2013 (11) TMI 1377 - HC - Income Tax

Genuineness of unexplained creadits - Penalty u/s 171(1)(c) - Held that - The A.O. did not carry out any enquiry after remanding of the issue - The enquiry in the previous assessment is not sufficient to make addition towards unexplained creditors - The enquiry carried out for the accounting period 1.4.1997 to 31.3.1998 in the year 2001 after lapse of three years would not result into accuracy in findings - When purchase and sales were not doubted, treated as genuine, there could be no reason for treating the creditors to be bogus - Even if assessee submits reply that he has surrendered income by piece, it was necessary for the AO to establish from the enquiry that the assessee had concealed the income or furnished inaccurate particulars - AO could not have relied upon earlier enquiry for imposing penalty - Decided against assessee.

Summary

Issues:
1. Justification for deleting penalty under Section 271 (1) (c) for unexplained credits.
2. Sufficiency of enquiry for levying penalty under Section 271 (1) (c).
3. Application of Madras High Court order on section 68 and possession of amount by assessee.

Analysis:

Issue 1:
The appeal revolves around the deletion of penalty under Section 271 (1) (c) by the ITAT. The Tribunal emphasized that the burden to prove concealment of income lies with the revenue department. It was highlighted that the assessing officer (AO) failed to conduct a detailed enquiry to establish concealment or inaccurate particulars. The Tribunal found that the AO imposed the penalty without sufficient investigation, solely relying on the previous assessment, which was remanded. The Tribunal concluded that the AO did not discharge the primary burden of proving concealment, as required by law.

Issue 2:
Regarding the sufficiency of enquiry for penalty imposition, the Tribunal pointed out that the AO did not conduct any fresh enquiry after the matter was remanded. It was noted that no proper opportunity was given to the assessee to explain the genuineness of the creditors. The Tribunal highlighted that the penalty order was passed mechanically without positively establishing that the assessee concealed income or furnished inaccurate particulars. The Tribunal stressed the importance of conducting a detailed enquiry before imposing penalties under Section 271 (1) (c).

Issue 3:
The Tribunal's reliance on the Madras High Court order in Alld. CIT v. K.A. Kuppuswami Chettiar, 130 ITR 464 was questioned in the appeal. The Tribunal found that the AO's failure to carry out a thorough investigation, especially after the matter was remanded, was a crucial factor in deleting the penalty. The Tribunal emphasized that the absence of a detailed enquiry and lack of opportunity for the assessee to explain raised doubts about the justification for penalty imposition. The ITAT's decision was upheld, concluding that the questions raised did not warrant consideration by the Court.

In summary, the High Court dismissed the income tax appeal, affirming the ITAT's decision to delete the penalty under Section 271 (1) (c) due to the revenue department's failure to establish concealment of income through a detailed enquiry. The Court emphasized the importance of proper investigation and providing the assessee with an opportunity to explain, highlighting the penal nature of penalty proceedings.