2014 (1) TMI 243 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - The assessee has furnished the affidavit of the creditors - The creditors were also produced before the Assessing Officer. They have admitted to have advanced the money to the assessee - They have also produced evidence with regard to the source of income in their hands -Merely because the Assessing Officer or appellate authorities were not satisfied with the source of income, it cannot be said that the assessee either furnished inaccurate particulars or concealed the income - The assessee s case does not fall within the mischief of Explanation (1) to Section 271(1)(c) because the assessee offered an explanation with regard to cash credit which was not found to be false by the Assessing Officer or the learned CIT(A)- The assessee also substantiated the explanation by producing the creditors who admitted having advanced the money to the assessee - Decided against Revenue.

Summary

Issues:
1. Cancellation of penalty under Section 271(1)(c) for unexplained cash credit of Rs.10,36,000/- in the accounts of the assessee.

Analysis:
The appeal before the Appellate Tribunal ITAT Delhi concerned the cancellation of a penalty of Rs.3,51,406/- imposed by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961, for unexplained cash credit of Rs.10,36,000/- in the accounts of the assessee. The Assessing Officer found cash credits in the accounts of three persons, and despite the assessee furnishing affidavits and producing the creditors before the authorities, the Assessing Officer was not satisfied with the creditworthiness and genuineness of the transactions. The addition of Rs.10,36,000/- was made under Section 68, and the penalty was levied. The learned CIT(A) canceled the penalty, leading to the appeal by the Revenue.

The Revenue argued that the creditors had no assessed income, failed to establish the source of the funds, and only had agricultural income, supporting the levy of the penalty. On the other hand, the assessee contended that the creditors affirmed the money deposits, provided evidence of agricultural income, and had discharged the onus of proof. The ITAT had previously noted the existence of a source of income with the creditors but emphasized the need to establish a nexus between the source and the cash credit.

The learned CIT(A) concluded that since the creditors admitted advancing loans and the Assessing Officer did not prove the loans were the assessee's concealed income, no penalty under Section 271(1)(c) could be imposed. The CIT(A) found no concealment or inaccurate particulars furnished by the assessee, hence canceling the penalty. The ITAT upheld this decision, emphasizing that the assessee had provided explanations supported by affidavits and creditor appearances, and the Assessing Officer did not find the explanations false. The ITAT found no grounds to levy the penalty, ultimately dismissing the Revenue's appeal.

In summary, the ITAT upheld the CIT(A)'s decision to cancel the penalty under Section 271(1)(c) due to the assessee's satisfactory explanation and evidence provided regarding the cash credit, despite the Assessing Officer's doubts about the source of income of the creditors. The ITAT's ruling was based on the lack of evidence of concealment or inaccurate particulars by the assessee, leading to the dismissal of the Revenue's appeal.