2016 (6) TMI 429 - AT - Income Tax

Penalty u/s 271(1)(c) - estimation of income u/s 44AF - Held that - The assessee is a small trader involved in bamboo business and filed his return of income by estimating the income u/s 44AF. Therefore, the assessee is not required to maintain any books of account as per the provisions of section 44AF and relaxation available to these kind of assessees. Hence, the assessee had filed the return of income and AO has not found any mistake or not found any discrepancies in the return of income, in this regard, the concealment of income is ruled out. Coming to the submission of inaccurate particulars, AO had sent the notice u/s 143(2) asking for information on the investment made by the assessee. Assessee had filed the relevant information called for. The Assessing Officer had attempted to investigate the genuineness of the document and persons involved in signing the agreement. The documents were found to be genuine and the persons involved are not traceable due to efflux of time i.e. after expiry of 5 years. Since assessee had discharged the initial burden of proof and considering the substantial time lag, we are inclined to adjudicate the issue in assessee s favour as this case is not a fit case to levy penalty u/s 271(1)(c) of the Act. Accordingly, the penalty is deleted and grounds raised by the revenue are dismissed.- Decided in favour of assessee.

Summary

Issues Involved:
Appeal against penalty imposed under section 271(1)(c) of the Income-tax Act, 1961 for Assessment Year 2003-04 based on unexplained deposits made in a bank account.

Analysis:

Issue 1: Penalty under section 271(1)(c) for unexplained deposits

The case involved two appeals by two assessees against the orders of CIT(A) for Assessment Year 2003-04, where the common issue was the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961. The Assessing Officer (AO) added an amount deposited in a bank account under section 69 of the Act, leading to a total income determination. The AO initiated penalty proceedings, which were subsequently deleted by the CIT(A) based on the appellant's submissions. The CIT(A) held that since the appellant did not maintain proper books of account and the deposits were for a short period, there was no concealment of income, citing relevant case law. The Revenue appealed the CIT(A)'s decision, arguing that the appellant failed to provide proper evidence for the source of the deposits, and the genuineness of the transactions was doubtful. The Revenue contended that the penalty should have been sustained due to discrepancies in the documents submitted by the appellant.

Issue 2: Adjudication of penalty deletion

During the appeal before the ITAT, the arguments put forth by both parties were considered. The Revenue claimed that the appellant did not prove the accuracy of the furnished information and that the documents submitted were questionable. On the other hand, the appellant, a small trader in the bamboo business, explained that the deposits were short-term and related to business transactions. The ITAT analyzed the case, noting that the appellant estimated income under section 44AF and was not required to maintain books of account. The AO did not find any discrepancies in the return of income, ruling out concealment. Despite the AO's attempts to verify the documents and persons involved in the transactions, the persons could not be located after a substantial time lag. Citing relevant case law, the ITAT concluded that the appellant had discharged the initial burden of proof, and due to the substantial time gap, the penalty under section 271(1)(c) was not justified. Consequently, the ITAT upheld the deletion of the penalty in both appeals, dismissing the grounds raised by the Revenue.

In conclusion, the ITAT dismissed the appeals of the Revenue, upholding the deletion of the penalty imposed under section 271(1)(c) for unexplained deposits in the bank account for Assessment Year 2003-04.