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2013 (9) TMI 530 - AT - Income TaxPenalty u/s 271(1)(c) - Held that - The revenue has to prove that the assessee has either concealed particulars of his income or has furnished inaccurate particulars of his income -There is no finding by the A.O. that the surrendered cash creditors are bogus - the penalty cannot sustained - under section 271(1)(c) penalty can be levied only if either the act of concealment of particulars of income or furnishing of inaccurate particulars of income is found to have been committed by the assessee Following Dilip N. Shroff vs JCIT & Another 2007 (5) TMI 198 - SUPREME Court and CIT vs Reliance Petroproducts Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT The assessee has claimed to have loans from 45 parties. Out of them the assessee had produced duly attested and properly sworn-in affidavits of 23 parties, wherein, they not only have confirmed the factum of their deposit but have also explained the source(s) thereof. It was only when the A.O. asked the assessee to produce all the 45 parties before him, the assessee not finding it feasible and being unable to comply, made a bonafide surrender of the total amount qua them. By the mere reason of such concealment or of furnishing of inaccurate particulars alone, the assessee does not, ipso facto, become liable to a penalty. Imposition of penalty is not at all automatic. Meaning thereby, any addition in quantum would not lead to automatic levy of penalty and this is also true in respect of furnishing of inaccurate particulars of income Decided in favour of Assessee.
Issues Involved:
1. Quantum addition of Rs. 36,00,166/- as bogus brokerage/sale commission. 2. Addition of Rs. 7,73,400/- as unproved cash credits. 3. Addition of Rs. 83,772/- as NSS refund. 4. Penalty under section 271(1)(c) of the Income Tax Act for the above additions. Detailed Analysis: 1. Quantum Addition of Rs. 36,00,166/- as Bogus Brokerage/Sale Commission: The assessee declared a total income of Rs. 5,44,491/- and disclosed agricultural income of Rs. 1,06,860/-. The main source of income was from trading steam coal. The assessee showed sales of coal at Rs. 10,75,30,359/- and purchases at Rs. 10,10,60,820/-, resulting in a gross profit of Rs. 64,69,539/-. After administrative expenses, the net profit declared was Rs. 4,47,491/-. The assessee debited Rs. 36,00,166/- as sales commission payable to Shri Lokesh Jain and Shri Rajesh Jain, shown as sundry creditors. The A.O. was not satisfied with the genuineness of these creditors as the amount was entered on the last day of the accounting year and remained unpaid in subsequent years. The assessee failed to produce the creditors or provide their complete details. Consequently, the assessee surrendered the amount of Rs. 36,00,166/-, which was added to the total income. 2. Addition of Rs. 7,73,400/- as Unproved Cash Credits: The assessee showed unsecured loans of Rs. 7,55,400/- under "sundry parties." Affidavits were filed for some creditors, but not for all. The A.O. directed the assessee to produce the creditors for examination, which the assessee failed to do. Consequently, the assessee surrendered the amount of Rs. 7,73,400/-, which was added to the total income. The assessee's appeal to the CIT(A) against this addition was dismissed. 3. Addition of Rs. 83,772/- as NSS Refund: The amount of Rs. 83,772/- received as NSS refund was directly credited to the capital account. The A.O. treated this as income under Section 80CCA(2) due to an inadvertent mistake by the assessee. This addition was not contested further. 4. Penalty under Section 271(1)(c) of the Income Tax Act: The A.O. imposed a penalty of Rs. 15,64,526/- for the following additions: - Rs. 36,00,166/- as bogus brokerage/sale commission. - Rs. 7,73,400/- as unproved cash credits. - Rs. 83,772/- as NSS refund. The assessee argued that the penalty should not be imposed as the surrender was made to buy peace and avoid litigation. The CIT(A) confirmed penalties on Rs. 36,00,166/- and Rs. 3,41,200/- but deleted the penalty on Rs. 83,772/-. The assessee filed an appeal against the penalty order. Legal Position and Conclusion: The Tribunal noted that penalty proceedings are distinct from assessment proceedings and require proof of either concealment of income or furnishing inaccurate particulars. The assessee's surrender was made to avoid litigation and was not an admission of concealment. The Tribunal referred to several judicial pronouncements, including CIT vs Reliance Petroproducts Pvt. Ltd, which held that making an incorrect claim does not amount to furnishing inaccurate particulars. The Tribunal found that the assessee had provided addresses of the parties and made a bonafide surrender. There was no finding by the A.O. that the surrendered cash credits were bogus. Consequently, the Tribunal deleted the penalties on both Rs. 36,00,166/- and Rs. 7,73,400/-. Final Order: - The appeal regarding the quantum addition (ITA No. 522/Jodhpur/2004) was dismissed. - The penalty appeal (ITA No. 23/Jodhpur/2009) was allowed, and the entire sustained penalty was deleted.
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