2018 (3) TMI 1806 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - deposit of cash found in bank accounts - HELD THAT - Assessee had made specific request for making further enquiries/investigation but no further enquiry was made by the A.O. If Utsav Corporation did not respond to the notice u/s. 133(6) A.O. should not have drawn any adverse inference without making any further enquiry. It appears that the entire additions have been made only on the basis of suspicion conjunctures and surmises. In our considered opinion the same cannot be the foundation for the levy of penalty u/s. 271(1)(c) of the Act. Assessee had given a very logical and reasonable explanation in respect of cash found to be deposited in the bank accounts. It is equally true that the said explanation did not find any favour with the A.O. But the fact remains that a very logical and reasonable explanation was given by the assessee. In our understanding of the facts we do not find any this to be a fit case for the levy of penalty u/s. 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act on two separate appeals by two different assessees.
2. Explanation of the source of cash deposit in bank accounts related to trading goods.
3. Relevance of affidavit submitted during penalty proceedings.
4. Consideration of further enquiries/investigations by the Assessing Officer.
5. Justifiability of penalty imposition based on suspicion, conjectures, and surmises.

Analysis:
1. The judgment involves two separate appeals by different assessees against the levy of penalties under section 271(1)(c) of the Income Tax Act. The appeals were heard together due to similar facts and disposed of by a common order for convenience.

2. The penalties were imposed based on cash deposits in bank accounts, with the assessee explaining that they were from the sale of trading goods. The Assessing Officer treated the cash deposits as income, initiating penalty proceedings. The assessee's explanation was supported by business transactions with specific corporations.

3. During the penalty proceedings, an affidavit was filed by a relevant individual, Shri Piyush Patel, clarifying previous statements and providing additional information. The Tribunal considered this affidavit crucial in assessing the case, highlighting the importance of separate assessment and penalty proceedings.

4. The Tribunal noted that despite the affidavit and requests for further enquiries, the Assessing Officer did not conduct additional investigations. The lack of thorough investigation and reliance on suspicion and conjectures were deemed insufficient grounds for penalty imposition.

5. Ultimately, the Tribunal found the assessee's explanation logical and reasonable, emphasizing that the penalty imposition was unjustified. The Tribunal set aside the findings of the lower authority and directed the Assessing Officer to delete the penalties in both appeals, highlighting the need for a solid foundation based on evidence rather than assumptions.

6. Additionally, an additional ground raised by the assessee was dismissed as it was not pressed during the proceedings. The judgment was pronounced in open court on a specific date in 2018, concluding the case.