2017 (5) TMI 573 - AT - Income Tax

Penalty under section 271(1)(c) - addition u/s 68 - Held that - Assessing Officer went into great lengths to verify the genuineness of these transactions and issued summons to the share applicants and his reasons that transaction was not genuine based on statement of the party , and not the product of conclusions based on suspicion. We observe that the facts of the case indicate the onus on the assessee to discharge complete liability to establish that the genuineness, credit-worthiness of the credit entry found in the books of accounts. In the present case, when the Dugar Polymers Ltd itself denied of making an investment in the shares of assessee Company and enclosed the audited balance sheet for financial years 2009 2010 for ready reference then the assessee should have responded positively to proceed next step for cross-verification and cross-examination to prove its point. In view of the above facts and findings we considered that opportunities were provided by the assessing officer to the assessee to substantiate its claim and to disprove the contention of the non-confirming party but the assessee failed to show any initiative as it had not shown any willingness for crossverification and cross-examination of the said party. In view of the above mentioned facts and reasons, we uphold the order of the Ld. CIT(A) vide which penalty imposed u/s. 271(1)(c) of the act was sustained and justified. - Decided against assessee.

Issues Involved:
1. Legality and sustainability of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Justification of addition under Section 68 of the Income Tax Act.
3. Proper recording of mandatory satisfaction by the Assessing Officer (AO) at the time of framing the assessment order.
4. Timeliness and jurisdiction of the penalty order.
5. Accuracy in the quantification of the penalty.
6. Adherence to the principles of natural justice and proper consideration of submissions by the lower authorities.

Issue-wise Detailed Analysis:

1. Legality and Sustainability of Penalty under Section 271(1)(c):
The assessee contested the penalty of ?11,89,650/- levied under Section 271(1)(c) for the addition of ?35,00,000/- under Section 68, arguing it was unsustainable both in law and on facts. The AO had initiated penalty proceedings for furnishing inaccurate particulars/concealment of income, which was upheld by the CIT(A). The Tribunal noted that the AO had provided ample opportunities for the assessee to substantiate its claim but the assessee failed to do so. The Tribunal upheld the penalty, emphasizing the failure of the assessee to prove the genuineness of the transaction and the creditworthiness of the share capital.

2. Justification of Addition under Section 68:
The AO made an addition of ?35,00,000/- to the total income of the assessee as unexplained cash credits under Section 68 after Dugar Polymers Ltd denied any transaction with the assessee. The CIT(A) confirmed this addition, stating that the onus was on the assessee to establish the genuineness and creditworthiness of the credit entry. The Tribunal agreed with the AO and CIT(A), noting that the assessee did not demand cross-examination of Dugar Polymers Ltd and failed to provide satisfactory evidence to prove the genuineness of the transaction.

3. Proper Recording of Mandatory Satisfaction:
The assessee argued that the AO did not record the mandatory satisfaction as required under the Act at the time of framing the assessment order. However, the Tribunal found that the AO had clearly documented the reasons for initiating penalty proceedings in the assessment order and during the penalty proceedings, thereby fulfilling the requirement of recording satisfaction.

4. Timeliness and Jurisdiction of the Penalty Order:
The assessee claimed that the penalty order was barred by limitation and thus without jurisdiction. The Tribunal, however, found no merit in this argument, noting that the penalty proceedings were initiated and concluded within the statutory time limits, and the necessary approvals were obtained from the Joint Commissioner of Income Tax.

5. Accuracy in the Quantification of the Penalty:
The assessee contended that the quantification of the penalty was erroneous and excessive. The Tribunal upheld the penalty amount, stating that the AO had imposed the minimum penalty of 100% of the tax evaded, which was justified given the circumstances of the case.

6. Adherence to Principles of Natural Justice:
The assessee argued that the lower authorities did not properly appreciate the facts and ignored various submissions, violating the principles of natural justice. The Tribunal found that the AO and CIT(A) had duly considered the submissions and evidence provided by the assessee. The Tribunal emphasized that the assessee failed to provide any contrary evidence to disprove the statement of Dugar Polymers Ltd and did not opt for cross-examination, thereby justifying the actions of the lower authorities.

Conclusion:
The Tribunal dismissed the appeal of the assessee, upholding the penalty imposed under Section 271(1)(c) and confirming the addition under Section 68. The Tribunal emphasized the failure of the assessee to prove the genuineness and creditworthiness of the share capital and found that the AO and CIT(A) had acted within their jurisdiction and followed due process. The order pronounced in the open court on 23-03-2017, concluded the appeal in favor of the Revenue.

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