2018 (1) TMI 23 - AT - Income Tax

Penalty u/s 271(1)(c) of the ITA - suppression of facts - Held that - the assessee has proved the source of money and department has no material to establish the case against the assessee that the assessee has concealed income and suppressed the facts and also deliberately furnished inaccurate particulars of income - penalty to be deleted - appeal of assessee allowed.

Issues Involved:
1. Confirmation of penalty levied under section 271(1)(c) of the Income Tax Act.
2. Validity of the addition on account of unexplained cash credits.
3. Assessment of evidence provided by the assessee regarding the source of cash deposits.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Levied under Section 271(1)(c):
The assessee challenged the confirmation of a penalty amounting to ?6,01,369/- levied under section 271(1)(c) of the Income Tax Act. The penalty was imposed by the Assessing Officer (AO) on the grounds that the assessee had concealed income and furnished inaccurate particulars. The penalty was confirmed by the Commissioner of Income Tax (Appeals) [CIT(A)], who observed that the explanation provided by the assessee was "patently false and wrong." The CIT(A) emphasized the importance of the penalty provisions as a deterrent against unscrupulous practices and upheld the AO's decision to levy the minimum penalty of 100% of the tax sought to be evaded.

2. Validity of the Addition on Account of Unexplained Cash Credits:
The core issue revolved around the addition of ?17,61,900/- as unexplained cash credits under section 68 of the Act. The assessee claimed that this amount was received as an advance for the sale of a residential property from relatives, who provided affidavits and supporting documents to substantiate the claim. However, the AO and CIT(A) found the explanations unsatisfactory, particularly due to contradictory statements from M/s Prerak Gems, who initially denied and later confirmed the purchase of jewelry from the assessee's in-laws. The AO concluded that the assessee had evaded tax and imposed the penalty accordingly.

3. Assessment of Evidence Provided by the Assessee Regarding the Source of Cash Deposits:
The assessee provided affidavits from the relatives who allegedly paid the advance, invoices from M/s Prerak Gems evidencing the sale of jewelry, and confirmation letters from the jeweler. Despite these submissions, the AO and CIT(A) were not convinced due to the initial denial by M/s Prerak Gems followed by a subsequent confirmation. The Tribunal, however, noted that the jeweler had explained the mistake and provided comprehensive documentation, including purchase bills, purchase registers, and income tax returns, confirming the transactions. The Tribunal found that the assessee had discharged the onus of proving the source of the cash deposits and that the department had no material evidence to establish that the assessee had consciously concealed income or furnished inaccurate particulars.

Conclusion:
The Tribunal concluded that the penalty under section 271(1)(c) was not justified as the assessee had provided sufficient evidence to explain the source of the cash deposits. The Tribunal relied on the precedent set by the Hon'ble Gauhati High Court in Commissioner Of Income-Tax vs Tezpur Roller And Flour Mills, which emphasized that penalty proceedings require cogent material evidence beyond the rejection of the assessee's explanation. Accordingly, the Tribunal set aside the order of the CIT(A) and directed the AO to delete the penalty, allowing the appeal of the assessee.

Final Judgment:
The appeal of the assessee was allowed, and the penalty levied under section 271(1)(c) was directed to be deleted. The order was pronounced on 27th December 2017.

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