2019 (2) TMI 287 - AT - Income Tax

Penalty u/s 271(1)(c) - addition u/s 68 - scope of quantum proceedings - Held that - Assessee during assessment proceedings as well as before Ld.CIT(A) had filed details/documents/evidences regarding shareholders as well as creditors which includes confirmation identity and creditworthiness thereby discharging initial onus cast upon assessee under section 68 Neither Ld. CIT (A) nor Assessing Officer in assessment proceedings or during remand proceedings verified any of aforestated details and summarily dismissed claim of assessee by stating that shareholders/creditors were not presented in person before authorities - quantum proceedings are different from penalty proceedings. In our considered view Assessing Officer has not disproved documents/evidences filed by assessee to be inaccurate/false in penalty proceedings. Merely because quantum addition has been confirmed by Ld. CIT (A) against which assessee has not preferred any appeal before this Tribunal would not lead to automatic levy of penalty unless Assessing Officer establishes that documents filed by assessee were not true. - Decided in favour of assessee.

Summary

Issues:
1. Confirmation of penalty for furnishing inaccurate particulars of income.
2. Invocation of section 271(1)(c) of the Act due to unexplained source of credit.
3. Disregard of material produced and submissions by the assessee.
4. Burden of proof on the assessee and failure to rebut by the Assessing Officer.
5. Alleged lack of application of mind by the CIT(A) regarding the evidence.
6. Absence of investigation by the Assessing Officer into the source of credit.
7. Distinction between assessment and penalty proceedings.
8. Requirement of discernible satisfaction for imposing penalty.
9. Consideration of share capital and unsecured loans for additions.

Analysis:

1. The appeal challenged the confirmation of a penalty for furnishing inaccurate particulars of income. The assessee disputed the penalty imposed by the Assessing Officer under section 271(1)(c) of the Act, arguing that the burden of proof had been discharged by providing confirmations, bank statements, and other documents, which were not rebutted by the authorities.

2. The invocation of section 271(1)(c) was based on the unexplained source of credit amounting to ?7,50,000. The CIT(A) upheld the penalty, stating that the assessee failed to satisfactorily explain the source of the credit. However, the tribunal noted that the quantum proceedings and penalty proceedings are distinct, and the burden shifts to the Assessing Officer to disprove the documents filed by the assessee.

3. The assessee contended that the material produced and submissions made were disregarded by the authorities. The tribunal observed that the Assessing Officer did not verify the details and summarily dismissed the claims without disproving the accuracy of the documents filed by the assessee.

4. Regarding the burden of proof, the tribunal emphasized that the Assessing Officer failed to provide evidence to show that the documents filed by the assessee were inaccurate. Merely confirming quantum additions does not automatically justify the imposition of a penalty unless the authorities establish the falsity of the documents.

5. The CIT(A) was criticized for not applying his mind to the evidence produced during the proceedings. The tribunal found that the quantum proceedings' outcome did not automatically warrant the penalty, especially when the documents filed by the assessee remained unproven as inaccurate.

6. The absence of investigation by the Assessing Officer into the source of credit was highlighted. The tribunal noted that no notices were issued to the loan creditors or share applicants, indicating a lack of effort to verify the details provided by the assessee.

7. The tribunal emphasized the distinction between assessment and penalty proceedings, stating that the assessee should be allowed to present evidence in penalty proceedings to demonstrate the accuracy of the information provided. The failure to verify the details filed by the assessee was considered a crucial flaw in upholding the penalty.

8. The tribunal also addressed the requirement of discernible satisfaction for imposing a penalty. Mere averments without clear satisfaction from the order itself were deemed insufficient to justify the penalty imposed by the Assessing Officer.

9. The consideration of share capital and unsecured loans for additions was a key aspect of the case. The tribunal noted that the assessee had filed substantial evidence regarding the shareholders and creditors, discharging the initial burden of proof, which the authorities failed to disprove.

In conclusion, the tribunal allowed the appeal filed by the assessee, emphasizing the importance of verifying the evidence provided by the assessee before imposing penalties for furnishing inaccurate particulars of income.