2018 (7) TMI 1616 - AT - Income Tax

Penalty imposed u/s 271(1)(c) - unexplained cash - as per assessee the permission sought by AO was from Addl. Commissioner which was not as per law as the permission sought must have been from the Joint Commissioner - Held that - The definition of Joint Commissioner clearly provides that wherever the word Joint Commissioner used in Income Tax Act, it means a person appointed to be a Joint Commissioner of Income Tax or Additional Commissioner of Income Tax under sub-Section (1) of Section 117 of the Act. Section 117 of the Act provides that the Central Government may appoint such persons as it thinks fit to be income tax authorities. Thus, in our considered view, the approval given by the Additional Commissioner is as per the scheme of law and there is no illegality. For unexplained cash the appellant has not given confirmation of the persons who are said to have given the cash, in spite of numerous opportunities having been given. Also, the appellant has not been able to produce the persons who are said to have given this cash. Also, no evidences, in the form of cash book, bank book, bank statement etc, showing the source of this cash in hands of the persons giving the cash were produced or submitted. The appellant has submitted Xerox copies of cash receipts but these receipts contained only the signature of the appellant and not of the buyers / persons said to have given cash. Furthermore, these receipts also do not contain the dates on which this cash was received. The appellant has filed a copy of the FIR filed by the buyers / person said to have given cash which states that the buyers have given a sum of ₹ 3, 51, 00, 000/- by cheque and cash. In this FIR, the amount of cash given or the date on which this cash was given, has not been mentioned. It is also not clear from the FIR whether the cash given is substantial or is merely a token amount. The above discussion would show that the appellant has not been able to substantiate his explanation. - Decided against assessee

Summary

Issues Involved:
1. Confirmation of penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of the permission sought by the Assessing Officer from the Additional Commissioner instead of the Joint Commissioner.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty Imposed Under Section 271(1)(c):

The primary issue in this appeal is the confirmation of the penalty imposed by the Assessing Officer (AO) under Section 271(1)(c) of the Income Tax Act, 1961. The assessee, engaged in trading LPG cylinders and earning interest income, filed a return declaring an income of ?8,41,720/-. The AO assessed the total income at ?37,75,147/- and initiated penalty proceedings for undisclosed income, resulting in a penalty of ?10,17,829/-.

The assessee argued that the cash deposits in his bank account were from buyers of immovable property belonging to M/s Tiger Continental Wild Life Resorts Ltd., where he was a director. The assessee provided details of cheques received and their subsequent dishonor, leading to cash payments. However, the AO added ?28,34,000/- as unexplained cash deposits, which the CIT(A) confirmed.

The assessee contended that the penalty was imposed without proper satisfaction recorded in the assessment order and that the cash deposits were fully explained. The assessee also argued that the CIT(A) ignored the explanation and evidence provided, including FIRs and arbitration proceedings confirming the cash payments.

The ITAT found that the assessee failed to substantiate his explanation and did not provide confirmations from the persons who allegedly gave the cash. The FIRs and other documents did not conclusively prove the source of the cash. The ITAT upheld the CIT(A)'s findings that the explanation was neither substantiated nor bona fide, and all material facts were not disclosed. Therefore, the penalty under Section 271(1)(c) was confirmed.

2. Validity of Permission Sought by Assessing Officer:

The assessee challenged the legality of the penalty order on the grounds that the AO sought permission from the Additional Commissioner instead of the Joint Commissioner, as required under Section 274(2) of the Act. The assessee argued that this procedural lapse rendered the penalty order invalid.

The ITAT clarified that the definition of "Joint Commissioner" under Section 2(28C) of the Act includes both a Joint Commissioner and an Additional Commissioner of Income Tax. Therefore, the approval given by the Additional Commissioner was in accordance with the law. The ITAT found no illegality in the procedure followed by the AO and dismissed this ground of appeal.

Conclusion:

In conclusion, the ITAT upheld the penalty imposed under Section 271(1)(c) of the Income Tax Act, 1961, confirming that the assessee failed to substantiate his explanation for the cash deposits and did not disclose all material facts. The ITAT also found that the approval for imposing the penalty was validly obtained from the Additional Commissioner, as per the legal provisions. The appeal of the assessee was dismissed.