of his father - Penalty deleted.

Summary

Issues:
1. Challenge to penalty order under section 271(1)(c) of the I.T. Act, 1961.
2. Determination of undisclosed income from unexplained cash deposits.
3. Requirement of specific satisfaction by the Assessing Officer for penalty under section 271(1)(c).
4. Applicability of Explanation 5 to section 271(1)(c) for immunity from penalty.
5. Addition towards expenditure on marriage and penalty imposition.

Issue 1: Challenge to Penalty Order under Section 271(1)(c)
The appellant challenged the penalty order under section 271(1)(c) of the I.T. Act, 1961, dated 24-3-2008, relevant to the assessment year 2000-01.

Issue 2: Determination of Undisclosed Income from Unexplained Cash Deposits
The appellant, engaged in textile trading, faced penalty proceedings for unexplained cash deposits in bank accounts. The Assessing Officer accepted the undisclosed income declared by the appellant, amounting to Rs. 6,20,000, without disturbing it.

Issue 3: Requirement of Specific Satisfaction for Penalty
The appellant argued that no specific satisfaction was recorded by the Assessing Officer for the unexplained cash deposits, citing the necessity under sub-section (IB) of section 271. The appellant relied on legal precedents to support the claim that without specific satisfaction, no penalty could be levied.

Issue 4: Applicability of Explanation 5 for Immunity from Penalty
The Tribunal analyzed Explanation 5 to section 271(1)(c) concerning the immunity from penalty if undisclosed income is declared and taxes paid. The Tribunal held that the appellant, by admitting and offering the undisclosed income, was entitled to immunity under Explanation 5.

Issue 5: Addition towards Expenditure on Marriage and Penalty Imposition
Regarding the addition of Rs. 1,50,665 towards marriage expenditure, the Tribunal found that the Assessing Officer did not adequately consider the appellant's explanations. The Tribunal noted discrepancies in the assessment process and deleted the penalty imposed on the marriage expenses.

In conclusion, the Tribunal partly allowed the appeal, upholding the penalty on the undisclosed income from unexplained cash deposits while deleting the penalty on the marriage expenditure addition.