2016 (5) TMI 367 - AT - Income Tax

Penalty levied U/s 271(1)(c) - unexplained investment U/s 69A - Held that - It is a fact that the assessee s father was 90 years old suffering from cancer, have not been denied. The fact that the earlier gift of ₹ 13.75 lacs from the father has not been disputed by the department. The ld CIT(A) while confirming the penalty has relied only on the observation of the ITAT in quantum proceedings. It is a settled law that the penalty proceedings are neither mechanical nor automatic and merely because there is a finding in the quantum order making the addition by itself cannot justify for imposition of penalty more so when the assessee had disputed the addition. The assessee s reliance on the decision in the case of Eilly Litty & Compnay and National Textiles (2009 (3) TMI 33 - SUPREME COURT ) is well founded. Thus the ld CIT(A) except relying on the observations of the ITAT has done nothing to hold the assessee s explanation was false and any other material to draw an inference qua the imposition of penalty. The assessee has given a reasonable explanation on merits about the gift and while considering the penalty issue, nothing adverse has been commented thereon except the finding of the ITAT. It is a settled law that penalty proceedings are distinguished and separate and assessee can raise fresh plea in the penalty proceedings, which has been done in this case. Having raised proper explanation and please in the penalty proceedings, it was incumbent on the CIT(A) to have considered the reply as an appellate authority and given proper findings. The mere reference to ITAT in quantum proceedings, which are separate and distinguish, cannot partake a character of exercise of appeal discretion by the ld CIT(A). In view thereof, the case before us is not fit for imposition of penalty, the same is deleted. - Decided in favour of assessee

Summary

Issues involved:
- Appeal against penalty under section 271(1)(c) of the IT Act, 1961 for concealment of income in respect of unexplained investment under section 69A for the assessment year 2006-07.

Detailed Analysis:
1. The appellant contested the penalty imposed under section 271(1)(c) for an addition of ?10,00,000 made to the returned income, related to unexplained cash deposits in the bank. The Assessing Officer (AO) justified the penalty by highlighting the unproved sources of the cash deposits and the failure to declare the income, leading to inaccurate particulars of income. The AO found the explanation provided by the appellant unsatisfactory, falling within Explanation-1 to section 271(1)(c). The appellant challenged the penalty in the first appeal, arguing that the penalty was upheld solely based on the quantum findings without independent consideration of the penalty proceedings.

2. The CIT(A) upheld the penalty based on the ITAT's quantum findings, emphasizing the unexplained cash deposits and dismissing the appellant's explanation regarding a gift from the appellant's ailing father. The appellant argued that the penalty should not be imposed merely due to sustained additions in quantum proceedings, citing legal precedents. The appellant maintained that the cash deposits were from a genuine gift received from the father, supported by documentary evidence. The appellant highlighted the near-death condition of the father and the delay in depositing the cash due to medical emergencies, refuting any intention to conceal income.

3. The appellant further contended that the quantum findings should not automatically lead to penalty imposition, emphasizing the distinct nature of penalty proceedings. The appellant cited various legal cases to support the argument that the burden of proof regarding the source of funds was discharged, shifting the onus to the revenue authorities. The appellant criticized the authorities for relying solely on quantum observations without independent assessment in the penalty proceedings.

4. The Tribunal observed that the CIT(A) had not provided any additional grounds to support the penalty, merely relying on the ITAT's quantum findings. The Tribunal acknowledged the appellant's reasonable explanation regarding the gift from the father and the unique circumstances leading to the delay in cash deposits. The Tribunal emphasized the need for independent consideration in penalty proceedings and concluded that the penalty was unjustified, ultimately allowing the appeal and deleting the penalty.

In conclusion, the Tribunal overturned the penalty imposed under section 271(1)(c) based on the appellant's reasonable explanation, the unique circumstances surrounding the cash deposits, and the lack of independent assessment in the penalty proceedings.