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2020 (4) TMI 655 - AT - Income TaxPenalty u/s 271(1)(c) - unexplained cash credit u/s.68 - disallowance of expenses - Merely because the assessee could not substantiated his stand of earning income on account of brokerage charges, the same was treated as cash credit u/s.68 - HELD THAT - AO had made passive disallowance of expenses, without offering any explanation or justification in the same and has not proved beyond doubt any activity of concealment of income on the part of assessee. AO had made arithmetic disallowance without offering any reason, explanation or decision in this regard, In the order of assessment, AO had not provided any reason for disallowance of expenses not even mentioned his express intention to disallow those expenses, thus penalty on the said reason is not imposable. In the case of DCIT Vs. Kulwant Singh 2019 (4) TMI 1287 - ITAT CHANDIGARH wherein it has categorically been held that when all the facts with regard to the income were declared in the original return itself, then it cannot be taken as a case of concealment or furnishing of inaccurate particulars of income. Where the satisfaction of the ld.AO while initiating the penalty proceedings u/s.271(1)(c) with regard to filing of inaccurate particulars of income while making claim of brokerage charges and it was not believed by the ld.AO and the ld.AO has considered the same as cash credit income u/s.68 - we find support from the decision of CIT Vs. Reliance Petro Products 2010 (3) TMI 80 - SUPREME COURT wherein it has categorically been held that mere making of a claim, which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding the income of the assessee and such claim made in the return cannot amount to be inaccurate particulars. - Decided in favour of assessee.
Issues:
Appeals against penalty imposition for inaccurate particulars of income and disallowance of expenses. Analysis: 1. The appeals were directed against the order of the Commissioner of Income Tax (Appeals) for the assessment years 2010-11 and 2011-12. 2. In the case for the assessment year 2010-11, the assessee claimed brokerage income but failed to provide details as requested by the Assessing Officer. Consequently, the income was treated as unexplained cash credit under section 68 of the Income Tax Act, leading to penalty proceedings for inaccurate particulars of income. 3. The Commissioner (Appeals) partially allowed the appeal, prompting the assessee to appeal further. 4. The main ground of appeal challenged the Commissioner's decision to uphold the penalty. The Authorized Representative argued that the Assessing Officer did not discuss or justify the disallowance of expenses claimed by the assessee, resulting in the imposition of a penalty without proper explanation. 5. The Authorized Representative cited judicial pronouncements to support the argument that mere unsustainable claims in the return do not amount to inaccurate particulars of income. 6. The Departmental Representative supported the orders of the Revenue Authorities. 7. After hearing both sides and reviewing the material, it was observed that the Assessing Officer had made passive disallowance of expenses without proper justification, leading to the penalty being upheld. 8. The Tribunal found that the Assessing Officer did not provide reasons for disallowing expenses and did not prove any concealment of income by the assessee. Citing a previous decision, the Tribunal concluded that declaring all income facts in the original return does not constitute concealment or furnishing inaccurate particulars of income. 9. The Tribunal further referenced a Supreme Court decision to emphasize that a claim not sustainable in law does not amount to furnishing inaccurate particulars of income. Consequently, the Tribunal deemed the penalty imposed as unsustainable and directed its deletion. 10. The appeal for the assessment year 2010-11 was allowed. 11. Since the facts were identical for the assessment year 2011-12, the Tribunal applied the same findings and allowed the appeal for that year as well. 12. Ultimately, both appeals were allowed, and the penalties were set aside. Judgment Delivery: The order was pronounced on February 14, 2020.
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