2021 (6) TMI 175 - AT - Income Tax

Penalty u/s 271(1)(c) - additions as unexplained cash deposited in his bank account and non-disclosure of bank interest - HELD THAT - As gone through the bank statement. It is duly reflected that in the month of April he has given advance of roughly Rs. 14 lakhs. Thereafter in the month of September and October Rs. 14 lakhs has been deposited in his account. To some extent the explanation of the assessee is plausible that he has given advance for purchase of the property which was not materialized and received back the amount during the year itself. The only deficiency in his explanation was that he could not buttress this explanation with supporting evidence i.e. confirmation from two persons viz. T. Ramkrishna S. Bhaskara Rao. Thus he failed to explain the source with support of evidence but his explanation was not found to be false. The lapse committed at his end may authorise the AO to make addition but that will not authorise the AO to visit the assessee with penalty. The explanation of the assessee ought to have been found as false by the AO. Nothing that sort of exercise has been made or any material discernible from the record. As far as interest part is concerned it is a very small amount. There might have some minor discrepancy while calculating the interest at the time of filing of the return. Considering all these aspects the assessee does not deserve to be visited with penalty. Appeal of the assessee is allowed.

Summary

Issues:
Confirmation of levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
The appeal was filed by the assessee against the penalty imposed by the ld.CIT(A) under section 271(1)(c) for the assessment year 2009-10. The case involved unexplained cash deposits in the bank account and non-disclosure of bank interest. The AO added &8377; 14 lakhs to the total income of the assessee, alleging it to be a loan without explained sources. The CIT(A) upheld the addition, leading to penalty proceedings. The assessee's explanation was based on giving advances for property purchase, which were returned and redeposited. However, the lack of confirmation from the individuals involved weakened the explanation. The AO's penalty was based on the failure to substantiate the sources adequately. The Tribunal found the explanation plausible but lacking in supporting evidence. The minor discrepancy in interest income was considered a genuine mistake by the retired assessee, who passed away during the appeal process.

The Tribunal analyzed section 271(1)(c) of the Income Tax Act, emphasizing the conditions for imposing penalties related to concealing income or furnishing inaccurate particulars. The section allows penalties ranging from 100% to 300% of the tax evaded due to concealment. The deeming provisions under Explanation 1 outline situations where the assessee's failure to provide explanations or substantiate them leads to deemed concealment of income. In this case, the Tribunal found the assessee's explanation regarding the cash deposits and interest income to be plausible, albeit lacking conclusive evidence. The Tribunal noted that while the AO was justified in making additions, the absence of proof of false explanation did not warrant a penalty. The Tribunal concluded that the assessee did not merit a penalty under section 271(1)(c) based on the available evidence and circumstances.

The Tribunal allowed the appeal, overturning the penalty imposed on the assessee. The decision was based on the Tribunal's assessment of the adequacy of the assessee's explanations, the absence of evidence proving false explanations, and the minor nature of the discrepancies in the case. The Tribunal's ruling emphasized the importance of substantiated explanations and the lack of grounds for penalizing the assessee in this instance.

Order pronounced in the Court on 4th June, 2021 at Ahmedabad.