2016 (5) TMI 795 - HC - Income Tax

Penalty u/s 271(1)(c) - sundry creditors outstanding - Held that - The Assessing Officer asked the assessee to furnish confirmations in respect of sundry creditors outstanding in the books of account of the assessee. The case was adjourned to 17.12.2008 and on this date, assessee has not filed the confirmations of the above four creditors and the matter was, therefore, adjourned by the Assessing Officer to 22.12.2008. On 22.12.2008, the counsel or assessee has shown his inability to furnish the confirmation of these four creditors. The copy of the surrender letter is filed at page 23 of the paper book in which the assessee agreed to include the amount of ₹ 5,24,000/- in his income and to pay the tax on the same. The addition was, therefore, made on agreed basis when assessee was cornered by the Assessing Officer to explain the genuineness of the credit in the matter and assessee failed to prove genuine credit/liability in books of account. There is no question of assessee surrendering the amount in question voluntarily. In the present case, at the assessment stage as well as at the penalty proceedings, the assessee has failed to explain the genuineness of the credits in the matter. Whatever explanation was filed, was not substantiated through any evidence or material on record. Thus, assessee failed to explain the genuine credits/liability in books of account on the matter in issue and has therefore, furnished inaccurate particulars of income so as to invite levy of the penalty - Decided in favour of revenue

Issues:
1. Upholding penalty under section 271(1)(c) of the Income Tax Act, 1961
2. Admissibility of additional evidence under Rule 29 of the Income tax Appellate Tribunal Rules 1963
3. Ignoring judicial records, orders, and complaints reflecting creditor liability
4. Perversity of findings by the Tribunal
5. Application of the decision of the Hon'ble Supreme Court in a specific case

Analysis:

Issue 1: Upholding penalty under section 271(1)(c) of the Income Tax Act, 1961
The appellant-assessee challenged the penalty imposed under section 271(1)(c) of the Act for the assessment year 2006-07. The Assessing Officer imposed a penalty amounting to ?1,42,942, which was upheld by the Commissioner of Income Tax (Appeals) and subsequently by the Tribunal. The Tribunal found that the appellant failed to explain the genuine credits/liability in the books of account, leading to the imposition of the penalty. The Tribunal concluded that the appellant furnished inaccurate particulars of income, justifying the penalty under section 271(1)(c). The Tribunal's decision was based on the appellant's failure to prove the genuineness of the credits, and the addition of ?5,24,000 remained unexplained, false, and bogus in the books of account.

Issue 2: Admissibility of additional evidence under Rule 29 of the Income tax Appellate Tribunal Rules 1963
The appellant filed an application under Rule 29 of the ITAT Rules to submit additional evidence, citing reasons such as being in jail during previous proceedings. However, the Tribunal declined to admit the additional evidence as some documents were prior to the assessment order, and no explanation was provided for the delay in filing. The Tribunal emphasized that the burden is on the assessee to prove the nature and source of the sundry creditors, which the appellant failed to do. The Tribunal held that the additional evidence was not relevant to the matter in issue and rejected its admission.

Issue 3: Ignoring judicial records, orders, and complaints reflecting creditor liability
The Tribunal considered various documents and records submitted by the appellant, including suspension of sentence, compromise deed, and court orders. However, the Tribunal found these documents irrelevant to the matter at hand and emphasized the appellant's failure to prove the identity, creditworthiness, and genuineness of the transactions with the creditors. The Tribunal highlighted that the appellant's explanations were not substantiated by evidence or material on record, leading to the dismissal of the appeal.

Issue 4: Perversity of findings by the Tribunal
The appellant contended that the Tribunal's findings were erroneous, both on the admissibility of additional evidence and the merits of the case. However, the High Court upheld the Tribunal's decision, stating that it was a plausible view based on the material on record. The Court found no illegality or perversity in the Tribunal's order and dismissed the appeal.

Issue 5: Application of the decision of the Hon'ble Supreme Court in a specific case
The appellant argued that the Tribunal wrongly applied a decision of the Supreme Court, which was distinguishable on facts and not universally applicable. However, the High Court did not find any merit in this argument and upheld the Tribunal's decision, emphasizing that the Tribunal's reasoning was based on the specific facts and circumstances of the case.

In conclusion, the High Court dismissed the appeal, upholding the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, and supporting the Tribunal's decision regarding the admissibility of additional evidence and the credibility of the appellant's explanations.

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