2016 (7) TMI 93 - AT - Income Tax

Addition of unexplained cash credit under section 68 - Held that - Commissioner of Income Tax (Appeals) has simply brushed aside the arguments advanced before him by the assessee and his learned Authorized Representative but only relied upon the audit report furnished under section 44AB of the Act and thereby came to a conclusion that the accounts drawn by the assessee is genuine with respect to the stock, however held certain sundry creditors to be bogus without further verification. It would have been proper on the part of the learned Commissioner of Income Tax (Appeals) to obtain a remand report from the learned Assessing Officer on the explanation advanced by the assessee before confirming the addition of ₹ 19,39,677/-. At the same time, we are not able to appreciate the conduct of the assessee whose intentions are malafide by furnishing unrealistic statement of accounts intended for different purposes and to gain undue advantage. We are further of the view that no purpose will be solved by remanding the case back to the file of the Assessing Officer because of the long lapse of time. Considering the facts and circumstances of the case and in the interest of justice, we are of the considered view that sustaining the addition by 50% of ₹ 19,39,677/- will suffice to meet the ends of justice. - Decided partly in favour of assessee Penalty under section 271(1)(c) - Held that - Since the entire addition has not been conclusively proved and it is based on assumption and not by verification of the explanation presented before the learned Commissioner of Income Tax (Appeals), we are of the considered view that levy of penalty under section 271(1)(c) of the Act will not be appropriate. While arriving at this conclusion we place reliance in the case of Hari Gopal Singh Vs. CIT 2002 (8) TMI 65 - PUNJAB AND HARYANA High Court wherein it was held that the onus to prove there is concealment is on the part of the Department. Therefore, we hereby delete the penalty levied by the learned Assessing Officer which is further confirmed by the learned Commissioner of Income Tax (Appeals). - Decided in favour of assessee

Summary

Issues:
1. Addition of unexplained cash credit under section 68 of the Act.
2. Penalty under section 271(1)(c) of the Act.

Issue 1 - Addition of unexplained cash credit under section 68 of the Act:
The appellant contested the addition of ?19,39,677 made by the Assessing Officer due to unexplained cash credit under section 68 of the Act. The appellant argued that the sundry creditors were not genuine as they were related to loans obtained from market financiers without security, leading to fictitious purchases and sales to maintain cash flow for loan disbursement. The appellant maintained that since taxes were already paid on these transactions, the addition was unjust and against the principles of natural justice. However, the Commissioner of Income Tax (Appeals) upheld the addition, stating that the appellant's audited accounts were final, and as per legal precedent, all bogus purchases should be added without considering gross profit. The Tribunal noted the malafide intentions of the appellant in furnishing unrealistic accounts but decided to confirm only 50% of the addition, deleting the balance to meet the ends of justice.

Issue 2 - Penalty under section 271(1)(c) of the Act:
The Tribunal concluded that since the addition of unexplained cash credit was not conclusively proved and was based on assumption rather than verified explanation, levying a penalty under section 271(1)(c) of the Act was deemed inappropriate. Citing the case law of Hari Gopal Singh Vs. CIT, it was held that the burden of proof for concealment lies with the Department. Consequently, the penalty levied by the Assessing Officer was deleted, as confirmed by the Commissioner of Income Tax (Appeals).

In summary, the Tribunal partly allowed the appeal regarding the addition of unexplained cash credit, confirming only 50% of the amount, and fully allowed the appeal concerning the penalty under section 271(1)(c) of the Act. The judgment emphasized the importance of substantiated evidence in tax assessments and penalties, ensuring fair treatment and adherence to legal principles.