2015 (7) TMI 279 - AT - Income Tax

Penalty u/s. 271(1)(c) - disallowance of expenditure/ claims and additions made on the basis of un-reconciled amounts or unconfirmed creditors - CIT(A) deleted penalty levy - Held that - The Hon ble Supreme Court in the case of B.A. Balasubramaniam and Bros. Co., Vs. CIT 1998 (1) TMI 7 - SUPREME Court in fact was considering the presumption of concealment where the returned income was less than 80% of income assessed. It was held that Explanation to Section 271(1)(c) became applicable and Income Tax Officer was justified in imposing penalty because, assessee had not been able to discharge the onus which was on it under the Explanation1 to Section 271(1)(c). This case law also is in fact supporting assessee s case wherein, there is no presumption of concealment as the law was amended and further assessee s bonafide explanation was not proved to be bogus. As already stated above, there were some disallowances of the claims made in the P&L A/c and addition on the basis of non-furnishing reconciliations or non-furnishing of confirmations. As seen from the balance sheet, there are many more credits which the AO has accepted as assessee was in a position to furnish the confirmation letters. Just because he could not confirm the two of the credits occurred during the year and two of the credits carried over from earlier year, it cannot be held that assessee s case come under concealment of Income. CIT(A) was correct cancelling the penalty - Decided against revenue.

Summary

Issues:
Appeal against cancellation of penalty u/s. 271(1)(c) of the Income Tax Act.

Analysis:
1. The assessee, engaged in manufacturing plastic jars, faced penalty under section 271(1)(c) due to non-production of bills and documents during assessment. The Assessing Officer (AO) concluded that the assessee concealed income, leading to a penalty of Rs. 19,69,107/- at 300% of the tax sought to be evaded.

2. The Commissioner of Income Tax (Appeals) cancelled the penalty, emphasizing that the AO's additions lacked proper verification and did not establish concealment. The CIT(A) noted that the AO failed to differentiate current-year transactions from previous years, leading to unjustified penalty imposition.

3. The dispute centered on whether disallowances and additions based on unverified amounts could warrant a penalty for income concealment. The CIT(A) found the assessee's explanations genuine, especially regarding unconfirmed creditors, and ruled that the penalty was unwarranted.

4. The Revenue argued that the penalty should stand as the assessee admitted income during assessment. However, the CIT(A) and the Supreme Court precedent in Reliance Petro Products case supported the assessee's stance, emphasizing the absence of deliberate concealment.

5. The judgment referenced various case laws, such as Kamal Chand Jain Vs. ITO and CIT Vs. Mangha Ram Om Prakash, to highlight the importance of substantiated explanations to avoid penalties. The CIT(A) upheld the cancellation of penalty, citing the lack of evidence for concealment and the genuineness of the assessee's claims.

6. Ultimately, the Tribunal upheld the CIT(A)'s decision, dismissing the Revenue's appeal and affirming the cancellation of the penalty under section 271(1)(c) of the Income Tax Act.