2017 (3) TMI 1044 - AT - Income Tax

Penalty under section 271(1)(c) - unexplained stock, unexplained cash, unexplained investment in furniture and fixture and unexplained investment - Held that - In the course of survey action, the survey team found unexplained stock, unexplained cash, unexplained investment in furniture and fixture and unexplained investment in renovation of shop alongwith loose papers indicating sales. In the circumstances, where in the course of search or survey action evidences in respect of source of income and application of income both are found, then addition could have been made either on source of income or application of income and it cannot be made both for source of income and application of income. In the present case, the Assessing Officer in the assessment order has nowhere observed that the assessee was having any source of investment in stock, cash etc other than the sales. In such circumstances, the apparent source of investment in stock, cash, furniture and fixture, renovation in shop etc. is the sales appearing in loose papers and the Assessing Officer should have allowed the telescoping of the income appearing in loose papers against the investment in stock, cash etc. It appears to us that the Assessing Officer has simply made addition for the amount offered by the assessee, without going into whether said addition could have been made in the hands of the assessee or not. It is the statutory duty of the Assessing Officer to assess the income in accordance with law only. We find that the Assessing Officer, even levied the penalty without any finding recorded in the order on the issue whether the explanation filed by the assessee was bonafide or not and whether all material facts related to the addition were disclosed by the assessee. Thus merely making addition by the Assessing Officer, which is accepted by the assessee, cannot make the assessee liable for the levy of penalty unless the conditions of Explanation-1 of section 271(1)(c) are satisfied. In view of discussion above, we feel it appropriate to restore the matter to the file of the Assessing Officer to examine the applicability of the conditions of Expanation-1 of the section 271(1)(c) of the Act and decide the issue of levy of penalty in accordance with law. - Decided in favour of assessee for statistical purpose.

Summary

Issues:
Penalty under section 271(1)(c) of the Income-tax Act, 1961 for concealing income particulars.

Detailed Analysis:

Issue 1: Surrendered amounts and discrepancies found during survey
The case involves discrepancies found during a survey, including excessive stock, cash, investments, and loose papers entries. The assessee accepted and surrendered these amounts for taxation. However, discrepancies remained regarding entries in loose papers.

Issue 2: Penalty imposition and grounds of appeal
The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act due to the discrepancies in the loose papers. The assessee, while admitting the surrender of certain amounts, argued against the penalty imposition, citing debatable views on the loose papers' entries and a desire to avoid further litigation.

Issue 3: Confirmation of penalty by Commissioner of Income-tax (Appeals)
The Commissioner of Income-tax (Appeals) upheld the penalty, stating that the assessee failed to provide a bonafide explanation for concealing income particulars. The assessee then appealed to the Tribunal against the penalty confirmation.

Issue 4: Tribunal's decision and legal analysis
The Tribunal analyzed the case, noting that the Explanation-1 of section 271(1)(c) of the Act requires a bonafide explanation for not levying a penalty. It found that the lower authorities did not establish whether the explanation provided by the assessee was bonafide. The Tribunal emphasized the need for the Assessing Officer to examine bonafide explanations before imposing penalties.

Conclusion:
The Tribunal allowed the assessee's appeal for statistical purposes, directing the matter back to the Assessing Officer for a thorough examination of the bonafide nature of the explanations provided by the assessee. The Tribunal stressed the importance of following legal procedures and ensuring that penalties are imposed only when warranted by law.