2017 (5) TMI 364 - AT - Income Tax

Penalty u/s. 271(1)(c) - additions on account of foreign travel expenses and addition u/s. 68. - Held that - CIT(A) has rightly observed that it was nowhere submitted that the three basic requirements of proving the identity, creditworthiness and genuineness of the transactions were duly fulfilled. Ld. CIT(A) held that the assessee has furnished inaccurate particulars with a view to concealment of income and explanation given by the assessee is not bonafide. Hence, the penalty was rightly confirmed by the Ld. CIT(A) on additions on account of foreign travel and addition u/s. 68 of the Act, which does not need any interference on our part, hence, we uphold the same - Decided against assessee.

Issues Involved:
1. Legality of the appellate order passed by the Ld. CIT(A) against principles of natural justice and provisions of the I.T. Act, 1961.
2. Confirmation of penalty under Section 271(1)(c) for additions on account of foreign travel expenses and addition under Section 68.
3. Validity of the penalty notice under Section 271(1)(c).
4. Justification for the penalty on disallowed foreign travel expenses.
5. Justification for the penalty on addition under Section 68.
6. General principles related to the imposition of penalty under Section 271(1)(c).

Detailed Analysis:

1. Legality of the Appellate Order:
The assessee challenged the appellate order dated 19/12/2011, arguing it was illegal and against the principles of natural justice and the provisions of the I.T. Act, 1961. The Tribunal upheld the appellate order, finding no violation of natural justice or the Act's provisions.

2. Confirmation of Penalty under Section 271(1)(c):
The Ld. CIT(A) confirmed the penalty imposed by the AO under Section 271(1)(c) for additions of ?5,15,176 on account of foreign travel expenses and ?1,50,000 on account of addition under Section 68. The Tribunal agreed with the CIT(A)'s decision, noting the assessee furnished inaccurate particulars of income intending to evade taxes.

3. Validity of the Penalty Notice under Section 271(1)(c):
The assessee argued that the penalty notice was invalid as it did not specify the default, citing judicial precedents. The Tribunal did not find this argument compelling enough to invalidate the penalty notice, as the AO's intention to penalize for inaccurate particulars was evident.

4. Justification for the Penalty on Disallowed Foreign Travel Expenses:
The AO disallowed the foreign travel expenses, stating they were not related to the assessee's share trading business and lacked evidence of business purpose. The Tribunal upheld this disallowance, noting that the assessee failed to substantiate the business relevance of the travel expenses, thereby justifying the penalty.

5. Justification for the Penalty on Addition under Section 68:
The AO added ?1,50,000 under Section 68, citing the assessee's failure to prove the identity, creditworthiness, and genuineness of the transaction with Sh. S. Maitra. The Tribunal agreed, noting the assessee only provided a confirmation letter without further evidence, thus supporting the penalty for furnishing inaccurate particulars.

6. General Principles Related to the Imposition of Penalty under Section 271(1)(c):
The Tribunal referenced various case laws establishing that penalties under Section 271(1)(c) are justified when there is deliberate concealment or furnishing of inaccurate particulars. The Tribunal found that the assessee's claims lacked bona fide and substantiation, aligning with the principles for imposing penalties.

Conclusion:
The Tribunal dismissed the assessee's appeal, upholding the penalties imposed by the CIT(A) for foreign travel expenses and the addition under Section 68, affirming that the assessee furnished inaccurate particulars with an intent to evade taxes. The decision emphasized the necessity of substantiating claims and the consequences of failing to do so under the I.T. Act, 1961.

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