2016 (10) TMI 852 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - unexplained investment - Held that - Whatever may be the reason for confirming part of the amount in assessment, the same does not automatically lead of levy of penalty u/s. 271(1)(c). Assessee can question the addition itself in penalty proceedings so as to justify non-levy of penalty. Considering the fact that these assets are acquired much earlier and assessee has shown them as opening balance only, in our opinion the mere addition of part of the amount does not attract penalty for concealment. Considering these facts of the case the penalty u/s. 271(1)(c) is not warranted. Accordingly, the same is set aside. - Decided in favour of assessee

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act for concealment of income.

Analysis:
The case involved an appeal by the assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act. The dispute arose from the addition of an amount as unexplained cash credit under section 68 of the Act. The assessee had provided explanations for the source of the opening balance of her capital account, attributing it to the sale proceeds of a house and accumulated agricultural income. The Assessing Officer rejected the explanations and added the amount as unexplained. The CIT(A) partially upheld the addition, leading to further relief being granted by the ITAT. Subsequently, a penalty was levied under section 271(1)(c) based on the sustained addition of a specific amount.

The CIT(A) confirmed the penalty under section 271(1)(c) citing the failure of the assessee to substantiate the sources of the accumulated savings. The ITAT upheld the addition and noted that the assessee could not produce any proof to support her claims. The ITAT also highlighted that the explanation provided by the assessee was found to be inadequate, invoking the provisions of explanation 1(A) to section 271(1)(c) which deems income as concealed if explanations are not satisfactory or found to be false. The ITAT rejected the reliance on case laws by the assessee, emphasizing the requirement for documentary evidence to support claims.

During the proceedings, the assessee contended that the addition represented the opening balance of her capital and provided details of assets held at the beginning of the block period. The counsel argued that the assets were acquired much earlier, and the addition in the assessment did not amount to concealment of income. The ITAT considered the contentions of both parties and reviewed the quantum proceedings. It noted that the assets forming the opening balance were acquired in earlier years and that the mere addition of part of the amount did not automatically warrant a penalty for concealment. Therefore, the ITAT set aside the penalty under section 271(1)(c) based on the circumstances of the case.

In conclusion, the ITAT allowed the appeal of the assessee, emphasizing that the addition of part of the amount as unexplained did not justify the imposition of a penalty for concealment of income. The decision was based on the understanding that the assets forming the opening balance were acquired much earlier and that the penalty under section 271(1)(c) was not warranted in this case.