2015 (12) TMI 1023 - AT - Income Tax

Penalty imposed under section 271(1)(c) - addition of deemed dividend under section 2(22)(e) - Held that - There is a credit balance in respect of M/s. Emmar Diamonds Ltd., appearing in the books of the assessee during the relevant financial year. It is also a fact that the assessee is a shareholder in M/s. Emaar Diamonds Ltd. It is also a fact on record that the credit balance appearing in the name of M/s. Emaar Diamonds Ltd. has been treated as a deemed dividend under section 2(22)(e) of the Act and in the quantum of appeal before the Tribunal, the assessee has accepted the addition by not pressing the ground raised. However, these facts alone would not be sufficient to conclude that assessee has either furnished inaccurate particulars of income or concealed the particulars of income so as to impose penalty under section 271(1)(c). It is well known that assessment proceedings and proceedings for imposition of penalty under section 271(1)(c) are two distinct and separate proceedings. In the facts of the present case, on a reference to the statement of account of loan transaction with M/s. Emaar Diamonds Ltd., a copy of which has been submitted at Page-8 of the paper book, it is very much clear that the assessee had an opening balance of loan to M/s. Emaar Diamonds Ltd. amounting to ₹ 2,32,26,000. During the year, the assessee has also received payment against the aforesaid loan to M/s. Emaar Diamonds Ltd., on different dates starting from 2nd August 2004. As it appears on 23rd September 2004, the assessee received an amount of ₹ 1.50 crores from M/s. Emaar Diamonds Ltd., as a result of which there was a credit balance in favour of the said party. It is the contention of the assessee that M/s. Emaar Diamonds Ltd. per mistake repaid in excess. However, immediately after such mistake came to the notice the assessee on 28th September 2004, paid back an amount of ₹ 50 lakh to M/s. Emaar Diamonds Ltd. On a perusal of the statement of account the explanation of the assessee appears to be correct. It is seen from the statement of account that the assessee is regularly advancing loan to M/s. Emaar Diamonds Ltd., therefore, the claim of the assessee that on 23rd September 2004, M/s. Emaar Diamonds Ltd., while making repayment has paid back excess amount per mistake is quite plausible. Considering the aforesaid facts, we are of the view that the assessee cannot be accrued of furnishing inaccurate particulars of income or concealing particulars of income. Therefore, imposition of penalty under section 271(1)(c) in the present case, in our view, is not justified. Accordingly, we delete the penalty imposed. - Decided in favour of assessee.

Summary

Issues:
- Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2005-06.

Analysis:
The judgment involves an appeal by the assessee against a penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2005-06. The case revolved around the treatment of a credit balance in relation to a sister concern under section 2(22)(e) of the Act. The Assessing Officer added the credit balance as deemed dividend due to the assessee's shareholding in the sister concern. The Commissioner (Appeals) confirmed the penalty imposition, stating that the assessee furnished inaccurate particulars of income. The assessee contended that the addition of deemed dividend did not automatically warrant a penalty under section 271(1)(c) as there was no deliberate attempt to conceal income. The Tribunal noted that while the assessee accepted the addition in the quantum proceedings, it did not imply inaccurate particulars or concealment of income for penalty imposition.

The Tribunal analyzed the facts, noting the loan transactions with the sister concern and the repayment discrepancies leading to the credit balance. The Tribunal observed that the mere acceptance of the addition under section 2(22)(e) did not establish inaccurate particulars or income concealment for penalty purposes. The Tribunal examined the statement of account showing the loan transactions and repayment details, concluding that the assessee's explanation regarding the excess repayment made in error was plausible. Based on the evidence presented, the Tribunal held that the imposition of penalty under section 271(1)(c) was not justified as the assessee did not furnish inaccurate particulars of income or conceal income deliberately.

The Tribunal emphasized the distinction between assessment proceedings and penalty imposition, highlighting the need for a fresh examination of facts and evidence for penalty determination. By scrutinizing the loan transaction details and repayment history, the Tribunal found that the assessee's actions did not amount to furnishing inaccurate particulars of income or concealing income. Consequently, the Tribunal allowed the assessee's appeal, deleting the penalty imposed under section 271(1)(c) for the assessment year 2005-06.