2016 (12) TMI 1186 - AT - Income Tax

Penalty u/s 271(1)(c) - unexplained cash deposits - Held that - The assessee could not come forward before the authorities below to explain the source of cash deposit of balance amount of ₹ 9,18,775/- and why the same has not incorporated in the return of income filed with the Revenue. The assessee s contention that the C.A. of the assessee expired in April, 2006 and the assessee has engaged the services of wife of the deceased C.A., who is not a qualified C.A. hence the error had occurred, could not be accepted as bonafide explanation to take the assessee out of clutches of penal provisions as contained in Section 271(1)(c), as the assessee has more than three years after death of his CA to have arranged his affairs so that true and correct return could be filed with the Revenue which is the obligation of the assessee and the onus is on the assessee to have filed true and correct return of income, as three year period after the death of CA is more than sufficient period available to the assessee to have arranged his affairs. The return of income was filed by the assessee in June, 2009 whereby there was a gap of more than three years when the CA expired on April 2006. Thus the explanation offered by the assessee is not bonafide and the said explanation was rightly rejected by the authorities below. This case is a fit case to impose penalty u/s 271(1)(c) - Decided against assessee

Summary

Issues Involved:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealment of income based on unexplained cash deposits in the bank account.

Analysis:
1. The appeal was filed by the assessee against the appellate order passed by the Commissioner of Income Tax (Appeals) for the assessment year 2009-10, arising from the penalty order under section 271(1)(c) of the Act. The grounds of appeal raised by the assessee included arguments about being a regular taxpayer, dealing with clients who provide cash for expenses, and unintentional errors in the tax return due to the unqualified person preparing it after the death of the original Chartered Accountant.

2. The Assessing Officer found unexplained cash deposits in the assessee's bank account totaling ?9,18,775, out of which only ?6,41,506 could be explained by the assessee. The AO treated the balance amount as unexplained cash credit and initiated penalty proceedings. The AO levied a penalty of ?2,93,036, which was confirmed by the Commissioner of Income Tax (Appeals).

3. The Tribunal noted that the explanation provided by the assessee, regarding the error in the tax return due to the unqualified person handling the filing after the death of the original Chartered Accountant, was not considered a bonafide explanation. The Tribunal observed that the assessee had more than three years to rectify the situation and file a correct return. The Tribunal upheld the penalty under section 271(1)(c) as the assessee failed to substantiate the sources of the unexplained cash deposits adequately.

4. The Tribunal emphasized that it is the assessee's obligation to file a true and correct return of income, and the onus is on the assessee to establish the sources of cash deposits. The Tribunal found the explanation provided by the assessee to be insufficient and upheld the penalty imposed by the lower authorities. The Tribunal concluded that the penalty under section 271(1)(c) was justified in this case, and the appeal filed by the assessee was dismissed.

In conclusion, the Tribunal upheld the penalty under section 271(1)(c) based on unexplained cash deposits in the bank account, as the assessee failed to provide a satisfactory explanation for the discrepancies in the tax return, despite having sufficient time to rectify the situation.