2014 (1) TMI 441 - AT - Income Tax

Imposition of penalty u/s 271(1)(c) of the Act Held that - Regarding unsecured loan in both years, the assessee has not even made an attempt to fulfill the requirement of law by establishing the identity and creditworthiness of the loan creditors and genuineness of the transaction - There is one more addition, i.e., regarding unaccounted income credited by the assessee and not declared the same for tax purpose and similarly the assessee had negative cash balance in Assessment Year 2008-09 shown under that head in Balance sheet without including the same in the income of the assessee - There is no explanation of the assessee as to how the penalty is not leviable and there is a clear cut case of concealment of income as well as furnishing of inaccurate particulars of income - As per explanation 1 to Section 271(1), if the explanation is given, which is not found to be false and some other conditions are fulfilled by the assessee, it can be said that 271(1)(c) is not applicable - no explanation is given by the assessee Thus, Section 271(1)(c) is clearly applicable Decided against Assessee. Applicability of Section 41(1) of the Act Held that - Penalty in respect of this addition is not justified because such liability is appearing in the balance sheet of the assessee - it cannot be said that the liability has conclusively ceased to exist and hence although the addition is not in dispute - it does not amount to concealment Thus, Penalty invoking the provision of Section 41(1) of the IT Act set aside decided in faovur of Assessee.

Summary

Issues involved:
Imposition of penalty under Section 271(1)(c) of the I.T. Act for the assessment years 2008-09 and 2009-10.

Analysis:

Assessment Year 2008-09:
1. The assessee contended that the penalty was levied without specifying whether it was for concealment of income or furnishing inaccurate particulars, citing a decision of the Hon'ble Gujarat High Court. The A.O. alleged both defaults, and the tribunal found the penalty order specific and valid based on the A.O.'s allegations. The tribunal distinguished previous judgments cited by the assessee and upheld the penalty.

2. Regarding the merit of the penalty, the penalty was imposed for unexplained cash credits and unaccounted income. The A.O. noted discrepancies in the income declared and unsecured loans received, with the assessee failing to provide evidence to support these transactions. The tribunal found clear instances of concealment and inaccurate particulars, upholding the penalty except for one addition under Section 41(1) of the IT Act, which was deemed unjustified.

Assessment Year 2009-10:
1. The issues raised were similar to the previous year, with the assessee challenging the penalty imposition without specific charges and failure to substantiate credits. The tribunal reiterated its stance from the previous year, upholding the penalty based on the A.O.'s specific allegations of concealment and inaccurate particulars.

2. The tribunal examined the unexplained income and unsecured loans received by the assessee, noting the lack of evidence provided to support these transactions. The penalty was upheld except for one addition under Section 41(1) of the IT Act, where the liability was shown in the balance sheet and not deemed as concealment.

In conclusion, the tribunal partly allowed the appeal for the assessment year 2008-09, deleting the penalty for one specific addition, while dismissing the appeal for the assessment year 2009-10, upholding the penalty imposed by the A.O.