2017 (3) TMI 429 - AT - Income Tax

Penalty u/s.271(1)(c) - unconfirmed/unsubstantiated cash credit - Assessee s claim is that the necessary particulars were duly submitted - Held that - The lack of response from the creditors cannot lead to an inference of concealment. As regards the cash credit of ₹ 2 lacks it has been submitted that name of the party was duly disclosed and assessing officer has failed to take cognizance of the same. In these circumstances in our considered opinion assessee cannot be held guilty of concealment or furnishing of inaccurate particulars of income. Ld. CIT was aware of this aspect but has held that the difference between assessed income and the returned income leads to an inference that there was concealment. This is totally against the exposition of the Hon ble Apex Court in the case of Reliance Petro product 2010 (3) TMI 80 - SUPREME COURT Furthermore we note that a larger bench of the Hon ble Apex Court in the case of Hindustan steel Ltd vs State of Orissa 1969 (8) TMI 31 - SUPREME Court had expounded that penalty need not be levied if the conduct of the assessee is not found to be contumacious. In the facts and circumstances of this case in our considered opinion the assessee s conduct is not contumacious to warrant levy of penalty. - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for assessment year 1997-98 based on unexplained cash credit and unproved loans.

Analysis:
The Assessing Officer (AO) levied a penalty of ?1,49,600 under section 271(1)(c) of the Income Tax Act based on additions made during assessment, including ?2,00,000 for unexplained cash credit and ?1,75,000 for unproved loans. The AO initiated penalty proceedings as the assessee allegedly concealed income and filed inaccurate particulars. The assessee failed to satisfactorily explain the cash payments and loans, leading to the penalty notice. Despite multiple opportunities, the assessee's submissions did not adequately prove the genuineness of the transactions, resulting in the penalty imposition.

Upon appeal, the CIT-A upheld the penalty, considering the difference between the returned and assessed income as indicative of concealment. The CIT-A disregarded the assessee's explanations regarding the cash credit and loans, leading to the penalty confirmation. The assessee argued that the additions were not due to inaccurate particulars or concealment, emphasizing the lack of mens rea or guilty mind. However, the CIT-A remained unconvinced, affirming the penalty based on the income difference inference.

The ITAT Mumbai, comprising of Shri Shamim Yahya and Shri Ravish Sood, analyzed the case and found that the penalty was unjustified. They noted that the additions were not conclusive evidence of concealment, especially as the necessary particulars were reportedly submitted. The tribunal highlighted that lack of response from creditors should not lead to a presumption of concealment. Additionally, the tribunal observed that the assessing officer overlooked disclosed information regarding the cash credit, indicating no deliberate concealment. Citing legal precedents, including the Reliance Petro product case and Hindustan Steel Ltd vs State of Orissa, the tribunal concluded that the assessee's conduct was not contumacious, warranting the deletion of the penalty.

In light of the above discussion and legal precedents, the ITAT set aside the CIT-A's order and revoked the penalty, allowing the appeal filed by the assessee. The tribunal's decision was based on the lack of conclusive evidence of concealment or deliberate inaccurate reporting, emphasizing the importance of assessing contumacious conduct before imposing penalties.