2018 (7) TMI 289 - AT - Income Tax

Levying penalty u/s. 271(1)(c) - additions made in the assessment order u/s. 143(3) - assessee has been found to be in the habit of introduction of unaccounted cash in his books of accounts - Held that - We note that at the time of assessment the assessee had given a consent to add the loans in their income to avoid litigation and save valuable time but which does not mean that the amount entered in the books in name of different persons are unverifiable therefore it cannot be treated as unsubstantiated cash deposit. AO has wrongly alleged in penalty order that the assessee contended the persons have genuinely advance the money for purchase of goods but due any reasons they have taken their money back which they have advanced earlier lack of their addresses it is very difficult to either present them or get their confirmations. As regard the second addition was made due to cash payment of ₹ 35,000/- it cannot be treated as concealment of income or furnishing of inaccurate particulars because the payment was made to M/s Shakurnbhary Straw Products as accepted in assessment order which is also supported by voucher. In this regard the only default was contravention of the provision of section 40A(3). Since there was no concealment of income nor furnishing of inaccurate particulars therefore penalty cannot be imposed on this point. The third addition was made by disallowing the provision of salary payable which was made for salary expenses incurred genuinely for previous year, at the time of assessment the assessee could not produce the person to whom the salary was given because that person was left job therefore consent of addition had been given, but this does not mean that assessee had concealed income or furnished inaccurate particulars. However, later, the assessee had received the confirmations from the persons to whom the amount of salary was given and produced the same before the Ld. CTI(A), which was not considered. Thus there was no concealment of income nor furnishing of inaccurate particulars on the above points because mere non-acceptance of explanation offered cannot form a basis for the satisfaction of assessing authority to the effect that the assessee has concealed particulars of his income. - Decided in favour of assessee.

Summary

Issues:
- Jurisdiction of AO in levying penalty
- Legality of assessment order
- Levying penalty on additions made in assessment order
- Jurisdiction and limitation of penalty
- Recording mandatory "satisfaction" for penalty order
- Appeal for altering or amending grounds

Analysis:
1. The appeal was against the order of the Ld. Commissioner of Income Tax (Appeals)-II, pertaining to the assessment year 2010-11. The Assessee raised multiple grounds challenging the penalty of ?90,000 levied by the Assessing Officer (AO) without proper jurisdiction and considering the facts and circumstances of the case. The AO had found the Assessee introducing unaccounted cash in the books, leading to the penalty under section 271(1)(c) of the Income Tax Act, 1961.

2. The Assessee contended that the penalty order was contrary to law as the assessment order under section 143(3) was illegal and beyond jurisdiction. The Assessee argued that the penalty was unwarranted, citing the decision of the Supreme Court in CIT vs. Reliance Petroproducts Pvt. Ltd. The Assessee provided explanations and documents to support the genuineness of transactions and loans, which were not fully considered by the authorities.

3. The Tribunal reviewed the orders and documents presented by both parties. It noted that the additions made in the assessment order were based on unsubstantiated cash deposits, contravention of tax provisions, and disallowed salary provisions. The Tribunal found that the Assessee had explained the transactions and loans, providing confirmations and documents. The Tribunal emphasized that non-acceptance of explanations does not automatically imply concealment of income.

4. Relying on legal precedents, the Tribunal concluded that there was no concealment of income or furnishing of inaccurate particulars by the Assessee. The Tribunal highlighted that the penalty under section 271(1)(c) is for concealment or furnishing inaccurate particulars, which were not evident in this case. Therefore, the Tribunal deemed the penalty unwarranted and ordered its deletion.

5. In the final decision, the Tribunal allowed the Assessee's appeal, quashed the penalty of ?90,000 under section 271(1)(c) of the Income Tax Act, and set aside the orders of the authorities below. The Tribunal held that the Assessee had neither concealed income nor furnished inaccurate particulars, leading to the deletion of the penalty.