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2016 (4) TMI 959 - AT - Income TaxPenalty u/s 271(1)(c) - addition u/s 68 - Held that - It is undisputed fact that these cash creditors are opening as on 01/4/2006 and not pertained to year under consideration. The ld Assessing Officer issued notice in quantum proceeding U/s 133(6) of the Act. The parties concerned filed confirmations in some of the cases. It is also fact that the assessee paid the outstanding during the year and in subsequent year but could not prove beyond doubt before the Assessing Officer. It is well settled law that opening balance of cash creditor cannot be added in the year under consideration U/s 68 of the Act. No Penalty u/s 271(1)(c) levied - Decided in favour of assessee
Issues Involved:
1. Confirmation of penalty under Section 271(1)(c) of the Income Tax Act, 1961. 2. Voluntary surrender of income by the assessee. 3. Assessment of the genuineness of cash creditors and unsecured loans. 4. Distinction between assessment proceedings and penalty proceedings. Issue-wise Detailed Analysis: 1. Confirmation of Penalty under Section 271(1)(c): The primary issue is whether the penalty of ?13,77,028/- levied under Section 271(1)(c) for "concealing and furnishing inaccurate particulars of income" was justified. The Assessing Officer (AO) imposed the penalty after finding discrepancies in the income declared by the assessee and the actual income. The AO noted that the assessee failed to provide complete addresses and details of cash creditors, leading to the conclusion that the surrender of income was not voluntary but compelled by the investigation. 2. Voluntary Surrender of Income by the Assessee: The assessee argued that the income was surrendered voluntarily to "buy peace of mind and to avoid prolonged litigation." The assessee cited several case laws to support the claim that voluntary surrender should not attract penalties. However, the AO and the CIT(A) found this claim to be "totally false and baseless," asserting that the surrender was made only after the department's investigation and not suo moto. The CIT(A) upheld the penalty, stating that the surrender was not voluntary and the assessee failed to prove the genuineness of transactions. 3. Assessment of the Genuineness of Cash Creditors and Unsecured Loans: The assessee had shown unsecured loans and cash creditors in the balance sheet, which were opening balances from previous years. The AO made additions under Sections 41(1)(a) and 68 of the Act due to the assessee's inability to produce confirmations for these loans. The assessee contended that these were genuine transactions and the amounts were surrendered to avoid litigation. The Tribunal noted that these were opening balances and not new transactions for the year under consideration, thus should not be added under Section 68. 4. Distinction Between Assessment Proceedings and Penalty Proceedings: The Tribunal emphasized that penalty proceedings are distinct from assessment proceedings. The AO's reliance on findings from the assessment order without independent enquiry in the penalty proceedings was criticized. The Tribunal cited various case laws to argue that mere confirmation of addition does not automatically justify the imposition of a penalty. The Tribunal also noted that the assessee had disclosed full particulars of loan creditors in the books of account and balance sheet. Conclusion: The Tribunal found that the penalty under Section 271(1)(c) was not justified. The key reasons included: - The amounts in question were carried over from earlier years and thus should not be added under Section 68. - The assessee had disclosed full particulars of the transactions. - The AO did not conduct an independent enquiry for the penalty proceedings but relied on the assessment order. - The Tribunal referenced similar cases where penalties were deleted under comparable circumstances. By following the precedents and considering the entirety of facts and circumstances, the Tribunal allowed the assessee's appeal, reversing the CIT(A)'s order and deleting the penalty. Final Judgment: The appeal was allowed, and the penalty of ?13,77,028/- under Section 271(1)(c) was deleted. The order was pronounced in the open court on 18/03/2016.
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