2016 (5) TMI 1553 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - unexplained credit under section 68 - HELD THAT - The assessee has not produced any materials to justify his stand that the penalty is not warranted in all these cases. The assessee has also not furnished the names and complete addresses of persons from whom he received the loans, the date of transaction and mode of payment, confirmation statements or any other relevant materials to establish the creditworthiness of the creditors. In the absence of these details, it is not possible for the Revenue to make any enquiries of its own to find the genuineness of the transactions. In the case of unrecorded bonded loans, the assessee himself has conceded that this amount represents unaccounted income of the assessee. The assessee also could not explain the source of investment made towards unredeemed pawn items. For the assessment years 2006-07 2007-08 source of investment could also not be established. For the above mentioned we do not have any other options but to confirm the penalty levied on all these counts. Accordingly penalty levied on all these counts are hereby confirmed. Levying penalty in regard to addition made on account of agricultural income, investment made in purchase of land to the extent and investment made in M/s.Ramdev Jewellery - AO has made addition only for the reason that the assessee s wife did not declare any agricultural income in her return of income with respect to the adjacent agricultural land owned by her - The quantum of agricultural income declared by the assessee is also minimal and there is no substantial reason to disbelieve the claim of the assessee. Revenue has also not brought any evidence to show that the assessee was not indulging in agricultural activities. Similarly, addition towards purchase of land to the extent of ₹ 2,08,000/- is made because the AO opined that the assessee had paid on-money. However, other than oral statements, no other materials or persons were examined to conclusively prove that the assessee had received on-money. Further, investment in Ramdev Jewellery for ₹ 50,000/- is a nominal amount and there can be a presumption that the assessee could possess such amount from his tax paid income. We hereby direct the AO to delete the penalty made on account of the incorrect claim of agricultural income for all the relevant assessment year, investment in purchase of land to the extent of ₹ 2,08,000/- and investment in Ramdev Jewellery for ₹ 50,000/- for the assessment year 2005-06. Appeals of the assessee are partly allowed.

Summary

Issues Involved:

1. Unexplained loans
2. Incorrect claim of agricultural income
3. Unrecorded bond loans
4. Investment in purchase of land
5. Investment in Ramdev Jewellery
6. Unexplained investment in unredeemed pawn items
7. Investment for which source is not proved

Issue-wise Detailed Analysis:

1. Unexplained Loans:
The assessee failed to prove the genuineness of certain transactions and the creditworthiness of the alleged creditors. Despite being asked by the Assessing Officer (AO) to provide names, addresses, dates of transactions, modes of payment, and confirmation statements, the assessee could not furnish these details. The AO treated these loan credits as unexplained under section 68 of the Act and initiated penalty proceedings under section 271(1)(c). The Tribunal upheld the penalty, noting the assessee's failure to explain the genuineness of the loan transactions, thereby confirming the concealment of income.

2. Incorrect Claim of Agricultural Income:
The AO made additions for all relevant assessment years, disbelieving the assessee's claim of agricultural income. This was primarily because the assessee’s wife, who owned adjacent agricultural lands, did not declare any agricultural income. The assessee also failed to provide evidence to support the claim of agricultural income. The Tribunal, however, directed the deletion of the penalty related to agricultural income, noting that the assessee owned agricultural land and the quantum of income was minimal. The Revenue did not provide evidence to prove that the assessee was not engaged in agricultural activities.

3. Unrecorded Bond Loans:
For the assessment years 2004-05 to 2007-08, the AO made additions based on unrecorded bond loans reflected in the seized materials. The assessee conceded that the entries not struck off in the bond books represented unaccounted money. The Tribunal confirmed the penalty on this count, as the assessee admitted to the unaccounted income.

4. Investment in Purchase of Land:
During the assessment year 2005-06, the assessee purchased land for a registered value of ?1,12,000/- but failed to disclose it in the return of income. The AO added ?3,20,000/- to the assessee's income, suspecting an on-money payment of ?2,08,000/-. The Tribunal directed the deletion of the penalty related to the on-money payment, citing a lack of conclusive evidence other than oral statements.

5. Investment in Ramdev Jewellery:
In the assessment year 2005-06, the assessee invested ?50,000/- in M/s. Ramdev Jewellery. The AO made an addition and levied a penalty due to the unexplained source of this investment. The Tribunal directed the deletion of the penalty, considering the amount nominal and presuming the assessee could possess such an amount from his tax-paid income.

6. Unexplained Investment in Unredeemed Pawn Items:
For the assessment year 2005-06, the AO observed an increase of ?20,27,745/- in unredeemed pawn items compared to the previous year. The assessee could not explain the source of this investment, leading to additions and the imposition of a penalty. The Tribunal confirmed the penalty due to the assessee's failure to provide evidence for the source of investment.

7. Investment for which Source is not Proved:
For the assessment years 2006-07 and 2007-08, the AO noted investments for which the source could not be established. The differences between the investments and the sources were ?6,37,883/- and ?13,26,173/- respectively. The assessee failed to furnish evidence to establish the source of these investments, leading to the confirmation of penalties by the Tribunal.

Conclusion:
The Tribunal confirmed the penalties for unexplained loans, unrecorded bond loans, unexplained investments in unredeemed pawn items, and investments for which the source was not proved. However, it directed the deletion of penalties related to the incorrect claim of agricultural income, investment in purchase of land to the extent of ?2,08,000/-, and investment in Ramdev Jewellery for ?50,000/-. The appeals were thus partly allowed.