2015 (8) TMI 1196 - AT - Income Tax

Penalty proceedings under Section 271(1)(c) - assessee offered an amount voluntarily - Held that - In penalty proceedings, the burden was always on the revenue to prove concealment and a finding reached in the quantum appeal that a particular income is liable to be added as income of the assessee is not binding in penalty proceedings. In this case, the A.O. imposed the penalty based on the statement recorded under Section 131 of the Act and thereafter, the assessee has submitted detailed reply with regard to the nature of business under what circumstance the amount was offered as the additional income. The A.O. without enquiry/investigation to verify the correctness of the explanation given by the assessee, he has simply rejected the explanation given by the assessee and imposed the statement given by the Managing Partner of the company during the course of survey. Keeping in view the facts and circumstances of the case and also following the above said judicial precedence, we are of the opinion that this is not a fit case to levy penalty under Section 271(1)(c) - See CIT v. S. Khader Khan Son (2013 (6) TMI 305 - SUPREME COURT ) - Decided in favour of assessee.

Summary

Issues:
Penalty under Section 271(1)(c) of the Income-tax Act based on concealed income and fictitious purchases.

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) regarding the penalty imposed under Section 271(1)(c) of the Act for the assessment year 2009-10.
2. The assessee, engaged in the business of exporting hosieries, admitted an undisclosed income of ` 67,00,780/- during a survey conducted under Section 133A of the Act. The Assessing Officer (A.O.) found discrepancies in outstanding credit balances and fictitious purchases.
3. The A.O. initiated penalty proceedings under Section 271(1)(c) based on the admission made by the Managing Partner regarding fictitious purchases to evade tax.
4. The CIT(A) confirmed the penalty, leading the assessee to appeal before the Tribunal.
5. The assessee contended that the voluntary disclosure of income should preclude penalty imposition. The defense cited the decision in CIT v. S. Khader Khan Son (2013) to challenge the evidentiary value of the partner's statement.
6. The Department argued that the admission of fictitious payments by the Managing Partner justified the penalty.
7. The Tribunal reviewed the case, noting the discrepancies in the purchases and the explanation provided by the assessee regarding unorganized vendors and difficulties in proving transactions.
8. Citing the Supreme Court decision in CIT v. S. Khader Khan Son (2013), the Tribunal highlighted the limited evidentiary value of statements recorded under Section 131.
9. Referring to CIT v. Balraj Sahni (1979), the Tribunal emphasized the distinction between assessment and penalty proceedings, stressing the revenue's burden to prove concealment in penalty cases.
10. Considering the circumstances and legal precedents, the Tribunal concluded that the penalty under Section 271(1)(c) was unjustified, as the A.O. did not adequately investigate the explanations provided by the assessee.
11. Consequently, the Tribunal allowed the appeal, setting aside the penalty.

This detailed analysis of the judgment highlights the key issues surrounding the penalty under Section 271(1)(c) based on concealed income and fictitious purchases, providing a comprehensive understanding of the legal proceedings and the Tribunal's decision.