2014 (4) TMI 671 - AT - Income Tax

Confirmation of penalty u/s 271(1)(c) of the Act Additions made u/s 68 of the Act Held that - The findings given in the assessment proceedings are quite relevant and have probative value but such a finding alone may not justify the levy of penalty in a given case, because the considerations that arise in the penalty proceedings are different from the assessment proceedings - In the penalty proceedings, the matter has to be examined from the angle that whether the assessee is guilty of furnishing inaccurate particulars of income or concealment of income - the issue has to be examined afresh and the assessee may adduce fresh evidence in the penalty proceedings to establish by way of material, relevant facts which may come into effect as liability of penalty. The assessee even though may not file any fresh evidence but still may rely upon the existing material to prove that presumption raised by the Explanation would stand rebutted and he is not guilty of concealment of furnishing of inaccurate particulars of income or for concealment - the sole material which has been relied upon is the statement of Mr. D.A. Sawant the piece of material alone cast a serious doubt against the genuineness of the loan - this may not be conclusive for the penalty proceedings - Once the assessee furnished the explanation based on the material on record, he has to give a conclusive finding on such explanation whether it is a bonafide or has been substantiated or not thus, the matter is remitted back to the AO to decide afresh about the penalty Decided in favour of Assessee.

Summary

Issues Involved:
1. Justification of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Genuineness and creditworthiness of loans taken from Mr. D.A. Sawant and M/s. G.R. Industries.
3. Adequacy of opportunity provided to the assessee to explain the case.

Issue-wise Detailed Analysis:

1. Justification of Penalty under Section 271(1)(c):
The core issue is whether the Commissioner (Appeals) was justified in confirming the penalty of Rs. 8,03,250 under section 271(1)(c) of the Income Tax Act, 1961, levied by the Assessing Officer due to additions made under section 68 for sums aggregating Rs. 22,50,000. The Tribunal noted that the penalty proceedings require an examination of whether the assessee is guilty of furnishing inaccurate particulars of income or concealment of income. The Tribunal emphasized that the considerations in penalty proceedings differ from those in assessment proceedings and that the findings in the latter have probative value but are not conclusive for the former.

2. Genuineness and Creditworthiness of Loans:
The loans in question were from Mr. D.A. Sawant (Rs. 20,00,000) and M/s. G.R. Industries (Rs. 2,50,000). The Assessing Officer had added these amounts under section 68, questioning the genuineness and creditworthiness of the lenders. Mr. D.A. Sawant, a salaried employee earning Rs. 8,000 per month, admitted in his statement that the Rs. 20,00,000 credited to his bank account was deposited by Mr. Kawaljeet Singh Sachdeva, and he merely issued cheques to the assessee. The Tribunal confirmed the addition on the grounds that the genuineness and creditworthiness of the loan could not be substantiated. Similarly, the loan from M/s. G.R. Industries was added because the assessee could not produce the party to verify the genuineness of the loan.

3. Adequacy of Opportunity Provided to the Assessee:
The assessee contended that the Assessing Officer passed the penalty order without giving a proper opportunity to explain the case. The Commissioner (Appeals) held that even if the assessee's letter dated 18th January 2010 was not considered by the Assessing Officer, the penalty could not be quashed as the order was passed on merits. The Tribunal found that the Commissioner (Appeals) did not adequately address the explanation provided by the assessee or the merits of the case. The Tribunal decided to restore the matter to the file of the Assessing Officer for a fresh examination of the assessee's explanation and the genuineness of the transactions.

Conclusion:
The Tribunal set aside the impugned order passed by the Commissioner (Appeals) and restored the entire issue of penalty to the file of the Assessing Officer. The Assessing Officer was directed to consider the assessee's explanation and conduct necessary inquiries, including from Mr. Kawaljeet Singh Sachdeva. The assessee was given the opportunity to produce confirmation from relevant persons to corroborate the genuineness of the transactions. The matter was to be decided afresh, providing due and effective opportunity of hearing to the assessee. The appeal was allowed for statistical purposes.