2017 (1) TMI 890 - AT - Income Tax

Penalty u/s 271(1)(c) - additions made with the aid of section 68 - Held that - The assessee failed to substantiate the alleged loans given by five entities. According to the assessee, representatives of all the concern came to Income-tax department in the quantum proceedings but after examination of one, rest of them ran away. It shows that transaction was not genuine. Facts in the case of National Textiles (2000 (10) TMI 19 - GUJARAT High Court) relied upon by the ld.counsel for the assessee are quite distinguishable. Therefore, considering well reasoned finding of the ld.CIT(A), I find no reasons to interfere in the order of ld. CIT(A), the same is confirmed and the appeal of the assessee is dismissed. - Decided in favour of revenue

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.

Detailed Analysis:
1. The appellant contested the penalty imposed by the ld.CIT(A) under section 271(1)(c) of the Income Tax Act, 1961. The penalty was confirmed for concealing income or furnishing inaccurate particulars, specifically related to loans obtained by the appellant from various entities.

2. The appellant had filed his return of income declaring a total income, but during assessment, it was found that loans obtained in cash were treated as bogus. The AO initiated penalty proceedings under section 271D, which were later dropped. However, the assessment was reopened, and additional income was added, leading to penalty proceedings under section 271(1)(c) where a penalty of &8377; 3,41,232/- was imposed.

3. The appellant argued that the creditors were small vendors in the scrap trading business and faced difficulties in producing them before the AO. The ld.CIT(A) upheld the penalty, stating that the appellant failed to establish the identity, genuineness, and creditworthiness of the creditors. The confirmation letters provided by the appellant were deemed insufficient as they lacked signatures, addresses, and PAN details of the creditors.

4. The appellant's counsel cited the National Textiles case, arguing that mere confirmation of additions under section 68 does not warrant a penalty without investigating the source of source. However, the Tribunal found that the appellant failed to substantiate the loans received from the entities, and the circumstances indicated the transactions were not genuine. The Tribunal upheld the penalty, dismissing the appeal.

5. The Tribunal concluded that the appellant's failure to substantiate the loans from the entities, coupled with the absence of genuine confirmations and the fleeing of representatives during proceedings, supported the imposition of the penalty. The Tribunal confirmed the ld.CIT(A)'s order, dismissing the appeal and upholding the penalty of &8377; 3,41,232/- under section 271(1)(c) of the Income Tax Act, 1961.