2015 (5) TMI 505 - AT - Income Tax

Penalty levied u/s 271(1)(c) - unexplained assets - Held that - So far the gold ornaments are concerned, the assessee has given the proper explanation for the source of gold ornaments in respect of each and every assessee. The Assessing Officer substantially accepted the assessee s explanation and treated only a small part of the gold ornaments to be unexplained. Therefore, in our opinion, the assessee has given proper explanation in respect of the gold ornaments which is not found to be false or untrue, though the Assessing Officer accepted the assessee s explanation partially on estimated basis. In the above circumstances, in our opinion, levy of penalty in respect of part of the gold ornaments which are treated as unexplained is not justified. However, the facts are different in respect of cash found and investments in other assets like KVP, NSC and SBI Bond. No proper explanation has been given in respect of cash found or the investment in KVP, NSC and SBI Bond. The only explanation for cash in hand was that it belongs to various family members and the savings is out of the withdrawal for household expenditure in the preceding year. We have seen that the withdrawal by the assessee in the preceding year is meager with which the assessee would be able to manage the household expenses only and would not be able to save much. No evidence has been given that the part of the cash belongs to the family members. The Assessing Officer has already given the credit on estimated basis in respect of some cash in hand. In view of above, we are of the opinion that in respect of cash in hand which is treated as unexplained and also the investments in KVP, NSC and SBI Bond, it cannot be said that the assessee was able to substantiate his explanation. The explanation given was general, without any supporting evidences. In view of above, we are of the opinion that the levy of penalty u/s 271(1)(c) in respect of unexplained jewelry was not justified while the levy of penalty in respect of unexplained cash and investments in KVP, NSC, SBI Bond was justified. - Decided partly in favour of assessee.

Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act.
2. Explanation and treatment of unexplained gold ornaments.
3. Explanation and treatment of unexplained cash.
4. Explanation and treatment of investments in Kisan Vikas Patra (KVP), National Savings Certificates (NSC), and SBI Bonds.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied Under Section 271(1)(c):
The common ground raised in all the appeals was against the confirmation of the penalty levied under Section 271(1)(c) by the CIT(A). The appellants argued that the penalty should not be levied merely because the additions were accepted to buy peace and end litigation. The Tribunal noted that the penalty under Section 271(1)(c) should not be automatically levied merely because the assessee accepted the additions.

2. Explanation and Treatment of Unexplained Gold Ornaments:
The Tribunal observed that a significant part of the gold ornaments found during the search was accepted by the Assessing Officer (AO) as explained. For instance, in the case of Atulbhai D. Patel, out of 1453 grams of gold ornaments, only 107 grams were treated as unexplained. Similarly, in the case of Sejalben A. Patel, out of 1919 grams, 188 grams were treated as unexplained. The Tribunal noted that approximately 90% of the gold ornaments were accepted as explained. It was acknowledged that the assessees might not maintain complete documentary evidence for the acquisition of each gold ornament. The Tribunal concluded that the plausible explanation provided by the assessees for the gold ornaments should not result in the levy of penalty under Section 271(1)(c) for the small portion treated as unexplained.

3. Explanation and Treatment of Unexplained Cash:
The Tribunal found that the explanation for the substantial cash found with Dahyabhai S. Patel, Premanandbhai S. Patel, Arvindbhai N. Patel, and Onil N. Patel was not satisfactory. Despite credit given by the AO for cash presumed to belong to various family members, more than 50% of the cash found from each person was treated as unexplained. The Tribunal noted that the withdrawals for household expenses were not sufficient to justify the accumulation of such substantial cash. For example, in the case of Onilbhai N. Patel, the total cash found was Rs. 4,72,900, out of which Rs. 3,52,900 was treated as unexplained. The Tribunal concluded that the unexplained cash represented undisclosed income, justifying the penalty under Section 271(1)(c).

4. Explanation and Treatment of Investments in KVP, NSC, and SBI Bonds:
The Tribunal noted that no satisfactory explanation was provided for the source of investments in KVP, NSC, and SBI Bonds. For instance, in the case of Onilbhai N. Patel, investments included Rs. 60,000 in KVP, Rs. 10,000 in NSC, and Rs. 3,20,000 in SBI Bonds. The Tribunal concluded that these investments represented undisclosed income, justifying the penalty under Section 271(1)(c).

Conclusion:
The Tribunal held that the levy of penalty under Section 271(1)(c) for unexplained gold ornaments was not justified as the assessees provided a plausible explanation. However, the penalty for unexplained cash and investments in KVP, NSC, and SBI Bonds was justified due to the lack of satisfactory explanation. The AO was directed to recalculate the penalty accordingly.

Result:
- Appeals bearing IT(SS)A Nos. 663, 664, 666, 667 & 672 were allowed.
- Appeals bearing IT(SS)A Nos. 661, 665 & 671 were partly allowed.
- Appeals bearing IT(SS)A Nos. 662, 668, 669 & 670 were rejected.

Order Pronouncement:
The order was pronounced in the Court on 17th April, 2015, at Ahmedabad.

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