2015 (11) TMI 1383 - AT - Income Tax

Penalty under section 271(1)(c) - CIT(A) deleted penalty - Held that - The assessee has given reasonable details showing confirmation by the lender, bank statement details etc. while such evidences may not prove the genuineness of the transaction to the hilt , these evidences do indeed show prima facie bonafides of the assessee. These evidences have not been found to be false, incorrect or doubtful. In these circumstances, mainly because the assessee has not been able to give details of lender s Assessing Officer, the explanation of the assessee cannot indeed be rejected. The assessee also has a reasonable explanation for not pursuing the quantum addition in appeal as the related quantum addition is completely tax neutral. In view of these discussions, as also bearing in mind entirety of the case, we approve well reasoned conclusion arrived at by the learned CIT(A) and decline to interfere in the matter. - Decided in favour of assessee.

Summary

Issues:
- Penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 1997-98.

Detailed Analysis:

1. Assessing Officer's Challenge to CIT(A) Order:
The Assessing Officer challenged the order of the ld. CIT(A) regarding the penalty under section 271(1)(c) of the Income Tax Act, 1961. The grounds for challenge included the failure of the assessee to substantiate the explanation offered, leading to the imposition of the penalty. The Assessing Officer justified the penalty by emphasizing the inability of the assessee to prove the creditworthiness of the creditor from whom a loan of Rs. 10 lakhs was taken. The Assessing Officer invoked section 68 of the Income-tax Act, 1961, which deals with unexplained cash credits. The Assessing Officer contended that the assessee's heavy losses did not absolve them from proving the creditworthiness of the creditor. The Assessing Officer relied on Explanation 1 to section 271(1) to establish that the assessee furnished inaccurate particulars of income, leading to the imposition of the penalty.

2. CIT(A)'s Deletion of Penalty:
The CIT(A) deleted the penalty imposed by the Assessing Officer. The CIT(A) considered the appellant's contentions and submissions, noting that the addition was made due to the appellant's failure to provide details of the Assessing Officer with whom the creditor was being assessed. The CIT(A) observed that the appellant had submitted the confirmation letter and bank statement of the creditor and had a plausible explanation for not appealing against the assessment order due to heavy losses. The CIT(A) found the appellant's explanations regarding the credit to be bona fide and concluded that penalty under section 271(1)(c) was not leviable. The CIT(A) directed the Assessing Officer to delete the penalty.

3. Appellate Tribunal's Decision:
The Appellate Tribunal dismissed the appeal by the Assessing Officer. The Tribunal noted that the appellant had provided reasonable details, including confirmation by the lender and bank statement details, demonstrating prima facie bonafides. While these details may not conclusively prove the genuineness of the transaction, they were not found to be false or incorrect. The Tribunal agreed with the CIT(A) that the explanation of the assessee could not be rejected solely based on the lack of details of the lender's Assessing Officer. The Tribunal also considered the tax-neutral nature of the quantum addition not pursued in appeal by the assessee. Consequently, the Tribunal upheld the CIT(A)'s decision to delete the penalty, emphasizing the reasonable explanations provided by the assessee and declining to interfere in the matter.

In conclusion, the Appellate Tribunal upheld the decision to delete the penalty under section 271(1)(c) of the Income Tax Act, 1961, based on the assessee's reasonable explanations and the lack of conclusive evidence of concealment or inaccurate particulars of income.