2015 (12) TMI 286 - AT - Income Tax

Penalty u/s 271(1)(c) - deceleration of additional income in reply to notice u/s 153A - Held that - So far as, the first addition is concerned, the money belonged to partnership firm M/s Silver Arch Builders and Promoters. Before the settlement commission, applicants made prayer for capitalization of their income following application method, which was allowed by the ld. Settlement Commission. As decided in ACIT vs Haresh N Mehta 2013 (11) TMI 1582 - ITAT MUMBAI assessee has explained the source of obtaining the alleged bogus loan, being the amount received from the firm, which has been offered by the firm to tax and subject to the proceedings before the Settlement Commission. Thus, it was held that double addition cannot be made of the amount which is already subjected to tax in the hands of the firm. Thus in the present case also penalty cannot survive So far as, the second addition is concerned there is no positive material on record imposing penalty and addition is based upon interpretation of facts. Therefore, at least, it is not a fit case for levying penalty, because, the assessee disclosed the material facts/details and even the ld. Commissioner of Income Tax (Appeals) affirmed the addition only to the extent of ₹ 9,92,800/- out of the addition of 28,60,000/-. That too is based upon appreciation of facts. It may or may not be a good case for sustaining part addition but not sustaining the penalty, because, for penalty either there should be concealment of income or furnishing of inaccurate particulars of such income. Even otherwise, if a claim is made which is not sustainable in law, penalty is not automatic, as was held by Hon ble Apex Court in CIT vs Reliance Petro products Pvt. Ltd. 2010 (3) TMI 80 - SUPREME COURT , thus, the penalty cannot survive. - Decided in favour of assessee

Summary

Issues Involved:
Penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for undisclosed income.

Detailed Analysis:

Issue 1: Grounds for Penalty Imposition
The assessee contested the penalty of Rs. 11,86,896/- imposed under section 271(1)(c) of the Income Tax Act, 1961, based on two main issues. The first issue pertained to unexplained cash credit, while the second issue involved bogus loans and gifts. The Assessing Officer initiated penalty proceedings after a search and seizure action under section 132 of the Act.

Issue 2: Assessment and Appeal
The assessee declared additional income following a notice under section 153A, leading to the penalty imposition. The penalty was affirmed by the Commissioner of Income Tax (Appeals) on the grounds of non-disclosure of income. The assessee then appealed to the Tribunal challenging the penalty.

Issue 3: Analysis of Additions
The major additions to the total income were related to unexplained cash credit, bogus loans, and gifts. The First Appellate Authority confirmed certain additions, including the unexplained cash credit and bogus loans, while deleting other additions.

Issue 4: First Addition
Regarding the first addition related to the money belonging to a partnership firm, it was argued that the direction of the Settlement Commission, which allowed capitalization of income, was binding on the Assessing Officer. The Tribunal's previous decisions supported the assessee's claim, leading to the dismissal of the Revenue's appeals. As the Settlement Commission's direction was not available during penalty imposition, it was concluded that no penalty was justifiable for the first addition.

Issue 5: Second Addition
For the second addition concerning unexplained cash credit, the Assessing Officer's addition was challenged based on the submission of necessary documents by the assessee. It was highlighted that the addition was made on presumption without independent investigation, and the penalty was not warranted as the addition was based on interpretation of facts. The Commissioner of Income Tax (Appeals) also affirmed only a partial addition, indicating a lack of concealment or inaccurate particulars. Citing legal precedent, it was concluded that the penalty could not be sustained.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the penalty could not be upheld in light of the arguments presented and the analysis of the additions made to the total income.