2014 (12) TMI 1055 - AT - Income Tax

Validity of confirmation of penalty u/s 271(1)(c) Assessee failed to offer any explanation regarding the deposit - Penalty proceedings initiated on addition of unexplained deposit made u/s 68 Held that - The assessee claimed to have received share application money from one person which the Director (Inv.) had found to be engaged in the business of accommodation entries and assessee was found to be the beneficiary of the same - assessee had no answer to the query of the revenue authorities - Section 68 clearly states that if a credit appearing in the books of account of the assessee is not explained regarding its nature and source then this amount will be treated as income of the assessee - the assessee has not furnished any explanation regarding this cash credit, therefore, AO rightly treated it as income of the assessee - assessee has failed to offer any explanation regarding this deposit. Therefore, explanation I to Section 271(1)(c) comes into play - the provisions of Section 271(1)(c) not only covers the cases in which assessee has concealed the income or has furnished inaccurate particulars of income - even without there being anything to indicate noteworthy deeming fiction for concealment of income comes to play and it covers the cases where the assessee does not offer any explanation for any material concerning the computation of total income - the assessee miserably failed to offer an explanation for the cash credit raised in the form of share application money - the case of the assessee is squarely hit by the provisions of Section 271(1)(c) thus, the order of the CIT(A) is upheld Decided against assessee.

Summary

Issues:
Appeal against order confirming penalty under section 271(1)(c) of the Income Tax Act, 1961 based on unexplained deposit of share application money.

Analysis:
The appeal was filed against the order of the Ld. CIT(A) confirming the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The case involved the assessee declaring a loss of Rs. 83,55,091, with the case being reopened under section 148 based on information regarding accommodation entries. The Assessing Officer (A.O.) observed a cash deposit of Rs. 10,01,500 in the bank account of a party, followed by a cheque issued to the assessee on the same date. The A.O. treated this as an unexplained deposit and imposed a penalty under section 271(1)(c). The Ld. CIT(A) upheld the A.O.'s decision, stating that the appellant failed to establish the identity and creditworthiness of the party providing the money, leading to unexplained credit in the books. The Ld. CIT(A) cited legal precedents emphasizing deliberate concealment of income as a ground for penalty imposition.

The appellant argued that the penalty was not justified as all particulars regarding share applicants were in the books of account, and the addition was due to a difference of opinion. The Department contended that the appellant failed to prove the creditworthiness and genuineness of entries, indicating mens rea and concealment. The Tribunal examined Section 271(1)(c) and its Explanation, highlighting the conditions for penalty imposition and the deeming provisions for concealment of income. The Tribunal noted that the appellant failed to offer any explanation for the cash credit, invoking Explanation I to Section 271(1)(c). The Tribunal emphasized that the appellant's failure to explain the deposit led to the application of the deeming fiction for concealment of income, as per the provisions of the Act.

In conclusion, the Tribunal dismissed the appeal, affirming the penalty imposed by the A.O. and upheld by the Ld. CIT(A). The Tribunal found that the appellant's inability to provide a satisfactory explanation for the cash credit resulted in the application of Section 271(1)(c) of the Act. The Tribunal concurred with the Ld. CIT(A)'s well-reasoned order, finding no grounds for overturning the penalty decision.

This detailed analysis of the judgment showcases the legal intricacies involved in the case, focusing on the application of Section 271(1)(c) and the significance of providing genuine explanations in tax matters to avoid penalties for concealment of income or furnishing inaccurate particulars.