2017 (7) TMI 1280 - AT - Income Tax

Penalty u/s. 271(1)(c) - Addition u/s 68 - loan transactions were not genuine nor the creditworthiness of the creditors stood proved - whether the Assessing Officer has recorded its satisfaction specifying a particular facet of section 271(1)(c) as concealment of particulars of income or furnishing of inaccurate particulars of income before initiating the penalty proceedings. - HELD THAT - In the instant case, a study of the assessment order as a whole indicates that the satisfaction of the AO regarding initiation of penalty proceedings for furnishing inaccurate particulars of income is quite discernible from the assessment order itself. It is no doubt true that in last para of assessment order, the AO has mentioned Issue notice u/s. 271(1)(c), read with explanation (B) for penal proceedings which are being initiated separately . However, at the same time, the AO has mentioned in last lines of para 5 of assessment order as under The assessee has failed to disclose the correct details regarding the income as well as the investments made by him, penal proceedings u/s. 271(1)(c) read with explanation (B) are being initiated against her. AO and on composite reading of assessment order, we find that the satisfaction of AO was discernible from the assessment order that the penalty proceedings were proposed to be initiated for furnishing inaccurate particulars of income. This alludes that the assessee was aware of the facets of section 271(1)(c), under which the penalty proceedings were proposed to be initiated, as is discernible from the assessment order. As such now there lies nothing in the mouth of assessee to contend that penalty is bad in law for want of specific charge against her. Therefore, we find that the facts of the case in hand are not existing in the judicial pronouncements relied by the assessee and thus are not relevant to the context of the present appeal before us in the peculiar facts and circumstances. Therefore, the additional ground raised by the assessee deserves to fail. On going through the findings reached by the ld. Authorities below and the examinations of documentary evidence furnished by assessee made by AO, we find that the creditors had made cash deposits in their bank accounts almost equal to the amounts of unsecured loans advanced to the assessee immediately prior to issuance of cheques/DDs in favour of the assessee. CIT(A) has rightly observed that in such a scenario, cash deposits of huge amounts prior to issue of cheques cannot be a co-incidence in case of each and every creditors under consideration, particularly when no such other instances of huge cash deposit were found in the bank statements. One of the creditors, Mr. Bishan Swaroop admitted in his statement that he borrowed money from several persons to advance loan to the appellant, which also does not appear credible for want of any supporting documents on record. ITRs submitted with respect to two of the creditors showing meager income, do not justify the creditworthiness of the creditors to advance huge loans to the appellant.No cogent evidence were laid on record to prove the creditworthiness of the creditors, the onus of which lay upon the assessee u/s. 68 which he failed to discharge - AO has rightly been treated as income in respect of which particulars were concealed by the assessee within the meaning of Explanation 1(B) of Section 271(1)(c) - Decided against assessee.

Issues Involved:
1. Sustenance of penalty under Section 271(1)(c) of the IT Act, 1961.
2. Validity of Show Cause Notices (SCNs) issued under Section 271(1)(c).
3. Genuineness and creditworthiness of unsecured loans.
4. Explanation and evidence for the source of investment in property and stamp duty.

Issue-wise Detailed Analysis:

1. Sustenance of Penalty under Section 271(1)(c):
The assessee challenged the penalty of ?11,63,947/- imposed under Section 271(1)(c) of the IT Act, 1961, for the assessment year 2009-10. The penalty was levied for furnishing inaccurate particulars of income. The assessee's total income was assessed at ?42,06,490/- against the returned income of ?4,56,490/-. The penalty was based on the addition of ?37,50,000/- made by the AO, which included unexplained investment in property and unsecured loans from seven persons.

2. Validity of Show Cause Notices (SCNs):
The assessee raised an additional ground challenging the validity of the SCNs dated 14.11.2011, 23.12.2011, and 03.04.2012, arguing that they did not specify the precise charge, making the penalty order unsustainable in law. The Tribunal admitted this legal ground, citing the decision of the Supreme Court in National Thermal Power Company Ltd. (229 ITR 383) and Delhi High Court in Gedore Tools Pvt. Ltd. (238 ITR 268). However, the Tribunal found that the satisfaction of the AO regarding initiation of penalty proceedings was discernible from the assessment order itself, thus rejecting the assessee's contention.

3. Genuineness and Creditworthiness of Unsecured Loans:
The AO found that the creditors had deposited cash in their bank accounts almost equal to the amount of unsecured loans advanced to the assessee immediately prior to issuing cheques. The assessee could only produce two creditors for examination, and the remaining creditors were not produced. The AO concluded that the loan transactions were not genuine, and the creditworthiness of the creditors was not proved. The CIT(A) upheld the AO's findings, stating that the assessee failed to substantiate the explanation and prove the creditworthiness and genuineness of the loan transactions.

4. Explanation and Evidence for Source of Investment in Property and Stamp Duty:
The assessee explained that the stamp duty of ?7,50,000/- was invested from past savings but failed to provide any supporting evidence. The AO added this amount to the total income, and the assessee did not challenge this addition in quantum appeal. The CIT(A) dismissed the assessee's appeal, stating that no detail or supporting evidence was submitted during the appellate proceedings. The Tribunal upheld the CIT(A)'s findings, noting that the assessee failed to substantiate the explanation and prove the creditworthiness and genuineness of the loan transactions.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the penalty imposed under Section 271(1)(c) of the IT Act. The Tribunal found that the satisfaction of the AO regarding initiation of penalty proceedings was discernible from the assessment order, and the assessee failed to substantiate the explanation and prove the creditworthiness and genuineness of the loan transactions. The Tribunal also noted that the assessee did not challenge the additions in quantum appeal, thereby accepting the additions made by the AO. The appeal was found to have no merits and was liable to be dismissed.

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