2015 (9) TMI 285 - AT - Income Tax

Penalty under section 271(1)(c) - addition u/s. 69A - Held that - The hon ble apex court in Reliance Petro-products case (2010 (3) TMI 80 - SUPREME COURT) holds that quantum and penalty proceedings stand on different footings. And each and every disallowance/addition does not lead to automatic imposition of section 271(1)(c) penalty. We notice that first of all, the authorities below do not produce any material much less a corroborating one to support the impugned addition of ₹ 20 lacs except that of survey statement. The co-ordinate bench in quantum case proceeds on an assumption of absence of a banking channel and non-production of the balance sum of ₹ 4 lacs in survey. The assessee s duly audited books are already on record. No case of diversion or above-stated withdrawn sum is being made out in the course of arguments. Case file demonstrate the very shroff to be an unsecured loan creditor for ₹ 27,19,423/- forming part of balance sheet. We infer in these facts that although assessee s plea was declined in quantum, the same is a reasonable explanation in the instant penalty proceedings for want of any further evidence to the contrary. We conclude in these facts that the assessee has successfully explained source of the robbed sum of ₹ 20 lacs to his bank withdrawal of ₹ 24 lacs. His arguments are accordingly accepted. The impugned penalty is deleted. - Decided in favour of assessee.

Summary

Issues:
- Challenge to lower appellate order affirming penalty imposition under section 271(1)(c)
- Justification for addition of undisclosed income of Rs. 20 lakhs
- Assessment of penalty for concealment and furnishing inaccurate particulars of income
- Confirmation of penalty imposition by Commissioner of Income Tax(A)
- Dispute over the explanation provided by the assessee regarding the source of the undisclosed income
- Consideration of quantum and penalty proceedings separately
- Lack of corroborative evidence supporting the addition of Rs. 20 lakhs
- Examination of the adequacy of the assessee's explanation for the source of the undisclosed income

Detailed Analysis:

1. The appeal challenges the lower appellate order affirming the penalty imposition under section 271(1)(c) for the assessment year 2005-06. The sole substantive ground of the assessee contests the Assessing Officer's action in imposing a penalty of Rs. 8,63,500 related to an undisclosed income of Rs. 20 lakhs, arising from a robbery incident and subsequent survey.

2. The Assessing Officer and the Commissioner of Income Tax(A) justified the addition of the undisclosed income based on the survey statement and the lack of evidence supporting the assessee's explanation regarding the source of the Rs. 20 lakhs. The Commissioner affirmed the penalty imposition, emphasizing the discrepancies in the assessee's statements during the survey proceedings and the assessment.

3. The assessee argued that the tribunal's confirmation of the addition was based on assumptions and presumptions, citing relevant case laws. The Revenue contended that the penalty was justified based on the survey statement and false book entries identified during the quantum proceedings.

4. The Tribunal observed that while the quantum addition had been finalized, the assessee had provided a reasonable explanation for the source of the undisclosed income in the penalty proceedings. The lack of corroborative evidence supporting the addition and the absence of diversion of the withdrawn sum led to the deletion of the penalty.

5. The Tribunal differentiated between quantum and penalty proceedings, emphasizing the need for specific evidence to support penalty imposition. The assessee's explanation linking the robbed sum to the bank withdrawal was deemed acceptable in the absence of contrary evidence, resulting in the deletion of the penalty.

6. Ultimately, the Tribunal allowed the assessee's appeal, concluding that the explanation provided for the source of the undisclosed income was satisfactory, leading to the deletion of the penalty imposed under section 271(1)(c).

Order pronounced in the open court on 26-08-2015.