2015 (4) TMI 785 - AT - Income Tax

Addition u/s 68 of the Income Tax Act,1961 - Failed to prove creditworthiness of the creditors - Penalty u/s 271(1)(c) - Furnished inaccurate particulars of income - Held that - It is settled principle of law that the assessee is required to prove genuineness of transaction, identity of creditors and creditworthiness of such creditors. In the absence of such proof, the Assessing Authority would be justified in making addition by invoking provisions of section 68 of the Act. In the case in hand, admittedly, the assessee could not furnish the evidences for proving creditworthiness of the creditors. Therefore, we do not find any infirmity in the order of the ld.CIT(A), same is hereby upheld. Thus, grounds of assessee s appeal are rejected. - Decided against the assessee. Levy of penalty for the additions made u/s 68 - Held that - There is no finding by the authorities below that the money belonging to the assessee has been circulated through the socalled creditors. The addition has been sustained on the basis that the assessee could not discharge its onus with regard to the creditworthiness of the creditors. - However, de hors the said provision, it is not possible to state with certainty that the said sums would be concealed income of the assessee for the year under consideration. - it cannot be said with certainty that the sum received from the creditors would be concealed income of the assessee. - Following the judgment of National Textiles 2000 (10) TMI 19 - GUJARAT High Court and Jalaram Oil Mills 2001 (6) TMI 15 - GUJARAT High Court and of CIT vs. Khoday Eswarsa and Sons 1971 (9) TMI 19 - SUPREME Court it is held that penalty cannot be sustained. - Decided in favour of assessee.

Summary

Issues Involved:
1. Addition under Section 68 of the Income Tax Act, 1961.
2. Penalty under Section 271(1)(c) of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Addition under Section 68 of the Income Tax Act, 1961:

The primary issue in the quantum appeal was the addition of Rs. 15 lakhs under Section 68 of the Income Tax Act, 1961. The assessee contended that they had discharged the primary onus by providing sufficient details and confirmations from creditors. However, the CIT(A) confirmed the addition, stating that the assessee failed to establish the identity of the creditors, the genuineness of the transactions, and the creditworthiness of the creditors. The Tribunal noted that the assessee could not furnish adequate evidence to prove the creditworthiness of the creditors, despite obtaining confirmations and making efforts to provide necessary documents. The Tribunal upheld the CIT(A)'s decision, emphasizing that the onus was on the assessee to prove the genuineness of the transaction, the identity of the creditors, and their creditworthiness. As a result, the quantum appeal was dismissed.

2. Penalty under Section 271(1)(c) of the Income Tax Act, 1961:

In the penalty appeal, the issue was the imposition of penalty under Section 271(1)(c) for allegedly filing inaccurate particulars of income. The assessee argued that the penalty proceedings and assessment proceedings are distinct and that there was no concealment of income. The Tribunal considered the fact that the deposits were received through banking channels and that the assessee had furnished confirmations from creditors. The Tribunal also noted that there was no finding by the authorities that the impugned amount represented the assessee's income or that the money belonged to the assessee. The Tribunal referred to the judgments of the Hon'ble Gujarat High Court in the cases of National Textiles vs. CIT and CIT vs. Jalaram Oil Mills, which held that penalty cannot be imposed if the facts and circumstances do not conclusively prove that the amount in question was the concealed income of the assessee. Based on these precedents, the Tribunal directed the AO to delete the penalty, allowing the penalty appeal.

Conclusion:

The Tribunal dismissed the quantum appeal, upholding the addition of Rs. 15 lakhs under Section 68, while allowing the penalty appeal, directing the deletion of the penalty imposed under Section 271(1)(c). The order was pronounced on February 20, 2015, at Ahmedabad.