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2016 (5) TMI 851 - AT - Income TaxPenalty levied u/s 271(1)(c) - addition u/s 68 - Held that - Assessing Officer imposed penalty under this Section on the basis of finding given in assessment order only no separate inquiry has been conducted to disprove the explanation furnished by the assessee. The case laws relied upon by the assessee are squarely applicable on the facts of the case. There is no material on record to show that surrendered income was concealed income of the assessee. Therefore, we have considered view that the ld CIT(A) was not justified in confirming the penalty U/s 271(1)(c) of the Act. Accordingly, we reverse the order of the ld CIT(A). - Decided in favour of assessee
Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. 2. Voluntariness and bona fide nature of income surrender by the assessee. 3. Independent inquiry during penalty proceedings. 4. Onus of proof regarding concealment of income. Issue-wise Detailed Analysis: 1. Confirmation of Penalty Levied under Section 271(1)(c) of the Income Tax Act, 1961: The core issue in the appeal was the confirmation of a penalty amounting to ?15,85,386 imposed under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was levied on the grounds of concealing income and furnishing inaccurate particulars. The assessee's contention was that the income was surrendered voluntarily during the assessment proceedings to avoid prolonged litigation and buy peace of mind. The Assessing Officer (AO) held that the surrender was not voluntary but compelled by the investigation results, thus justifying the penalty. 2. Voluntariness and Bona Fide Nature of Income Surrender by the Assessee: The assessee argued that the income was surrendered voluntarily and bona fide. However, the AO and CIT(A) found this claim to be false, asserting that the surrender occurred only after the department's investigation revealed discrepancies. The CIT(A) concluded that the surrender was not voluntary and was made only after the AO's inquiries, thus indicating that the assessee furnished inaccurate particulars of income. 3. Independent Inquiry during Penalty Proceedings: The assessee contended that the penalty was imposed without any independent inquiry during the penalty proceedings and solely relied on the assessment order's findings. The CIT(A) upheld the penalty, stating that penalty proceedings are independent and do not necessarily require new evidence beyond what was part of the regular assessment. The CIT(A) cited various judicial decisions to support this view. 4. Onus of Proof Regarding Concealment of Income: The CIT(A) emphasized that the responsibility to rebut the inference of concealment lies with the taxpayer. The assessee is expected to provide a credible explanation for the difference between returned and assessed income. In this case, the explanation provided by the assessee was not found to be bona fide. The CIT(A) upheld the AO's conclusion that the assessee failed to prove the absence of concealment, thereby justifying the penalty. Tribunal's Judgment: Upon hearing the rival contentions and reviewing the material, the Tribunal noted that the assessee was in the first year of business and maintained records of customers who booked vehicles. The Tribunal found that the customers were less educated, and the transactions were in cash, which explained the incomplete addresses. The Tribunal observed that the AO did not conduct a separate inquiry during the penalty proceedings and relied solely on the assessment order's findings. Citing precedents, the Tribunal concluded that there was no material evidence to show that the surrendered income was concealed. Hence, the Tribunal reversed the CIT(A)'s order and deleted the penalty. Conclusion: The Tribunal allowed the assessee's appeal, concluding that the penalty under Section 271(1)(c) was not justified. The Tribunal emphasized the need for independent inquiries during penalty proceedings and found the assessee's explanation to be bona fide in the context of the first year of business. The order was pronounced in the open court on 08/04/2016.
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