2017 (8) TMI 332 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance of loss claimed on account of stock damaged/stolen - AO observed that the event of theft did not occur in the year under consideration - Held that - In the case in hand, the explanation furnished by the assessee has not been examined in the light of evidences furnished in the course of appellate proceeding before the Ld. CIT-A, while upholding the penalty invoking Explanation -1 to the section 271(1)(c) of the Act. In the interest of Justice, we feel it appropriate to restore the issue to the file of the Ld. CIT-A with the direction to admit the additional evidences filed by the assessee, examine the applicability of Explanation-1 to the section 271(1)(c) and decide the issue afresh in accordance with law. Grounds of appeal are accordingly allowed for statistical purpose.

Issues Involved:
1. Applicability of Section 271(1)(c) read with Section 275 of the Income-tax Act, 1961.
2. Allegations of concealment of income and filing inaccurate particulars of income.
3. Enhancement of penalty by the CIT(A).
4. Bona fide nature of the claim disallowed in assessment proceedings.
5. Adequacy of explanation furnished by the appellant regarding additions/disallowances.
6. Conscious concealment and furnishing of inaccurate particulars by the appellant.

Detailed Analysis:

1. Applicability of Section 271(1)(c) read with Section 275:
The appellant argued that the provisions of section 271(1)(c) read with Section 275 are not applicable. The Tribunal examined the facts and found that the appellant did not file the return on time and failed to provide a satisfactory explanation for the abnormal loss claimed. The Tribunal noted that the appellant's return was filed late and the abnormal loss was not substantiated with adequate evidence, thus attracting the provisions of section 271(1)(c).

2. Allegations of Concealment of Income and Filing Inaccurate Particulars:
The appellant contended that there was neither concealment of income nor filing of inaccurate particulars. The Tribunal found that the appellant failed to provide a reasonable explanation for the abnormal loss of stock claimed. The Assessing Officer (AO) and the CIT(A) observed that the appellant did not substantiate the claim of stock loss due to demolition and theft with necessary evidence. The Tribunal upheld the findings that the appellant furnished inaccurate particulars of income.

3. Enhancement of Penalty by the CIT(A):
The CIT(A) enhanced the penalty from ?5,65,55,859 to ?7,88,04,440, noticing an error in the amount of addition/disallowance of abnormal loss considered by the AO. The Tribunal noted that the CIT(A) issued a notice for enhancement and, after considering the appellant's submissions, enhanced the penalty. The Tribunal found that the CIT(A) acted within his jurisdiction in enhancing the penalty.

4. Bona Fide Nature of the Claim Disallowed in Assessment Proceedings:
The appellant argued that the claim of abnormal loss was bona fide and should not attract a penalty. The Tribunal examined the appellant's explanations and evidence, including the FIR and bank certificate, and found them insufficient to substantiate the claim. The Tribunal noted that the claim was not supported by adequate evidence, and thus, the bona fide nature of the claim was not established.

5. Adequacy of Explanation Furnished by the Appellant:
The appellant contended that adequate explanations were furnished regarding the additions/disallowances. The Tribunal found that the explanations provided by the appellant were not substantiated with necessary evidence. The Tribunal noted that the appellant failed to demonstrate the availability and destruction of stock, and the explanations were not found to be bona fide.

6. Conscious Concealment and Furnishing of Inaccurate Particulars:
The CIT(A) held that the appellant consciously made the concealment and furnished inaccurate particulars of income to avoid tax. The Tribunal agreed with this finding, noting that the appellant did not file the return on time and failed to provide adequate evidence for the claimed loss. The Tribunal found that the appellant's actions amounted to conscious concealment and furnishing of inaccurate particulars.

Conclusion:
The Tribunal restored the issue to the file of the CIT(A) with directions to admit additional evidence submitted by the appellant and re-examine the applicability of Explanation-1 to Section 271(1)(c) of the Act. The CIT(A) was instructed to decide the issue afresh in accordance with the law, providing the appellant with sufficient opportunity for hearing. The appeal was allowed for statistical purposes.

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