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2017 (2) TMI 694 - AT - Income Tax


Issues Involved:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act for unexplained expenditure.
2. Levy of penalty under Section 271(1)(c) of the Income Tax Act for undisclosed income.
3. Levy of penalty under Section 271(1)(c) of the Income Tax Act for unaccounted receipts and commission.

Issue-wise Detailed Analysis:

1. Levy of Penalty for Unexplained Expenditure (ITA 233/2016, A.Y. 2007-08):
The penalty under Section 271(1)(c) was considered for an addition of ?94,000 as unexplained expenditure under Section 69C. The Assessing Officer (AO) found a hand-written sheet during a search operation, which showed transactions not reconciled with the regular books of account. The assessee claimed that the amount was part of the undisclosed rotation capital investment declared by Shri J.C. Bansal before the Settlement Commission. However, the AO did not accept this explanation as it was not supported by evidence, leading to the conclusion that the assessee concealed income and furnished inaccurate particulars. The penalty was upheld by the CIT(A) and confirmed by the ITAT, as the explanation was found to be vague and not substantiated by any documentary evidence.

2. Levy of Penalty for Undisclosed Income (ITA 233/2016, A.Y. 2007-08):
The penalty was also considered for an addition of ?5 lakhs as undisclosed income. A seized document showed transactions in cheques and cash, which the assessee failed to reconcile with the regular books of account. The assessee claimed that the payment was not made as the cheques were dishonored. However, the AO did not accept this explanation due to the lack of supporting evidence. The CIT(A) confirmed the addition and the penalty, stating that the assessee did not disclose all facts in the return of income. However, the ITAT found that the assessee later provided evidence showing that the payments were received and accounted for in the books of account, proving that no cash was received against the sale of the flat. Therefore, the penalty on this addition was deleted by the ITAT, emphasizing that quantum and penalty proceedings are distinct and independent.

3. Levy of Penalty for Unaccounted Receipts and Commission (ITA 234/2016, A.Y. 2009-10):
For the A.Y. 2009-10, penalties were considered for two additions: ?59,43,115 and ?4,80,000. The first addition was based on seized documents showing payments from Shri Budhiraja family and a letter detailing investments in M-1 Plaza. The AO added ?1,28,68,362, which was later restricted to ?59,43,115 by the CIT(A). The ITAT confirmed this addition as the assessee failed to produce Shri Monga before the AO and did not co-relate the entries in the seized paper. The penalty was upheld by the CIT(A) but was later deleted by the ITAT, as the explanation provided by the assessee was found to be bonafide and supported by evidence.

For the second addition of ?4,80,000, the penalty was based on seized documents detailing commission payments not reconciled with the books of account. The assessee's explanation was not accepted, and the penalty was confirmed by the CIT(A) and the ITAT, as the explanation was found to be an afterthought and not substantiated by evidence.

Conclusion:
The ITAT partly allowed the appeals, deleting the penalty for the addition of ?5 lakhs in A.Y. 2007-08 and ?59,43,115 in A.Y. 2009-10, while upholding the penalty for the additions of ?94,000 in A.Y. 2007-08 and ?4,80,000 in A.Y. 2009-10. The judgments emphasized the distinction between quantum and penalty proceedings and the necessity of substantiating explanations with evidence.

 

 

 

 

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