2014 (7) TMI 1039 - AT - Income Tax

Levy of penalty u/s 271(1)(c) Addition u/s 68 on disallowance of interest expenses and unexplained cash credit Held that - Assessment proceedings and penalty proceedings are separate and distinct and the finding in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings - assessee had disclosed the material facts namely name of the depositors copy of their PAN card, confirmation of the depositor and their acknowledgement of return of Income - When the assessee has furnished all the material facts relevant thereto, the disallowance of such claim cannot automatically lead to the conclusion that there was concealment of particulars of his income by the assessee or furnishing inaccurate particulars - What is to be seen is whether the said claim made by the assessee was bona fide and whether all the material facts relevant thereto have been furnished and once it is so established, the assessee cannot be held liable for concealment penalty u/s 271(1) (c) of the Act as all the necessary facts were furnished, simply because the addition has been made it does not call for levy of penalty u/s 271(l)(c) Decided in favour of Assessee.

Summary

Issues:
Appeal against penalty order under section 271(1)(c) of the Act for A.Y. 2003-04.

Detailed Analysis:

Issue 1: Addition on account of unexplained cash credit and interest expenses
The Assessee, engaged in trading of Polyester Yarn, filed a return of income for A.Y. 03-04, declaring total income. The assessment framed by the AO included additions for unexplained cash credit and interest expenses related to it. The AO levied a penalty under section 271(1)(c) of the Act. The CIT(A) confirmed the penalty, stating that the Assessee concealed the real facts and furnished inaccurate particulars of income. The CIT(A) held that the appellant managed affairs to convert unexplained money into explained credits, doubting the creditworthiness of the creditors. The Assessee appealed against this decision.

Issue 2: Assessee's submission and arguments
During the appeal, the Assessee submitted documentary evidence to prove the identity and genuineness of the transaction with the depositors. The Assessee argued that all necessary details were provided, and the addition made under section 68 does not automatically justify a penalty under section 271(1)(c). The Assessee relied on relevant case laws to support the argument that the penalty should be deleted.

Issue 3: Tribunal's decision and reasoning
The Tribunal noted that the penalty under section 271(1)(c) is leviable if there is concealment or furnishing of inaccurate particulars of income. The Tribunal emphasized that assessment and penalty proceedings are separate, and the findings in assessment do not conclusively apply to penalty proceedings. Explaining the ingredients of section 271(1)(c), the Tribunal highlighted that if the Assessee offers a bona fide explanation with all relevant facts disclosed, the penalty should not be imposed. In this case, since the Assessee had provided all material facts related to the transaction, the disallowance of the claim did not indicate concealment or furnishing of inaccurate particulars. Therefore, the Tribunal canceled the penalty levied by the AO, allowing the Assessee's appeal.

Conclusion:
The Tribunal allowed the Assessee's appeal, canceling the penalty levied under section 271(1)(c) for the A.Y. 2003-04. The decision emphasized the importance of providing genuine and complete information to avoid penalties for concealment of income.