2017 (7) TMI 209 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee has received the cash loans - proof of identity, genuineness and creditworthiness of donors - Held that - The assessee having once filed the confirmations in which no defect has been pointed out, the onus on the assessee stands discharged. In response to notice u/s 131(1) of the Act the said parties filed the affidavit, bank account, acknowledgment of filing of income tax returns directly to the Assessing Officer. The finding of the Assessing Officer that the said entities are fake is on the basis of no material on record and purely on the basis of surmises and conjectures. In fact on the other hand the assessee has proved the identity, genuineness and creditworthiness by filing various documents by the customers as mentioned here in above. Even if the creditors do not appear in response to the notice u/s 131, it is not the duty to enforce the said parties by the assessee and make them present before the Assessing Officer. Assessing Officer will have to arrive at a prima facie satisfaction during the course of proceedings with regard to the assessee having concealed particulars of income or furnished inaccurate particulars, before he initiates penalty proceedings. See case of Madhushree Gupta 2009 (7) TMI 38 - DELHI HIGH COURT . Thus the penalty so levied u/s 271(1)(c) of the Act is directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
- Validity of penalty order under section 271(1)(c) of the Income Tax Act
- Jurisdiction of the Assessing Officer to impose penalty
- Nature of transactions as advances received from customers
- Consideration of appellant's reply by the Assessing Officer
- Compliance with relevant laws in penalty imposition
- Discharge of onus by the assessee in proving genuineness of transactions

Validity of Penalty Order:
The appeal questioned the validity of the penalty order under section 271(1)(c) of the Income Tax Act. The appellant argued that the order was illegal as the show cause notice was issued by a different authority than the one passing the penalty order. Additionally, it was contended that the Assessing Officer did not record satisfaction during assessment proceedings, as required by law, before imposing the penalty.

Jurisdiction of Assessing Officer:
Another issue raised was the jurisdiction of the Assessing Officer to levy the penalty without being prima facie satisfied during the assessment proceedings regarding the concealment of income or furnishing inaccurate particulars. Reference was made to a judgment by the Delhi High Court in the case of Madhushree Gupta to support the argument that the penalty was imposed without proper initiation.

Nature of Transactions:
The case involved transactions where the assessee received advances from customers against booking of plots. The Assessing Officer disputed the nature of these transactions, considering them as cash loans instead of advances. The appellant provided confirmations from various parties along with PAN and bank statements to prove the genuineness of the advances received.

Consideration of Appellant's Reply:
It was contended that the Assessing Officer did not consider the appellant's reply filed in response to the show cause notice before passing the penalty order. This lack of consideration was highlighted as a procedural error in imposing the penalty under section 271(1)(c) of the Act.

Compliance with Relevant Laws:
The appellant challenged the penalty order on the grounds that it was not in accordance with the relevant laws. The argument was based on the assertion that both the order by the CIT(A) and the penalty order by the Assessing Officer did not adhere to the legal provisions, rendering them liable to be quashed.

Discharge of Onus by the Assessee:
The final issue revolved around the assessee's discharge of onus in proving the genuineness of the transactions. The appellant argued that by providing necessary confirmations and documents, the onus on the assessee was fulfilled, and the Assessing Officer's doubts regarding the authenticity of the transactions lacked substantial basis. Reference was made to a Supreme Court decision to support the contention that the assessee had met the burden of proof.

In the judgment delivered by the Appellate Tribunal ITAT Delhi, the penalty under section 271(1)(c) was directed to be deleted based on the arguments presented. The Tribunal found in favor of the assessee, emphasizing procedural lapses, lack of jurisdiction in penalty imposition, and the genuineness of the transactions as key factors in overturning the penalty order. The decision highlighted the importance of proper initiation of penalty proceedings, consideration of appellant's submissions, and the discharge of onus by the assessee in proving the legitimacy of transactions.