2017 (3) TMI 1223 - AT - Income Tax

Penalty u/s.271(1)(c) - Held that - As emerges from this tribunal s quantum order that it is not an instance wherein the assessee had not offered any explanation or adduced altogether false explanation in order to state source of the impugned cash deposits. The fact remains that the assessee has already proved to have been engaged in commission business in automobile sector wherein it is not always possible to file all the relevant confirmations. Learned co-ordinate bench also appears to have benefit of opening balance, accumulated profit as well as peak credit after preparing a fund flow statement. We take into account the same to conclude that this is not a fit case to invoke the impugned penalty provision as the assessee has not been able to substantiate his claim in quantum proceedings. We wish to observe here that the hon ble apex court in Reliance Petroproducts case (2010 (3) TMI 80 - SUPREME COURT) has already settled the law that quantum and penalty proceedings are separate and each and every disallowance / addition made in the course of former does not ipso facto attract the latter penal provision in the Act. We keep in mind the same and direct the Assessing Officer to delete the impugned penalty. - Decided in favour of assessee

Summary

Issues:
Assessment of penalty under section 271(1)(c) of the Income Tax Act, 1961 for alleged concealment of income based on unexplained cash deposits in the bank account.

Analysis:
1. The assessee, a commission agent dealing with old vehicles, faced penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961 due to unexplained cash deposits of ?15,58,100 in the bank account. The Assessing Officer treated these deposits as unexplained cash credits under Section 68 of the Act and initiated penalty proceedings for alleged concealment of income.

2. The CIT(A) upheld the Assessing Officer's action, leading the assessee to appeal before the ITAT. The tribunal restricted the quantum addition to ?11.40 lakhs, considering the turnover and profit percentage claimed by the assessee. The tribunal observed discrepancies in the explanations provided by the assessee regarding cash deposits and withdrawals, leading to the partial allowance of the appeal.

3. During the penalty proceedings, the Assessing Officer heavily relied on the quantum developments to allege concealment of income and imposed a penalty of ?4,59,830. However, the ITAT, after analyzing the facts, concluded that the penalty provision should not be invoked. The tribunal noted that the assessee had proven engagement in the commission business and had provided explanations, albeit with some discrepancies. Referring to the Reliance Petroproducts case, the ITAT emphasized that quantum and penalty proceedings are distinct, and not every addition automatically attracts a penalty.

4. Ultimately, the ITAT directed the Assessing Officer to delete the imposed penalty, considering the assessee's engagement in the commission business and the quantum analysis provided by the tribunal. The appeal of the assessee was allowed, overturning the penalty imposed by the lower authorities.

This detailed analysis of the judgment highlights the issues, quantum proceedings, penalty imposition, explanations provided by the assessee, and the ITAT's decision to delete the penalty based on the facts and legal principles involved.