2024 (3) TMI 1070 - AT - Income Tax

Penalty proceedings u/s 271(1)(c) - failure of the assessee to explain the source of cash deposit in the bank account - burden of proof - HELD THAT - Burden of proof in the penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty u/s 271(1)(c) - On facts we note that the assessee has taken consistent stand towards source of cash deposits from his uncle and mother. The bank statement vouches for withdrawal of cash in the hands of relatives. Assessee thus has offered explanation in respect of source of cash deposit which may not have been accepted for the purposes of quantum proceedings but sustaining such addition in the quantum proceedings could not in our view warrant a conclusion that assessee has concealed certain particulars of income or furnished inaccurate particulars of income per se. We are inclined to agree with the contention on behalf of the assessee that discretion vested with the AO u/s 271(1)(c) ought to have been exercised in favour of the assessee and imposition of penalty is not justified. It is trite that imposition of penalty u/s 271(1)(c) is not automatic and should not be imposed merely because it is lawful to do so. Some degree of plausibility can be assigned to the plea raised on behalf of the assessee. We also note that the assessee being deceased it may not be possible on behalf of the assessee to prove the circumstantial facts to the hilt in this independent proceeding. Thus a soft instance deserves in the present case. Appeal of the assessee is allowed.

Summary

Issues: Justification of imposition of penalty under u/s 271(1)(c) of the Income Tax Act, 1961 concerning AY 2013-14.

Summary:

Issue: Justification of imposition of penalty

The appeal was filed against the penalty order u/s 271(1)(c) of the Income Tax Act, concerning AY 2013-14, regarding failure to explain a cash deposit in the bank account. The counsel for the assessee argued that the penalty proceedings are distinct from other proceedings. The deceased-assessee had received the cash deposit from relatives, supported by evidence such as ITR acknowledgment and bank statements. The burden of proof in penalty proceedings differs from assessment proceedings. The consistent explanation provided by the assessee regarding the source of cash deposits was considered, and it was noted that the addition in quantum proceedings does not automatically lead to penalty imposition.

The discretion of the AO u/s 271(1)(c) should have been in favor of the assessee, as the imposition of penalty was deemed unjustified. Imposition of penalty is not automatic and requires some plausibility. Considering the mitigating circumstances and the inability of the deceased assessee to prove all facts, the penalty was directed to be reversed and deleted. Ultimately, the appeal of the assessee was allowed.