2015 (12) TMI 30 - AT - Income Tax

Penalty under section 271(1)(c) - Difference in stock as per bank statement vis-a-vis books of the assessee - Held that - Revenue proceeds on the basis that difference between these two figures represents concealed income. That view is not entirely free from doubt as it is a ground reality that bank statements at times reflect inflated value of stocks so as to avail higher credit limits. There is nothing more than bank statement figure which is put against the assessee. Whatever be the merits of upholding addition on such facts, in our considered view, an addition of this nature cannot be visited with penalty proceedings. Hon ble jurisdictional High Court s judgment, in the case of CIT Vs Sachidanand Pulse Mills 2014 (12) TMI 750 - Gujarat high Court holds so. Penalty in respect of declining deduction for write off due to joint venture having been aborted, we find that the Tribunal has confirmed the quantum addition. While doing so, the Tribunal, vide order had observed that the resolution also passed after the financial year by the appellant and no copy of MOU dated 15.11.2003 has been furnished before any of the authorities below . The aspect regarding joint venture having been aborted was rejected on technical grounds. Such a loss, if it is indeed found to be on aborted joint venture, is generally allowable. It is also important to bear in mind that the AO did not even bother to given an opportunity of hearing because, as it appears from his observations extracted earlier in the order, he was of the view that findings in the assessment proceedings were good enough for imposing penalty as well. That is clearly an erroneous approach. In view of these discussions, the penalty in respect of write off was not justified either. The penalty in respect of depreciation already stands deleted and the AO is not in appeal. - Decided in favour of assessee

Summary

Issues:
Challenge to penalty under section 271(1)(c) for assessment year 2005-06.

Analysis:
1. The appellant challenged the penalty imposed under section 271(1)(c) by the CIT(A) in the assessment year 2005-06. The appellant contended that the penalty was incorrectly upheld by the CIT(A).

2. During the assessment proceedings, the Assessing Officer made various additions, including a difference in stock value, depreciation on a display unit, and write-off of advances. The Assessing Officer required the assessee to explain why penalty under section 271(1)(c) should not be imposed. The appellant requested to keep the penalty proceedings on hold until the related appeal was disposed of by the Tribunal, which was rejected by the Assessing Officer. The penalty was imposed based on the discrepancies found in the stock value and write-off of advances.

3. The CIT(A) upheld the penalty concerning the difference in stock value and write-off of advances. The CIT(A) observed that the appellant failed to provide a satisfactory explanation for the discrepancies, leading to the penalty being confirmed based on inaccurate particulars of income.

4. Upon further appeal, the Tribunal considered the arguments and evidence presented. The Tribunal found that the addition related to the stock value discrepancy did not warrant penalty proceedings, citing a judgment from the jurisdictional High Court. Additionally, the penalty for the write-off of advances was deemed unjustified as the Assessing Officer did not provide an opportunity for a fair hearing and the quantum addition had technical discrepancies.

5. Ultimately, the Tribunal decided to delete the penalty imposed on the appellant, considering the various factors and legal precedents. The appellant was granted relief, and the appeal was allowed.

This comprehensive analysis covers the issues raised in the legal judgment and provides a detailed breakdown of the proceedings and decisions made by the authorities involved.