2018 (11) TMI 273 - HC - Income Tax

Levy of penalty u/s 271(1)(c) - unexplained deposits of cash amounts in own bank accounts - Held that - The assessee failed to furnish any explanation about the source of deposit made in the bank account and when no explanation whatsoever has been furnished by the assessee, the question of explanation being bonafide did not arise. No question of law much less any substantial question of law, arises in this appeal. The impugned order in our considered view does not suffer from any infirmity.

Issues:
1. Levy of penalty under Section 271(1)(c) of the Income Tax Act based on unexplained cash deposits.
2. Challenge to the correctness of the penalty levied.
3. Failure to provide a bonafide explanation for cash deposits.
4. Comparison of various High Court judgments in similar cases.

Issue 1: Levy of Penalty under Section 271(1)(c) of the Income Tax Act based on unexplained cash deposits

The appellant challenged the penalty of ?4,99,321 imposed by the Assessing Officer and upheld by the CIT(A) and Income Tax Appellate Tribunal under Section 271(1)(c) of the Act. The Tribunal confirmed the penalty, citing that the appellant failed to explain the source of cash deposits totaling ?15,25,000 in his bank account. The appellant contended that the deposits represented advances received on the sale of land and did not constitute income as the sale deeds were not executed or registered during the relevant financial year. However, the Tribunal held that the appellant's failure to provide a satisfactory explanation for the cash deposits justified the penalty under Section 271(1)(c).

Issue 2: Challenge to the correctness of the penalty levied

The appellant argued that the disallowance of claims should not be the basis for imposing a penalty under Section 271(1)(c), citing judgments from various High Courts and the Supreme Court. However, the Tribunal differentiated the appellant's case, emphasizing that the penalty was imposed due to unexplained cash deposits, not claim disallowances. The Tribunal noted that the appellant did not offer a bonafide explanation for the deposits at any stage of the proceedings, leading to the confirmation of the penalty.

Issue 3: Failure to provide a bonafide explanation for cash deposits

During the penalty proceedings, the appellant's defense centered on the bonafide nature of his explanation for the cash deposits. However, the Tribunal observed that the appellant failed to furnish any explanation regarding the source of the deposits to the Assessing Officer or the CIT(A). As a result, the Tribunal concluded that the appellant's silence on the matter indicated a lack of bonafide intention, thus justifying the penalty under Section 271(1)(c).

Issue 4: Comparison of various High Court judgments in similar cases

The appellant attempted to draw parallels with judgments from other High Courts to challenge the penalty imposed. However, the Tribunal and the High Court dismissed these arguments, emphasizing the unique circumstances of the appellant's case. The High Court reiterated that the appellant's failure to provide a reasonable explanation for the cash deposits distinguished his case from those cited in the judgments, ultimately upholding the penalty under Section 271(1)(c).

In conclusion, the High Court dismissed the appeal, affirming the penalty under Section 271(1)(c) based on the appellant's inability to provide a satisfactory explanation for the unexplained cash deposits in his bank account. The judgment highlighted the significance of bonafide explanations in penalty proceedings and differentiated the case from precedents cited by the appellant, ultimately upholding the Tribunal's decision.

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