2024 (8) TMI 500 - AT - Income Tax

Penalty levied u/s 271(1)(c) - addition of unsecured loan received by the assessee was added u/s 68 based on the statement of the assessee u/s 131 that she had taken entries from the three parties because she was not having much capital at hand for her business - whether the penalty was leviable for concealment of income or for furnishing inaccurate particulars thereof? HELD THAT - It is well established that penalty proceedings and assessment proceedings are separate and distinct and assessee is entitled to file further explanation and lead further evidence in course of penalty proceedings. The Hon ble Supreme Court in case of T. Ashok Pai 2007 (5) TMI 199 - SUPREME COURT has held that since burden of proof in penalty proceedings varies from that in the assessment proceedings, a finding in an assessment proceeding that a particular receipt is income cannot automatically be adopted, though a finding in the assessment proceeding constitutes good evidence in the penalty proceedings. In the penalty proceedings, thus, the authorities must consider the matter afresh as the question has to be considered from a different angle. We find that despite repeated request the AO has not supplied copy of the alleged statement recorded on oath where assessee admitted to have taken the unsecured loans as entries for business purpose. This is a relevant piece of evidence in absence of which penalty cannot be levied. The assessee has challenged that no such statement was given by her. No prejudice would be caused to the interests of revenue if such statement had, in fact, been recorded. The assessee should have been supplied a copy of the said statement as per the principles of natural justice, which has not been followed in the case. Therefore, levy of penalty without supplying copy of the impugned statement and without eliciting reply of the assessee thereon is not in accordance with law. Assessee has also stated that the impugned loans were subsequently repaid by the assessee. Such claim has not been rebutted by the Department. As in the case Ayachi Chandrashekhar Narsanghji 2013 (12) TMI 372 - GUJARAT HIGH COURT has held that where department had accepted repayment of loan in subsequent year, no addition was to be made in current year on account of cash credit. Hence, on merit also assessee is not liable for penalty u/s 271(1)(c) - Decided in favour of assessee.

Summary

Issues Involved:
Penalty under section 271(1)(c) for concealment of income or furnishing inaccurate particulars thereof.

Analysis:
1. The appeal by the assessee challenged the penalty levied under section 271(1)(c) of the Income-tax Act, 1961, for the assessment year 2005-06. The grounds of appeal raised by the assessee primarily questioned the validity and merit of the penalty imposed by the Assessing Officer (AO).

2. The facts of the case involved the assessee taking an unsecured loan and admitting to receiving entries from parties due to insufficient capital. The AO added this amount to the total income under section 68 of the Act and initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The CIT(A) upheld the penalty, leading to the appeal before the Tribunal.

3. The assessee contended that the penalty proceedings were invalid as the AO did not specify the particular limb of section 271(1)(c) under which the penalty was initiated. The assessee also argued on the merits, stating that no statement admitting to taking unsecured loans was recorded, and the loans were subsequently repaid. The assessee relied on legal precedents to support their arguments.

4. The Revenue, represented by the Senior-DR, supported the lower authorities' decision to uphold the penalty, citing the affirmation of the addition by the CIT(A) and Tribunal.

5. After considering the submissions and evidence, the Tribunal found that the AO did not provide a copy of the alleged statement admitting to taking unsecured loans despite repeated requests by the assessee. The Tribunal emphasized the distinction between assessment and penalty proceedings, highlighting that the burden of proof in penalty proceedings is different. The Tribunal also noted that the loans were repaid and cited legal precedents to support the decision to delete the penalty.

6. The Tribunal ruled in favor of the assessee on merit, deleting the penalty imposed by the AO. As a result, the issue of jurisdiction became academic and did not require further adjudication.

7. Consequently, the appeal filed by the assessee was allowed, and the penalty under section 271(1)(c) was deleted.

This detailed analysis highlights the key legal arguments, factual background, and the Tribunal's decision in the case concerning the penalty under section 271(1)(c) of the Income-tax Act, 1961.