2015 (1) TMI 695 - AT - Income Tax

Penalty under section 271(1)(c ) - inaccurate particulars of income shown by assessee - Held that - In the present set of facts addition has been made in the hands of the assessee after making due and diligent enquiries where the transaction in question was held to be not genuine and it was held to be a case of professional entry provider. The evidences collected by the Assessing Officer and the statement of Shri Sanjay Rastogi recorded who had clearly stated that he was giving entries to various concerns including the assessee and the assessee was found to have received the amount through five concerns having similar address which admittedly were being run by the same person i.e. Shri Sanjay Rastogi and Shri Ashwani Uppal established the case of revenue. Thus where the complete chain of transactions had been established by the investigating authority and it has been established that the assessee was a professional entry provider and addition having been made in the hands of the assessee thus attract the levy of penalty under section 271(1)(c) of the Act. It is not a case of a bonafide explanation being given by the assessee which has not been accepted by the Department but finding of fact by the Assessing Officer/Commissioner of Income Tax (Appeals) and the order of the Tribunal establishes deliberate attempt to evade tax by way of introduction of cash credits and the assessee having furnished inaccurate particulars of income makes it liable to levy of penalty under section 271(1)(c) of the Act. Upholding the order of the Commissioner of Income Tax (Appeals) grounds of appeal raised by the assessee are dismissed. - Decided against assessee.

Issues Involved
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the assessment proceedings and penalty proceedings being independent.
3. Justification for the penalty based on circumstantial evidence and statements.
4. The burden of proof and the concept of bona fide explanation by the assessee.

Detailed Analysis

1. Levy of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:

The primary issue in the appeal was the levy of penalty under section 271(1)(c) amounting to Rs. 14,99,400/-. The penalty was imposed for allegedly furnishing inaccurate particulars of income. The Tribunal noted that penalty for concealment under this section is applicable where the assessee has either concealed income or furnished inaccurate particulars. However, it emphasized that the levy of such penalty is not automatic upon the making of an addition to the income and that the assessee must be given an opportunity to explain its stand.

2. Validity of the Assessment Proceedings and Penalty Proceedings Being Independent:

The Tribunal reiterated that assessment and penalty proceedings are independent. The assessee argued that the penalty should not be levied merely because an addition was made during the assessment. The Tribunal supported this view by citing the Supreme Court's observation in Dharmendra Textiles & Processors, which stated that penalty under section 271(1)(c) is a civil liability and does not require the establishment of mens rea.

3. Justification for the Penalty Based on Circumstantial Evidence and Statements:

The Tribunal examined the facts that led to the re-assessment and subsequent penalty. The Assessing Officer (AO) had initiated proceedings based on information from the Addl. Director of Income Tax (Investigation), which indicated that the assessee had received accommodation entries from entities controlled by Shri Sanjay Rastogi and Shri Ashwani Uppal. The AO concluded that the share application money received by the assessee was bogus and added Rs. 42 lakhs to the income. This addition was upheld by the Tribunal in an earlier order (ITA No. 1117/Chd/2008).

The Tribunal noted that the AO's findings were based on circumstantial evidence, such as similar addresses of entities involved and statements from Shri Sanjay Rastogi. The Tribunal emphasized that the AO had made diligent inquiries and established a chain of transactions proving that the assessee was a professional entry provider.

4. The Burden of Proof and the Concept of Bona Fide Explanation by the Assessee:

The Tribunal discussed the burden of proof under Explanation 1 to section 271(1)(c), which lies on the assessee to establish the bona fides of its claim. The Tribunal referred to several judicial precedents, including CIT Vs. Sidhartha Enterprises and CIT Vs. Reliance Petroproducts Pvt. Ltd., which held that penalty should not be imposed if the explanation given by the assessee is plausible and bona fide, even if not accepted by the AO.

In the present case, the Tribunal found that the assessee's explanation was not bona fide. The evidence collected, including the statements of Shri Sanjay Rastogi, indicated a deliberate attempt to evade tax by introducing cash credits through bogus entries. The Tribunal concluded that the assessee had furnished inaccurate particulars of income, justifying the levy of penalty under section 271(1)(c).

Conclusion

The Tribunal upheld the order of the Commissioner of Income Tax (Appeals), confirming the levy of penalty under section 271(1)(c) of the Income Tax Act, 1961. The appeal of the assessee was dismissed, with the Tribunal emphasizing that the assessee had failed to provide a bona fide explanation and had deliberately attempted to evade tax by furnishing inaccurate particulars of income. The decision was pronounced in the open court on 17.9.2014.

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