2015 (7) TMI 651 - AT - Income Tax

Penalty u/s 271(1)(c) - Bogus expenses - Held that - In the light of the pleadings before the Bench and the arguments advanced the only claim of the assessee which may have some force is that the relief on quantification of the penalty imposed as admittedly the Ld. CIT(A) on facts has not taken into consideration the fact that in the quantum proceedings at the stage of the CIT(A), relief was granted to the extent of ₹ 3 lakh and it has been urged that the said relief has not been varied till date. It is further seen that it has been canvassed that the issue of expenses for bogus share application money was restored by the ITAT to the AO. Both the Ld. Sr. DR and the ld. AR have submitted that the issues also come up in a miscellaneous petition also before the ITAT. Accordingly the issue for considering these issues is restored back to the file of the CIT(A) with the direction to consider the allowability of the said limited claim of the assessee and thereafter passed a speaking order in accordance with law after giving the assessee a reasonable opportunity of being heard. - Decided partly in favor of assessee for statistical purposes.

Summary

Issues Involved:
1. Legality and factual correctness of the CIT(A) order.
2. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act.
3. Penalty on addition due to share application money.
4. Disclosure of all facts by the appellant.
5. Merit-based finding regarding concealment in the penalty order.
6. Explanation provided by the appellant regarding concealment.
7. Limitation on the penalty order.

Detailed Analysis:

1. Legality and Factual Correctness of the CIT(A) Order:
The appellant contested the CIT(A) order dated 27/08/2012, arguing it was flawed both legally and factually. The Tribunal reviewed the facts and confirmed that the CIT(A) had provided partial relief in the quantum proceedings, but the ITAT and the High Court upheld the remaining additions.

2. Confirmation of Penalty under Section 271(1)(c):
The CIT(A) confirmed the penalty of Rs. 10,14,087 levied by the AO under Section 271(1)(c). The AO concluded that the assessee failed to justify the genuineness and creditworthiness of Rs. 25,50,000, which was deemed as accommodation entries. Additionally, preliminary expenses of Rs. 17,308 were inappropriately debited. Thus, the AO determined that the assessee willfully concealed taxable income amounting to Rs. 25,67,308.

3. Penalty on Addition Due to Share Application Money:
The appellant argued that the penalty on the addition of share application money was unjustified as all material and evidence proving the identity of share applicants were provided. However, the Tribunal noted that the High Court found the share application transactions to be bogus, with statements from individuals denying their investments. The Tribunal upheld the penalty, emphasizing that the assessee failed to discharge the primary onus of proving the cash credit.

4. Disclosure of All Facts by the Appellant:
The appellant claimed that all facts were disclosed in the return, negating concealment or furnishing inaccurate particulars. The Tribunal recognized that assessment and penalty proceedings are distinct, but the appellant's explanations were not accepted during the quantum proceedings, leading to the penalty.

5. Merit-Based Finding Regarding Concealment in the Penalty Order:
The appellant contended that the penalty order lacked merit-based findings on concealment. The Tribunal, however, referred to the High Court's findings that the transactions were bogus and the appellant failed to produce shareholders for verification, thus justifying the penalty.

6. Explanation Provided by the Appellant Regarding Concealment:
The Tribunal considered the appellant's explanation that the penalty proceedings should independently evaluate the explanations offered. However, the Tribunal found that the appellant's failure to produce books of accounts and rebut the findings of three separate forums, including the High Court, rendered the explanations insufficient.

7. Limitation on the Penalty Order:
The appellant argued that the penalty order was barred by limitation. The Tribunal did not find merit in this argument, as the penalty proceedings were initiated and concluded within the permissible time frame.

Conclusion:
The Tribunal upheld the penalty imposed under Section 271(1)(c) but acknowledged that the CIT(A) did not consider the relief granted in the quantum proceedings regarding Rs. 3 lakh. The Tribunal restored the issue to the CIT(A) for reconsideration of the penalty quantum, directing a re-evaluation of the limited claim after giving the appellant a reasonable opportunity to be heard.

Judgment:
The appeal was partly allowed for statistical purposes, with directions for the CIT(A) to reassess the penalty quantum considering the relief granted in the quantum proceedings. The order was pronounced on 15th July 2015.