2012 (11) TMI 392 - AT - Income Tax

Penalty u/s. 271(1)(c) - Held that - It is evident from the assessment order that the AO had unearthed certain documents to establish that the assessee had made investment of Rs.15 lacs in gold. At the time of search initially the assessee had agreed for such investment made which was not from accounted income of the assessee, however, the assessee had retracted from his statement subsequently. The learned CIT(A) confirmed the order of the learned AO for the reason that the assessee had failed to discharge the prima facie onus cast upon him to establish that he had not made such investment outside his books of accounts. As the assessee had also again and again reiterated before the revenue that he had enough holding of gold due to the disclosure made in VDIS Scheme in the year 1997. As from the facts of the case it is apparent that no gold was found at the time of search and the entire episode revolves round the existence of gold based on certain documents found at the time of search, thus as decided in COMMISSIONER OF INCOME-TAX Versus RAVI KUMAR 2007 (7) TMI 45 - HIGH COURT, PUNJAB AND HARYANA that though addition could be sustained based on certain documents found during the course of search, penalty cannot survive unless and until some more cogent evidence of concealment of income is revealed - in favour of assessee.

Summary

Issues:
Assessment of penalty under section 271(1)(c) of the Act for concealment of income.

Analysis:
The appeal was filed by the assessee against the order of the CIT(A)-II, Surat regarding the penalty imposed under section 271(1)(c) of the Act for the assessment year 2005-06. The assessment was finalized with an addition of Rs. 15 lakhs on account of unexplained investment, leading to the initiation of penalty proceedings. The AO levied a penalty of Rs. 4,50,000 under section 271(1)(c), considering it a case of concealment of income. The AO's penalty order highlighted the failure of the assessee to provide convincing evidence to justify the unexplained investment, leading to a conclusion of willful concealment of income. The CIT(A) upheld the AO's decision, emphasizing the contradictory explanations provided by the assessee throughout the proceedings. The ITAT also affirmed the CIT(A)'s findings, confirming the penalty.

The assessee contended that the investment in jewelry was initially agreed upon during a search but retracted the statement the next day. No physical jewelry was found during the search, and the revenue's inference was based on loose papers without specific details linking the investment to the assessee. The assessee argued that substantial jewelry was declared under the VDIS scheme in 1997, and the Tribunal's confirmation was based on a retracted statement. The ITAT, after considering the submissions and evidence, concluded that while certain documents found during the search could support an addition to income, there was insufficient evidence to uphold the penalty for concealment of income. Therefore, the penalty imposed by the AO and confirmed by the CIT(A) was deleted, and the appeal of the assessee was allowed.