2014 (12) TMI 225 - AT - Income Tax

Admission of additional ground Held that - No fresh investigation is required for the additional grounds raised by the assessee and the facts are clear from the material available on the record, thus, additional grounds are admitted. Penalty u/s 271(1)(c) Assessee could not furnish the details relating to cash credits and agreed for the addition - Held that - The AO made the addition and initiated the penalty proceedings u/s. 271(1)(c) - from the above observations of the AO, it is crystal clear that the penalty proceedings u/s 271(1)(c) of the Act were initiated in respect of addition of ₹ 5,40,000/- and the AO clearly mentioned that the assessee tried to make clear concealment of income by way of claiming unexplained credits - both the conditions i.e. concealment of income and furnishing inaccurate particulars of income by way of claiming unexplained credits existed and the penalty u/s 271(1)(c) of the Act was rightly initiated by the AO. Cash credits voluntarily surrendered by assessee Amount received from many relatives and list of them could not be shown Held that - Assessee contended that the voluntary surrender of income was not acceptance of incorrectness of these cash creditors, but it was offered to buy peace of mind by herself and her relatives and this does not mean that the cash credits were the assessee s own income and she attempted to conceal the same in the disguise of cash credits - the assessee had shown cash credits of ₹ 5,40,000/-, but failed to explain the names of the persons from whom those credits were received - when the assessee was unable to explain those cash credits to the satisfaction of the AO, she preferred to surrender the income and offered the same for taxation. AO did not accept the explanation of the assessee and credited the same as concealment of income and accordingly initiated the penalty proceedings u/s. 271(1)(c) of the Act - had the case been not selected for scrutiny and the AO did not ask for explanation from the assessee, the addition was not possible because only when the assessee was cornered the amount was surrendered and merely on this basis that the assessee made the surrender, it cannot be said that there was no concealment of income - relying upon MAK Data P. Ltd. Versus Commissioner of Income Tax-II 2013 (11) TMI 14 - SUPREME COURT - only on the basis that the assessee made surrender when cornered by the Department, it cannot be said that the penalty u/s. 271(1)(c) of the Act was not leviable thus, the order of CIT(A) is upheld Decided against assessee.

Issues Involved:
1. Legality of the penalty under Section 271(1)(c) of the Income Tax Act, 1961.
2. Justification of the penalty imposed by the Assessing Officer (AO) and sustained by the Commissioner of Income Tax (Appeals) [CIT(A)].
3. Validity of the additional grounds raised by the assessee.
4. Applicability of Section 68 of the Income Tax Act in the absence of books of accounts.

Issue-wise Detailed Analysis:

1. Legality of the Penalty under Section 271(1)(c):
The primary issue revolves around the penalty imposed under Section 271(1)(c) for concealing income or furnishing inaccurate particulars. The assessee argued that the penalty was not justified as the income was voluntarily surrendered to avoid litigation and buy peace of mind. However, the Tribunal noted that the surrender was not voluntary but rather a result of the assessee being cornered by the AO. The Tribunal relied on the Supreme Court ruling in MAK Data P. Ltd. Vs. CIT, which held that voluntary disclosure does not absolve the assessee from penal proceedings. The Tribunal concluded that the penalty was rightly imposed as the assessee failed to explain the cash credits and thus concealed income.

2. Justification of the Penalty Imposed by AO and Sustained by CIT(A):
The Tribunal examined the AO's and CIT(A)'s reasoning for imposing and sustaining the penalty. The AO initiated penalty proceedings after the assessee failed to explain cash credits of Rs. 5,40,000 and subsequently added the amount as unexplained credits under Section 68. The CIT(A) upheld the penalty, observing that the assessee furnished wrong particulars of income and failed to prove the identity, capacity, and genuineness of the transactions. The Tribunal agreed with the CIT(A), noting that the assessee's inability to provide details of the cash credits justified the penalty.

3. Validity of the Additional Grounds Raised by the Assessee:
The assessee raised additional grounds challenging the validity of the penalty order, arguing that the AO's satisfaction recorded in the assessment order differed from the penalty order. The Tribunal admitted the additional grounds, noting that no fresh investigation was required as the facts were already on record. However, the Tribunal found no merit in the additional grounds, stating that both conditions of concealment of income and furnishing inaccurate particulars existed, thus justifying the penalty.

4. Applicability of Section 68 in the Absence of Books of Accounts:
The assessee contended that Section 68 was not applicable as no books of accounts were maintained. The CIT(A) rejected this argument, stating that the balance sheet prepared by the assessee represented the financial affairs and could be construed as books of accounts in miniature. The Tribunal upheld this view, citing case law that even in the absence of formal books, the AO could rely on the balance sheet to make additions for unexplained cash credits.

Conclusion:
The Tribunal dismissed the appeals, affirming the penalties imposed under Section 271(1)(c) for both assessees. The Tribunal concluded that the penalties were justified as the assessees failed to explain the cash credits and thus concealed income. The Tribunal's decision was based on the principle that voluntary surrender of income does not absolve the assessee from penal consequences, especially when the surrender is made under compulsion.

← Previous Next →