2011 (12) TMI 231 - AT - Income Tax

Plea for waiver of penalty u/s 271(1)(c) addition on account of unexplained credit/ undisclosed sources accomodating entries of loan/credit entry lender company s person admitted amount during statement recorded assessee instead of rebutting the statement surrendered the amount assessee contending it to be voluntarily disclosure - Held that - Onus was placed on the assessee to explain the difference between the assessed income and returned income, assessee did not discharge the said onus and did not offer any explanation during the penalty proceedings before the AO. Penal provision would operate when there is a failure to disclose fully or truly all the particulars. Indisputably, the assessee, instead of rebutting the statement of lender company s person recorded during the remand proceedings, surrendered the amount. It is also observed that when the assessee concealed incriminating material with regard to the income disclosed by the assessee, surrender cannot held to be voluntarily. It was made because the the appellant had no alternative but to surrender the amount before the department. It is also held that subsequent act of disclosure of an income would not make any difference and it cannot be said that the assessee had not concealed particulars of their income or had not furnished inaccurate particulars of such income. Thus, in light of the discussion made above and conduct of the assessee, order of CIT(A) in confirming the penalty imposed is upheld - Decided against the assessee.

Summary

Issues Involved:
1. Addition of Rs. 10,00,000 as income from undisclosed sources.
2. Addition of Rs. 20,000 as cost of unexplained credit.
3. Levy of penalty of Rs. 4,03,000 under Section 271(1)(c) of the Income-tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition of Rs. 10,00,000 as income from undisclosed sources:
The assessee filed a return declaring a loss of Rs. 2,15,350, which was processed and selected for scrutiny. During the reassessment, it was found that the assessee had received a loan/credit entry of Rs. 10,00,000 from M/s. Frenzy Products (P) Ltd., managed by Shri Sanjay Rastogi. The AO reopened the assessment under Section 147 of the Act, and during the proceedings, it was revealed that the loan was a bogus entry. Shri Sanjay Rastogi admitted to providing accommodation entries. The assessee, instead of rebutting the statement, surrendered the amount of Rs. 10,00,000. The CIT(A) confirmed the addition, and the ITAT upheld this decision, stating that the surrender was not voluntary but was made due to the incriminating evidence gathered by the department.

2. Addition of Rs. 20,000 as cost of unexplained credit:
The AO added Rs. 20,000 as commission for obtaining the bogus entry. The CIT(A) directed the AO to record statements of concerned parties, including Shri Sanjay Rastogi, who confirmed the commission. The ITAT, however, deleted this addition, noting that the assessee was not given an opportunity to cross-examine Shri Sanjay Rastogi, and thus, there was no firm evidence to conclude that the sum of Rs. 20,000 was paid for obtaining the entry.

3. Levy of penalty of Rs. 4,03,000 under Section 271(1)(c) of the Income-tax Act, 1961:
After the reassessment, the AO issued a show-cause notice for levy of penalty under Section 271(1)(c) for concealment of income. The assessee did not respond, and the AO levied a penalty of Rs. 4,03,410. The CIT(A) upheld the penalty, noting that the surrender of Rs. 10,00,000 was not voluntary but made after being confronted with the statement of Shri Sanjay Rastogi. The CIT(A) observed that the assessee had concealed the particulars of its income by furnishing inaccurate particulars. The ITAT confirmed the penalty, emphasizing that the surrender was made under the constraint of exposure to adverse action by the department and was not voluntary. The ITAT also noted that the assessee did not offer any explanation during the penalty proceedings, thus attracting Explanation 1 to Section 271(1)(c).

Conclusion:
Both the quantum and penalty appeals were dismissed. The ITAT upheld the addition of Rs. 10,00,000 as income from undisclosed sources and confirmed the penalty under Section 271(1)(c), while deleting the addition of Rs. 20,000 as cost of unexplained credit due to lack of cross-examination opportunity.