2015 (12) TMI 1017 - AT - Income Tax

Penalty u/s. 271(1)(c) - addition u/s. 68 - Held that - In the present case the assessee had disclosed the material facts before the AO. When the assessee has made a particular claim in the return of income and has also furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars thereof. It is a settled legal position that penalty proceedings are different from assessment proceedings and the findings given in the assessment though it may constitute good evidence but same is not conclusive in the penalty proceedings Further, merely because Assessee has not challenged the order of assessment levying tax and interest and has paid tax and interest that by itself will not be sufficient for the authorities either to initiate penalty proceedings or impose penalty. In the present case, we are of the view that in the absence of complete and convincing corroborative evidence, the Revenue may justify addition, but in the matter of penalty proceedings, the onus lies heavily on the Revenue to prove that the assessee had concealed its income or has filed inaccurate particulars of its income. No penalty is leviable u/s 271(1)(c) and therefore direct its deletion. Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act based on additions made by the Assessing Officer and confirmed by the Commissioner of Income Tax (Appeals).

Analysis:

Issue 1: Levy of penalty under section 271(1)(c) on the addition of unsecured loan and opening cash balance.
The Assessing Officer (AO) had levied a penalty under section 271(1)(c) on the Assessee for the disallowance and additions made during assessment. The Commissioner of Income Tax (Appeals) partially upheld the penalty, directing the AO to delete the penalty on certain disallowances but confirming it on the addition of unsecured loan and opening cash balance. The Commissioner held that the Assessee failed to provide a satisfactory explanation regarding the opening cash balance and the unsecured loans, leading to the conclusion that the penalty was justified under the legal provisions. The Commissioner relied on the decision of the Hon'ble Supreme Court in the case of Dharmendra Textile to support the penalty imposition. However, the Assessee contended that the additions were duly reflected in the statements of cash for the relevant assessment years and had not concealed any income or furnished inaccurate particulars. The Assessee argued that the penalty should be deleted as the onus was on the Revenue to prove concealment of income. The Tribunal agreed with the Assessee, emphasizing that the penalty proceedings are distinct from assessment proceedings, and the Revenue must provide convincing evidence to justify the penalty. Therefore, the Tribunal directed the deletion of the penalty under section 271(1)(c) in this case.

Conclusion:
The Tribunal allowed the appeal of the Assessee, concluding that no penalty was leviable under section 271(1)(c) based on the facts and legal provisions presented. The decision highlighted the importance of providing a bona fide explanation and complete evidence to justify the imposition of penalties under the Income Tax Act.