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2016 (3) TMI 414 - AT - Income TaxPenalty under section 271(1)(c) - undisclosed deposits - Held that - The assessee has given explanation about the source of deposits in the accounts. The explanation could not be substantiated with the supporting evidence, but the explanation was not held by the AO as false. Had the assessee gave confirmation from M/s.Shrinathji Corporation in the Asstt.Year 2002-03, then the addition itself would have been deleted, but the AO has not issued any notice to M/s.Shrinathji Corporation in order to find out whether the explanation given by the assessee is false or not. Similarly, in the Asstt.Yar 2003-04, the explanation given by the assessee is that he has received back ₹ 1.50 lakhs from Shri Anvarbhai Kapadia and that amount was deposited in the bank account. The AO has accepted the facts that a sum of ₹ 3.00 lakhs advanced by the assessee, but disbelieved the explanation of ₹ 1.50 lakhs. Again the explanation of the assessee was not held to be false. Therefore, in view of our discussion, we are of the view that the assessee does not deserve to be visited with penalty under section 271(1)(c) of the Act, and accordingly impugned penalty in both the appeals are cancelled. - Decided in favour of assessee
Issues: Appeal against penalty imposed under section 271(1)(c) for the assessment years 2002-03 and 2003-04.
Analysis: 1. The assessee contested the penalty imposed by the CIT(A) for concealing income or furnishing inaccurate particulars under section 271(1)(c) of the Act. The AO reopened the assessment due to deposits in FD/OD accounts, treating them as unexplained investments. 2. In the assessment year 2002-03, the AO added amounts deposited in the FD/OD account, which the CIT(A) partially upheld. The AO imposed a penalty of Rs. 1,50,000, which the assessee challenged. 3. For the assessment year 2003-04, the AO added Rs. 1,50,000, alleging discrepancies in the explanation provided by the assessee. The penalty imposed was Rs. 20,000. 4. The ITAT reviewed the AO's tabulated details of deposits in the FD/OD account. The CIT(A) deleted most additions except for Rs. 5.00 lakhs, lacking confirmation from M/s. Shrinathji Corporation. 5. The ITAT found that the assessee explained the source of deposits, though evidence was lacking. The AO did not prove the explanation was false or verify with M/s. Shrinathji Corporation. 6. In the assessment year 2003-04, the AO doubted the explanation regarding funds received from Shri Anvarbhai Kapadia. The ITAT noted the AO did not prove the explanation false. 7. Section 271(1)(c) allows penalties for concealing income or furnishing inaccurate particulars, ranging from 100% to 300% of the tax evaded. The deeming provisions under Explanation 1 apply when the assessee fails to substantiate explanations. 8. The ITAT ruled that the assessee's explanations, though lacking evidence, were not proven false by the AO. Lack of confirmation from M/s. Shrinathji Corporation in one instance did not warrant penalty imposition. 9. Therefore, the ITAT canceled the penalties imposed under section 271(1)(c) for both assessment years, as the assessee's explanations were not deemed false or inaccurate. 10. Both appeals of the assessee were allowed, and the penalties were canceled.
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