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2019 (4) TMI 296 - HC - Income TaxPenalty u/s 271(1)(c) - assessee agreed to the addition of cash credits - assessee offered for taxation genuine loans to avoid protracted litigation - money in question remitted by the son and daughter of the said senior partner Mr.Jaganathan - tribunal reduced penalty from 200% to 100% - substantial question of law - HELD THAT - The matter of explanation furnished by the assessee firm, being accepted by the learned Tribunal or not, is a fact finding exercise and unless the findings of the Tribunal can be held to be perverse, in our opinion, no substantial question of law arises. We do not find any such perversity in the order passed by the learned Tribunal. Tribunal has already reduced the penalty to the minimum level of 100% of tax on such concealed income. It cannot be said that merely because the assessee has agreed to a particular addition to be made in his declared income, the penalty under Section 271(1)(c) of the Act cannot be imposed nor there is any merit in the proposition that since the penalty was not imposed for the cash entry in the name of daughter for which also the assessee agreed for the said addition, no such penalty could be imposed for the credit in the name of the son Mr.Anandha Kumar Jagannathan and in the name of the third party Mr.Rueban Robert Ponnia. No substantial question of law arising in the present appeal filed by the assessee.
Issues:
1. Upholding of penalty under Section 271(1)(c) of the Income Tax Act. 2. Reversal of the order of the Commissioner of Income Tax (Appeals) canceling the penalty. 3. Justification for imposing penalty based on genuine loans offered by the assessee. Issue 1: Upholding of Penalty under Section 271(1)(c) of the Income Tax Act: The appeal raised substantial questions of law regarding the imposition of penalty under Section 271(1)(c) by the Income Tax Appellate Tribunal (ITAT). The Tribunal upheld the penalty imposed on the assessee, citing gross falsification of records in relation to loans received. The Tribunal found discrepancies in the accounts of the creditors, indicating that the funds were actually sourced from the managing partner of the assessee-firm. Despite the assessee's argument that the loans were genuine and offered for taxation to avoid litigation, the Tribunal concluded that the records were falsified to show receipt from the creditors. The Tribunal directed the Assessing Officer (AO) to restrict the penalty to a minimum amount. Issue 2: Reversal of the Order of the Commissioner of Income Tax (Appeals) Canceling the Penalty: The Commissioner of Income Tax (Appeals) had initially canceled the penalty imposed by the Assessing Authority, but the ITAT reversed this decision and reinstated the penalty to a minimum level. The ITAT justified its decision based on the findings of gross falsification of records and the misleading representation of funds received as loans from creditors. The ITAT differentiated the case from precedents cited by the appellant's counsel, emphasizing the deliberate misrepresentation of transactions in the books of accounts. The ITAT's decision to reinstate the penalty was based on the lack of creditworthiness of the creditors and the misleading nature of the transactions. Issue 3: Justification for Imposing Penalty Based on Genuine Loans Offered by the Assessee: The appellant argued that the loans offered by the assessee were genuine and were declared for taxation to avoid prolonged legal disputes. However, the Revenue contended that the funds sourced from the son and daughter of a senior partner were routed through a third party, raising doubts about the authenticity of the transactions. The ITAT upheld the penalty at a minimum level of 100% of the tax on the concealed income, emphasizing the deliberate misrepresentation of funds in the books of accounts. The High Court, after considering the arguments from both sides, concluded that no substantial question of law arose in the case. The Court found no merit in the appellant's contention that penalty imposition was unjustified due to the declaration of certain funds as income. In conclusion, the High Court dismissed the appeal, stating that no substantial question of law arose from the case. The Court upheld the ITAT's decision to impose the penalty under Section 271(1)(c) based on the deliberate misrepresentation of funds in the accounts, despite the appellant's argument regarding the genuineness of the loans declared for taxation.
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