2017 (12) TMI 1657 - AT - Income Tax

Penalty levied u/s.271(1)(c) - addition u/s.68 - failure to file the confirmation letters in a proper format with all particulars mentioned in it - Held that - There is no dispute on the fact that assessee furnished the names and addresses of 19 depositors. Each of the deposit vary from 15, 000/- to 30, 000/- per the depositor. The names and addresses of the 19 depositors are already on record. It shows the existence of the basic details of the depositors. The details furnished by the assessee indicate the capacity of the assessee in furnishing all the details of the deposits as well as the depositors. It is possible that the assessee would have furnished if the time is given and not after lapse of time of years. AO has not taken any positive step to demonstrate the incorrectness of the details so furnished by the assessee. Therefore in the absence of positive incriminating information against the assessee in our view levy of penalty u/s.271(1)(c)is not justified. It may be good enough for confirming the additions on merit in quantum appeals but certainly falls short of the requirement of confirming the penalty u/s.271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act for inaccurate particulars of income.

Analysis:

Issue 1: Penalty under section 271(1)(c) of the Income Tax Act
The appeal was filed against the order of CIT(A)-2, Pune regarding the penalty levied under section 271(1)(c) of the Income Tax Act. The case involved the confirmation of a penalty of ?1,77,350 on the addition of ?5,15,000 under section 68 of the Act. The main contention was the failure to provide confirmation letters for depositors, leading to the penalty imposition.

Issue 2: Failure to provide confirmation letters
The assessee, engaged in online trading of lottery, received deposits from subscribers during the assessment year. The Assessing Officer (AO) made an addition of ?13,60,000 under section 68 as the assessee could not provide confirmation letters for 19 out of 53 depositors. In the appellate proceedings, the CIT(A) accepted deposits from 34 depositors and restricted the addition to ?5,15,000 involving 19 depositors, leading to the penalty imposition.

Issue 3: Justification of penalty imposition
The CIT(A) confirmed the penalty based on the failure of the assessee to provide confirmation letters from depositors and establish the genuineness of credits. The inability of the assessee to gather confirmation letters and prove the genuineness of credits were key factors in confirming the penalty. However, during the appeal, the counsel argued that there was no incriminating evidence against the assessee and that the penalty imposition was unjustified.

Issue 4: Tribunal's decision
After hearing both parties, the Tribunal noted that the assessee had provided names and addresses of the depositors but failed to submit confirmation letters in the proper format. The Tribunal observed that there was no positive evidence of income concealment or fake credits. The penalty imposition was deemed unjustified as there was no incriminating information against the assessee. The Tribunal allowed the appeal, stating that the penalty under section 271(1)(c) was not justified.

In conclusion, the Tribunal ruled in favor of the assessee, allowing the appeal against the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision was based on the lack of positive evidence supporting the penalty imposition, emphasizing the absence of incriminating information against the assessee.