2018 (3) TMI 1864 - AT - Income Tax

Penalty u/s 271(1)(c) - Unexplained bank deposits - assessee failed to explain the source of such deposits - HELD THAT - When the assessee has failed explanation source and the said addition has been confirmed even up to the stage of this Tribunal then, in the penalty proceedings only defence available to the assessee is that though the explanation of the assessee was not accepted by the AO however, the same is bonafide. We find that the assessee has not furnished any such explanation either before the Assessing Officer in penalty proceeding or before the ld. CIT(A) in the appellate proceedings. Even what the assessee has contended before the ld. CIT(A) is only the same decisions as we have referred in the forgoing paragraphs and nothing else. The assessee has not uttered even a single sentence about the source of the deposit made in the bank account and therefore, when no explanation at all was furnished by the assessee then the question of the same being bonafide does not arise. Even before the ld. CIT(A), the assessee did not furnish any explanation regarding the source of the deposits made in the bank account. Hence, in the facts and circumstances of the case, we do not find any error or illegality in the orders of the authorities below. Accordingly we confirmed the levy of penalty u/s 271(1)(c) of the Act. - Decided against assessee.

Summary

Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of ex-parte assessment order under Section 144 of the Income Tax Act.
3. Acceptance of assessee's submissions and cited court decisions.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:

The primary issue was the confirmation of a penalty amounting to ?4,99,321/- levied by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was based on an ex-parte assessment order under Section 144 of the Act for the assessment year 2006-07. The AO made an addition of ?15,25,000/- on account of unexplained cash deposits in the bank account under Section 69 of the Act. The assessee's appeal against this addition was dismissed by the CIT(A) and further confirmed by the Tribunal. The AO subsequently levied a penalty of ?4,99,321/-, being 100% of the tax to be evaded. The assessee challenged the penalty before the CIT(A), but the appeal was dismissed. The Tribunal noted that the assessee failed to furnish any explanation regarding the source of the deposits, both during the assessment and penalty proceedings. The Tribunal upheld the penalty, stating that the assessee's failure to provide an explanation rendered the penalty justified.

2. Validity of Ex-Parte Assessment Order under Section 144 of the Income Tax Act:

The assessment was completed ex-parte under Section 144 due to the non-appearance of the assessee despite several notices. The assessee filed a return of income on 26.07.2006, which was assessed on 20.12.2011 at a total income of ?83,03,000/-. The AO made additions of ?15,25,000/- and ?65,80,000/- on account of unexplained cash deposits. The assessee contended that the notice under Section 143(2) was not served within the statutory time, leading to an ex-parte assessment. However, this contention was not accepted by the CIT(A) and the Tribunal, as the assessee failed to produce evidence or explain the source of the deposits during the assessment proceedings.

3. Acceptance of Assessee's Submissions and Cited Court Decisions:

The assessee cited 20 decisions from various High Courts and the Supreme Court, arguing that disallowance of any claim cannot be the basis for levying a penalty under Section 271(1)(c). However, the Tribunal found that these decisions were rendered in specific factual contexts and were not applicable to the assessee's case. The Tribunal emphasized that the assessee failed to explain the source of the deposits, and thus, the decisions cited did not support the assessee's case. The Tribunal noted that the assessee's reliance on these decisions without furnishing an explanation for the deposits did not constitute a bona fide defense.

Conclusion:

The Tribunal dismissed the appeal of the assessee and confirmed the levy of penalty under Section 271(1)(c) of the Income Tax Act, 1961, due to the assessee's failure to explain the source of the unexplained cash deposits in the bank account. The Tribunal found no error or illegality in the orders of the authorities below and upheld the penalty imposed by the AO. The order was pronounced in the open court on 19/03/2018.