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2012 (10) TMI 367 - AT - Income TaxPenalty u/s 271(1)(c) - difference after reconciliation of opening and closing balance of creditor - Held that - Admittedly, the assessee did not reconcile the accounts of the year under consideration in the light of information received u/s 133(6) in the form of copy of account of the assessee from the two parties vis-a-vis assessee s books and accordingly, vide his letter dated 7.12.2009 surrendered the two amounts as income of the year under consideration to purchase peace of mind. Subsequently, in response to a showcause notice before levy of penalty, the assessee reiterated that amount of ₹ 1 lac in the a/c of NK Jain & Co/was brought forward while difference in the a/c of GTM Sales Corporation remained irreconcilable. Apparently, the assessee did not improve upon his case in the penalty proceedings - the assessee did not reconcile the difference either at the assessment stage or even in penalty proceedings. Apparently, only when the assessee was cornered, the assessee surrendered the amount, thus it is to be concluded that the surrender was not at all voluntary - A very heavy onus was placed on the assessee to explain the difference between the assessed income and returned income and the assessee in the instant case did not discharge the said onus. - no hesitation in upholding the order of the CIT(A) in confirming the penalty imposed by the AO under s. 271(1)(c) - against assessee.
Issues Involved:
1. Levy and sustaining of penalty under Section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: Issue 1: Levy and sustaining of penalty under Section 271(1)(c) of the Income Tax Act, 1961 Facts: - The assessee, engaged in manufacturing and wholesale trading, filed a return declaring an income of Rs. 7,22,300 for AY 2007-08. - During assessment, discrepancies were found in the accounts of creditors M/s N.K. Jain & Company and M/s GTM Sales Corporation. - The AO issued notices under Section 133(6) of the Act, revealing differences of Rs. 1,00,000 and Rs. 47,320 respectively. - The assessee admitted the discrepancies but claimed they were explainable. However, to avoid the issue becoming time-barred, the assessee surrendered the amounts for taxation. - The AO added the amounts and initiated penalty proceedings under Section 271(1)(c). Penalty Proceedings: - The assessee argued that the surrender was made to purchase peace of mind and was subject to no penalty. - The AO rejected this argument, stating the surrender was made after detection and imposed a penalty of Rs. 48,413. - The CIT(A) upheld the penalty, emphasizing that the discrepancies were detected by the AO and the surrender was not voluntary. Tribunal's Findings: - The Tribunal noted that the assessee failed to reconcile the differences during both assessment and penalty proceedings. - The Tribunal referred to Section 271(1)(c) and Explanation 1, which states that failure to offer a satisfactory explanation results in a presumption of concealment. - The Tribunal highlighted that the burden of proof lies on the assessee to rebut the presumption of concealment. - The Tribunal cited various judicial pronouncements, including the Supreme Court's decision in K.P. Madhusudanan vs. CIT, which affirmed that the penalty is applicable if the assessee fails to provide a bona fide explanation. Conclusion: - The Tribunal concluded that the assessee did not offer any substantial explanation or evidence to reconcile the discrepancies. - The surrender of income was not considered voluntary as it was made after the AO's detection. - The Tribunal upheld the CIT(A)'s decision, confirming the levy of penalty under Section 271(1)(c) of the Act, and dismissed the appeal. Result: - The appeal was dismissed, and the penalty of Rs. 48,413 imposed by the AO was upheld.
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