2017 (8) TMI 719 - AT - Income Tax

Penalty u/s. 271(1)(c) - addition u/s 68 - proof of genuineness of the gift transactions - Held that - the A.O had hardly afforded a period of 5 days to the assessee for producing the aforesaid parties for examination, and on account of failure on the part of the assessee to do the needful within the said short period, therefore added the aforesaid amount to the income of the assessee. Assessee had came forth with an explanation as regards the aforesaid amounts so received by him by way of bank transactions from the duly identified parties, and it is neither the case of the department, nor so evidenced by the material available on record, that the said explanation of the assessee had been found to be false, therefore there can be no escape from the fact that the assessee to some extent had also substantiated his aforesaid explanation (which though not being to the satisfaction of the A.O, would though justify an addition in the hands of the assessee during the course of the quantum proceedings), therefore, the case of the assessee falls beyond the scope and gamut of the Explanation 1 of Sec. 271(1)(c). We find that our aforesaid view that in respect of a transaction which is found to be unproved but not disproved, no penalty u/s. 271(1)(c) is liable to be imposed, stands fortified by the judgment of the Hon ble High Court of Bombay in the case of CIT 8 Vs. Upendra V. Mithani (2009 (8) TMI 1159 - BOMBAY HIGH COURT). - Decided in favour of assessee.

Summary

Issues involved:
1. Penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for furnishing inaccurate particulars of income/concealment of taxable income.

Detailed Analysis:
1. The case involved an individual engaged in the business of dealing in shares and securities, who was also a director in a company. Search and seizure action under section 132(1) of the Income-tax Act was conducted at the company's premises, leading to the issuance of a notice under section 153C to the individual. The Assessing Officer (A.O) made additions to the individual's income due to alleged unproved gift transactions totaling to a certain amount.
2. Subsequently, the A.O issued a show-cause notice under section 271(1)(c) regarding the penalty for furnishing inaccurate particulars of income. The individual contended that the additions were made not because the transactions were found to be bogus but due to failure to comply with the A.O's directions. The A.O imposed a penalty, which was upheld by the Commissioner of Income Tax (Appeals) [CIT(A)].
3. The individual appealed the penalty imposition, arguing that although the transactions were unproved, they were not disproved, and hence, no penalty should be levied. The Appellate Tribunal noted that while the individual failed to produce the donors for examination as directed by the A.O, certain materials existed to support the genuineness of the transactions.
4. The Tribunal emphasized the distinction between assessment and penalty proceedings, stating that the mere addition of an amount to income does not automatically warrant a penalty. It considered the quasi-criminal nature of penalty proceedings under section 271(1)(c) and the need for a bonafide explanation. Despite the failure to fully substantiate the transactions, the Tribunal found that the individual had provided some evidence supporting the receipt of amounts through bank transactions.
5. Citing a precedent from the Hon'ble High Court of Bombay, the Tribunal held that in cases where transactions are unproved but not disproved, no penalty under section 271(1)(c) should be imposed. Consequently, the Tribunal set aside the penalty imposed by the A.O, ruling in favor of the individual.

This detailed analysis covers the issues involved in the legal judgment comprehensively, highlighting the arguments presented by the parties and the reasoning behind the Tribunal's decision.