2023 (9) TMI 1338 - AT - Income Tax

Penalty order u/s. 271(1)(c) - expenditure claimed u/s. 57 - Assessee has shown gross income from other sources and claimed the expenses/deduction against the above income - AO during the assessment proceedings required the assessee to justify the expenses/deduction u/s 57 against the income earned from other sources - HELD THAT - As seen from the Penalty order, the A.O. proceeded with the Penalty proceedings after the disposal of appeal by CIT(A) who has confirmed the disallowance - AO issued a show cause notice dated 08-01-2018 and served on the assessee by RPAD to explain its case on 29-01-2018. Even for this Penalty proceedings, the assessee has not responded thereby the AO imposed a minimum penalty u/s 271(1)(c) - Even before the Ld. CIT(A), the assessee has mentioned about the pendency of the appeal before the ITAT and not explained the expenditure claimed u/s. 57 - CIT(A) also confirmed the levy of penalty u/s. 271(1)(c) of the Act. As it can be seen from the assessment proceeding as well as penalty proceeding, the assessee failed to substantiate its claim of expenditure made u/s. 57 to earn the income from other sources . In the absence of the same, even before the Lower Authorities as well as before this Tribunal mere filing written submission for 5 pages without any material evidences cannot yield good result to the assessee. We do not find proper assistance from the assessee by simply filing a written submission without any material evidences before us as well as before Ld. CIT(A). It is not the case of the Revenue that made the addition without hearing the assessee, whereas five opportunities were given to the assessee to explain its case which were never responded by the assessee and nor filed any details or evidences in respect of the expenses claimed u/s. 57 of the Act. Therefore, we have no hesitation in confirming the order passed by the Lower Authorities. Thus the grounds of appeal raised by the assessee is hereby rejected.

Summary

Issues Involved:
1. Validity of the assessment order under section 144 of the Income Tax Act.
2. Justification of disallowance of expenses claimed under section 57 of the Act.
3. Applicability of section 44AD to the assessee's income.
4. Legitimacy of the penalty imposed under section 271(1)(c) of the Act.

Summary:

1. Validity of the assessment order under section 144 of the Income Tax Act:
The assessee filed an appeal against the ex parte assessment order passed under section 144 due to non-compliance with multiple notices issued under sections 142(1) and 143(2). The assessee argued that the assessment order was passed without providing a reasonable opportunity. However, it was observed that the assessee failed to respond to the notices and did not provide any evidence for the expenses claimed under section 57. The Tribunal confirmed that the assessment order was validly passed under section 144 due to the assessee's persistent non-appearance and non-compliance.

2. Justification of disallowance of expenses claimed under section 57 of the Act:
The assessee claimed a deduction of Rs. 5,19,863 against the gross income of Rs. 6,72,483 under "income from other sources". The AO disallowed the entire claim due to the lack of supporting evidence, and the CIT(A) upheld this disallowance. The Tribunal noted that the primary onus was on the assessee to substantiate the expenses, which was not fulfilled. The Tribunal found no reason to interfere with the findings of the lower authorities and dismissed the grounds of appeal related to the disallowance of expenses.

3. Applicability of section 44AD to the assessee's income:
The assessee argued that the principles of section 44AD should be applied, which allows for presumptive taxation for small businesses. However, the Tribunal clarified that section 44AD applies to business income, not to income from other sources, which was the case here. The CIT(A) and the Tribunal both dismissed this argument, stating that the assessee's income did not qualify for the application of section 44AD.

4. Legitimacy of the penalty imposed under section 271(1)(c) of the Act:
The AO imposed a penalty of Rs. 70,551 under section 271(1)(c) for concealment of income and furnishing inaccurate particulars. The assessee failed to respond to the penalty proceedings and did not provide any evidence to substantiate the expenses claimed. The CIT(A) and the Tribunal upheld the penalty, emphasizing that the assessee did not discharge the onus of proving the legitimacy of the claimed expenses.

Conclusion:
The Tribunal dismissed both the quantum appeal and the penalty appeal filed by the assessee, confirming the validity of the assessment order under section 144, the disallowance of expenses under section 57, the inapplicability of section 44AD, and the legitimacy of the penalty under section 271(1)(c). The order was pronounced in the open court on 27-09-2023.