2023 (8) TMI 41 - AT - Income Tax

Penalty u/s 271(1)(c) - unexplained cash credit - peak credit theory applied - assessee has contended that by applying peak credit theory, the ld. CIT(A) has granted relief on estimated basis based on the details furnished by the assessee and therefore, there was no concealment of income or furnishing of inaccurate particulars - HELD THAT - We find force in the argument of the ld. Counsel. Against the quantum addition, once the ld. CIT(A) has determined the unexplained cash credit by considering the peak credit amount deposited, which is nothing but an estimated credit, the Assessing Officer was not legally and factually correct to levy penalty under section 271(1)(c) of the Act. Accordingly, the penalty levied under section 271(1)(c) of the Act stands deleted. Appeal of assessee allowed.

Summary

Issues involved: Assessment under section 143(3) of the Act, Addition under section 69A of the Act, Penalty proceedings under section 271(1)(c) of the Act.

Assessment under section 143(3) of the Act:
The appeal was filed against the order of the ld. Commissioner of Income Tax (Appeals) for the assessment year 2011-12. The assessee, a retired employee of BHEL, had a cash deposit in a cooperative bank, leading to scrutiny. The Assessing Officer completed the assessment u/s 143(3) assessing total income at a higher amount. The ld. CIT(A) partly allowed the appeal, sustaining certain additions and directing a recomputation of income.

Addition under section 69A of the Act:
The Assessing Officer added a sum under section 69A of the Act due to unexplained cash credit in the bank account. The ld. CIT(A) restricted the addition based on peak credit theory and allowed relief for personal expenses. The penalty was initiated under section 271(1)(c) of the Act due to non-response to a notice, which was confirmed by the ld. CIT(A).

Penalty proceedings under section 271(1)(c) of the Act:
The assessee appealed against the penalty levied under section 271(1)(c) of the Act. The ld. Counsel argued that since relief was granted based on peak credit theory, there was no concealment of income or inaccurate particulars. The Tribunal agreed, stating that the penalty was not justified as the ld. CIT(A) had already determined the unexplained cash credit. The penalty under section 271(1)(c) of the Act was deleted, and the appeal was allowed.

Judgment Summary:
The Tribunal, after considering the submissions and details, upheld the ld. CIT(A)'s decision on the assessment and addition under section 69A of the Act. However, regarding the penalty proceedings under section 271(1)(c) of the Act, the Tribunal found in favor of the assessee. The penalty was deleted as the relief granted by the ld. CIT(A) based on peak credit theory indicated no concealment of income or inaccurate particulars. The appeal was allowed, and the penalty was set aside.