2019 (8) TMI 607 - AT - Income Tax

Penalty u/s.271(1)(c) - Introduction of additional capital - Assessee was unable to explain the source for the additional capital introduced - HELD THAT - A perusal of the reply given by the assessee in the penalty proceedings show that certain details were filed by the assessee before the Assessing Officer. The assessee had also asked for further opportunity to explain the additional capital and the disallowance of the consultancy charges. No other explanation has been given. Though the assessee says that he has submitted the details, what is the nature of the details also not being coming out of the reply filed by the assessee. It is in the absence of the details being filed, the addition has been made in the course of original assessment. It is because of non-production of the details that the addition has got sustained also. A perusal of the order of the Co-ordinate Bench of this Tribunal in the assessee s own case in the quantum proceedings show that explanation has not been given. The Tribunal has also categorically given a finding that the assessee has not produced any evidence in support of her claim. This being so, even the decision of the Hon ble Bombay High Court in the case of Nayan Builders and Developers 2014 (7) TMI 1150 - BOMBAY HIGH COURT cannot be applied in so far as the very facts that have led to the addition are not being explained by the assessee. However, considering the fact that the assessee has asked for another opportunity to explain her case before the Assessing Officer, in the interest of justice, the issues in the appeal are restored to the file of the Assessing Officer for re-adjudication of the penalty proceedings after granting the assessee adequate opportunity of being heard. The assessee shall provide all the details as called for and as required to substantiate her case for non-levy of penalty U/s.271(1)(c) of the Act. Appeal of the assessee is partly allowed for statistical purposes.

Summary

Issues involved:
Appeal against penalty levied under section 271(1)(c) of the Income Tax Act, 1961 for assessment year 2008-09 due to unexplained additional capital and consultancy charges.

Analysis:
The appeal was filed by the assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2008-09. The Assessing Officer added the unexplained additional capital and consultancy charges to the total income of the assessee as the source for these amounts was not adequately explained. The Commissioner of Income Tax (Appeals) reduced the addition on account of additional capital, but the Tribunal confirmed the order. The assessee further appealed to the High Court, citing debatable issues based on precedents like the case of M/s.Nayan Builders and Developers. The High Court had previously held that penalties are not applicable on debatable issues. However, the Department argued that the assessee failed to provide details or explanations regarding the additional capital and consultancy charges during the assessment or penalty proceedings, which led to the penalty imposition.

The Tribunal noted that the assessee did submit some details during the penalty proceedings but failed to provide sufficient information to justify the additions made during the assessment. Despite the request for further opportunity to explain, the nature of the details submitted remained unclear. The Tribunal emphasized that the burden of proof lies with the assessee, and in this case, the evidence supporting the claims was not produced. While referencing the decisions of the High Courts in other cases, the Tribunal highlighted the importance of explaining the source of income to avoid penalties. Therefore, the Tribunal decided to remand the case back to the Assessing Officer for re-adjudication of the penalty proceedings, providing the assessee with another chance to substantiate their case by providing all necessary details and explanations.

In conclusion, the appeal of the assessee was partly allowed for statistical purposes, and the case was remanded to the Assessing Officer for a fresh decision after granting the assessee an opportunity to present all relevant details to support their claims and potentially avoid the penalty under section 271(1)(c) of the Income Tax Act, 1961.