2014 (8) TMI 873 - AT - Income Tax

Penalty u/s 271(1)(c) - Undisclosed bank accounts Addition of peak credit Held that - The six bank accounts with reference to which addition was made by the AO were not disclosed by the assessee in its return of income - The source of deposit in the bank accounts could not be explained by the assessee - the addition of peak balance in the bank accounts cannot be held as an addition made merely on estimate basis without relevant materials relying upon CIT Vs. Becharbhai P. Parmar 2012 (4) TMI 418 - GUJARAT HIGH COURT - the disclosure of the other five undisclosed bank accounts by the assessee cannot be held as voluntary disclosure by the assessee it came up because the Department already detected one undisclosed bank account which contained transfer entries of the remaining five undisclosed bank accounts there was no reason to interfere with the orders Decided against Assessee.

Summary

Issues: Appeal against penalty under section 271(1)(c) for Assessment Years 1991-92 and 1992-93.

Analysis:
1. The appeals were filed against the penalty imposed by the Commissioner of Income Tax (Appeals) for non-disclosure of bank accounts. The Assessing Officer treated the peak balance in undisclosed bank accounts as income of the assessee.

2. The Assessing Officer determined the total income for the relevant years, which was later revised due to an arithmetical error. Subsequently, penalties under section 271(1)(c) were levied for the respective years.

3. The Commissioner of Income Tax (Appeals) upheld the penalty, leading to the appeals before the Tribunal. The assessee contended that the addition was based on estimates and, therefore, penalty should not be levied. They also argued that the undisclosed bank accounts were voluntarily disclosed, except for one account.

4. The Tribunal noted that the undisclosed bank accounts were not declared in the income tax return, and the source of deposits remained unexplained. The Tribunal distinguished previous cases where penalties were imposed based on differences between declared and estimated balances, unlike the current scenario where the actual peak balances were considered.

5. Referring to a decision of the Hon'ble Gujarat High Court, the Tribunal emphasized that penalties cannot be solely based on additions made on estimation grounds. The Tribunal rejected the argument that the disclosure of five bank accounts was voluntary, as they were linked to the initially undisclosed account detected by the Department.

6. Ultimately, the Tribunal dismissed the appeals, stating that the undisclosed bank accounts were not voluntarily disclosed, and the penalties imposed by the lower authorities were justified. The decision was pronounced on June 30, 2014, at Ahmedabad.