2018 (4) TMI 1273 - AT - Income Tax

Penalty u/s 271(1)(c) - addition based on documents unearthed during the course of survey - unaccounted cash payments - Held that - Certain vouchers prepared and signed by the employees was found in survey, there was no authentic evidence to establish that the assessee had made cash payments. The persons to whom such payments were made were neither cross examined nor proper investigation made. No concrete finding by the revenue as to whether the assessee had made any cash payment which is unaccounted. Since the assessee has offered an explanation with respect to the documents found during the course of survey, the onus have shifted on the Revenue to establish it otherwise. Further the assessee has not admitted for any addition as proposed by the Revenue. Therefore the entire addition is made based on presumptions and assumptions from certain documents unearthed during the course of survey proceedings by rejecting the explanations offered by the assessee without any basis. In these circumstances, though it may be a fit case for addition, we are of the considered view that the penal provisions of Section 271(1)(c) of the Act would not be applicable in the case of the assessee. - Decided in favour of assessee

Summary

Issues:
Penalty under Section 271(1)(c) of the Income Tax Act based on unexplained cash credit.

Analysis:
The appeal challenged the penalty of ?38,84,470 imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act. The case involved a private limited company engaged in wind turbine operations, energy conservation projects, and civil constructions. The AO made an addition of ?1,19,72,476 based on an excel sheet found during a survey, indicating unaccounted cash payments. The company denied making these payments, stating the excel sheet was for budgeting purposes. The AO rejected this explanation, citing vouchers seized during search proceedings as evidence of cash payments. The Commissioner of Income Tax (Appeals) upheld the penalty, relying on previous court decisions.

On appeal, the company argued that the addition was based on assumptions from discarded computer documents and should not warrant a penalty. The company emphasized that no actual cash payments were made and the excel sheet was a rough estimate. The Tribunal noted that the entire addition relied on documents from the computer, with no concrete evidence of unaccounted cash payments. The Tribunal cited precedents where penalties were not imposed when additions were made on estimates or when the explanation offered by the assessee was found to be bonafide. The Tribunal found that the penalty was not justified as the addition was based on presumptions and assumptions without sufficient evidence of actual unaccounted cash payments.

The Tribunal distinguished previous court decisions cited by the Commissioner of Income Tax (Appeals), noting that those cases involved different issues such as willful enhancement of losses or wrong claims of loss, unlike the present case based on information from a deleted excel sheet. The Tribunal concluded that the penalty was not warranted in this case and directed the AO to delete the penalty levied on the company. As a result, the appeal of the Assessee was allowed.