2022 (4) TMI 1228 - AT - Income Tax

Penalty u/s 271(1)(c) - unexplained cash credit under section 68 - HELD THAT - The record of the Tribunal reveals that the assessment order for the assessment year 2011-12 has not been filed by the assessee alongwith the appeal in the Tribunal. DR has also not apprised us about the present status of the quantum appeal. Nonetheless the legal position is that the onus of proving the nature and source of credit entries in its books of account lies on the assessee. It is for the assessee to offer explanation to the satisfaction of the AO. If an assessee fails to do so and the identity of the creditor, his creditworthiness and genuineness of the transaction remains unproved, the sum so credited may be charged to income tax as the income of the assessee under section 68 of the Act. Levy or otherwise of the penalty relating thereto would depend on the facts and circumstances of each case. There is not statutory bar on passing penalty order pending appeal against an assessment order as remedy in such cases is provided in section 275(1A) which permits revision of the penalty order in conformity with the appellate order(s) in quantum appeal. We have gone through the orders of the Ld. AO/CIT(A), perused the material on record and heard the Ld. DR. It is observed from the appellate order of the Ld. CIT(A) that he has dismissed the appeal filed by the assessee as not admitted for the reason that the appeal had been filed late and existence of sufficient cause had not been established by the assessee before him. As regards merits the Ld. CIT(A) observed that under Explanation 1(A) to section 271(1)(c), an addition made becomes deemed concealment, if assessee fails to offer an explanation. According to him the Ld. AO had communicated the results of inquiries to the assessee and assessee did not offer any explanation. Therefore, the addition becomes deemed concealment and the Ld. AO was not required to establish anything further. Discussion on merits has been held by the Ld. CIT(A) as academic only. We are conscious that the Ld. CIT(A) has to exercise his discretion under section 249(3) in judicious manner but in the case under consideration the assessee did not submit even an application for condonation of delay. Curiously enough, there is no whisper anywhere in the records of the Tribunal also that the appeal of the assessee has been dismissed by the Ld. CIT(A) as it was not presented within the period allowed under section 249(2)(b) of the Act. Thus, the finding of the Ld. CIT(A) remains uncontroverted. It is a clear case of negligence and inaction on the part of the assessee. In DCIT vs. Jaya Publications (2009) 309 ITR (AT) 245 (Chennai), the Chennai Bench of the Tribunal held that in the absence of any acceptable reason and where there was actually negligence and in action the delay could not be condoned. In the case before us the appeal was not presented before the Ld. CIT(A) within 30 days of service of notice of demand. It was presented nearly after a month of the expiry of that period. No reasons for the delay have been given either before the Ld. CIT(A) or before the Tribunal. We, therefore, decline to interfere with the decision of the Ld. CIT(A) in this regard. As regards merits of the case, the assessee has neither appeared before the Ld. CIT(A) nor before us. We have dealt with the contentions raised by the assessee in the synopsis filed before us along with the appeal. Assessee appeal dismissed.

Summary

Issues:
Assessment of unexplained cash credit under section 68 of the Income Tax Act, 1961 and imposition of penalty under section 271(1)(c) for concealment of income/furnishing inaccurate particulars of income.

Analysis:

1. Assessment of Unexplained Cash Credit:
- The assessee, a trading and manufacturing company, filed a return of income for the assessment year 2011-12 declaring income of ?32,19,20,154. The Assessing Officer (AO) completed the assessment under section 143(3) with a total income of ?34,94,35,270, including an addition of ?2,75,15,116 on account of unexplained cash credit under section 68.
- The AO initiated penalty proceedings under section 271(1)(c) for concealment of income, imposing a penalty of ?91,37,780, being 100% of the amount of tax sought to be evaded.
- The AO communicated the results of inquiries to the assessee regarding creditors, but the assessee did not offer any explanation. The addition made was deemed concealment as per Explanation 1(A) to Section 271(1)(c).

2. Penalty Imposition and Appeal:
- The assessee appealed before the Commissioner of Income Tax (Appeals) (CIT(A)), contending that the penalty imposition was illegal, unlawful, and against natural justice. The appeal was dismissed as not admitted due to being filed late without sufficient cause established.
- The CIT(A) observed that the AO did not need to establish further concealment as the assessee failed to offer an explanation, leading to deemed concealment. The appeal was dismissed on procedural grounds, and the discussion on merits was considered academic.

3. Tribunal Appeal and Decision:
- The assessee appealed before the Tribunal, challenging the CIT(A)'s order, citing lack of notice, inadequate opportunity, and pending quantum appeal as reasons.
- The Tribunal found that the appeal was presented late without sufficient cause, as no application for condonation of delay was submitted. The Tribunal declined to interfere with the CIT(A)'s decision due to negligence and inaction on the part of the assessee.
- The Tribunal also noted that the onus of proving the nature and source of credit entries lies on the assessee, and the penalty imposition depends on the facts and circumstances of each case.
- The Tribunal upheld the CIT(A)'s decision, dismissing the appeal of the assessee for being filed late and failing to establish sufficient cause, along with the uncontroverted findings of the AO/CIT(A).

In conclusion, the Tribunal upheld the dismissal of the appeal, emphasizing the importance of timely filing, providing explanations, and meeting procedural requirements in tax matters. The decision highlighted the significance of establishing sufficient cause for delay and complying with statutory provisions to avoid adverse consequences in tax assessments and penalty proceedings.