2010 (6) TMI 608 - AT - Income Tax

Unsecured loans - assessee had not provided the addresses of the depositors, failed to prove the identity of the loan creditors, capacity of the depositors and source from where loan was given to the assessee - Held that loan taken by the assessee was not a bona fide transaction - penalty imposed - Appeal dismissed

Summary

Issues Involved:
1. Sustenance of penalty under section 271(1)(c) of the Income-tax Act, 1961.
2. Assessee's failure to prove the identity, capacity, and creditworthiness of loan creditors.
3. Applicability of the decision in CIT v. Reliance Petroproducts (P.) Ltd. to the case.
4. Relevance of the decisions in CIT v. Dr. A.K. Sharma and K.P. Madhusudhanan v. CIT.

Issue-wise Detailed Analysis:

1. Sustenance of penalty under section 271(1)(c) of the Income-tax Act, 1961:
The appeal was directed against the order passed by the Commissioner of Income-tax (Appeals), which partly sustained the penalty imposed by the Assessing Officer under section 271(1)(c). The penalty was imposed due to the assessee's failure to provide sufficient evidence to support the unsecured loans, leading to an addition of Rs. 1.50 lakhs as unexplained cash credit under section 68. The Tribunal upheld the penalty, confirming that the assessee had concealed particulars of income.

2. Assessee's failure to prove the identity, capacity, and creditworthiness of loan creditors:
The Assessing Officer observed that the assessee failed to discharge the burden of proof regarding the identity, capacity, and genuineness of transactions related to unsecured loans. The assessee did not provide confirmations for two creditors, Neelam R. Bhatia and Fountain Mix, leading to an addition of Rs. 7,82,600 under section 68. Despite the assessee's claim that the loans were taken through a finance broker, the Tribunal upheld the addition due to the lack of confirmatory letters and proper addresses.

3. Applicability of the decision in CIT v. Reliance Petroproducts (P.) Ltd. to the case:
The assessee argued that the penalty should be deleted based on the decision in CIT v. Reliance Petroproducts (P.) Ltd., which held that a mere incorrect claim does not amount to furnishing inaccurate particulars. However, the Tribunal distinguished this case, noting that the penalty was imposed for concealment of particulars of income, not for making an incorrect claim. Therefore, the decision in Reliance Petroproducts was not applicable.

4. Relevance of the decisions in CIT v. Dr. A.K. Sharma and K.P. Madhusudhanan v. CIT:
The Departmental representative relied on these decisions to support the penalty. In Dr. A.K. Sharma's case, the court held that the assessee must discharge the burden of proving no concealment of income. In K.P. Madhusudhanan's case, the Supreme Court upheld the penalty for failure to furnish evidence for loans. The Tribunal found these cases relevant, as the assessee in the current case also failed to provide evidence for the loan creditors, confirming the penalty for concealment of income.

Conclusion:
The Tribunal confirmed the penalty imposed by the Assessing Officer and sustained by the Commissioner of Income-tax (Appeals), rejecting the assessee's appeal. The Tribunal held that the assessee had concealed particulars of income by failing to provide evidence for the loan creditors, making the penalty under section 271(1)(c) applicable. The appeal was dismissed, affirming the penalty for the unexplained cash credit.