2020 (4) TMI 216 - AT - Income Tax

Penalty u/s 271 (1)(c) - unsecured loan treated as unexplained cash credit under section 68 - whether the assessee has furnished inaccurate particulars of income with respect to the cash credit which were treated as unexplained under section 68 ? - HELD THAT - Assessee failed to explain or furnish the basic details of the parties from whom it has taken loan during the year. Thus in the absence of explanation/ documentary evidence and the assistance from the side of the assessee, the Revenue cannot be held guilty in not discharging its onus in the present facts and circumstances. It is well-settled law that an obligation gets discharged due to impossibility of performance. The law of impossibility of performance does not necessarily require absolute impossibility, but also encompass the concept of severe impracticability - doctrine of impossibility of performance applies in this case. Due to uncontrollable circumstances, the performance of the obligation to verify the loan creditors was not possible by the Revenue as no details were furnished by the assessee. Thus the impossibility of performance releases the Revenue from its obligation to verify such liability in the present facts and circumstances. A default occurs only when an obligation is not performed. We find that the assessee has not furnished the basic details about the parties therefore we hold that the assessee has furnished inaccurate particulars of income. Regarding the contention of the assessee that there was no specific charge levied by the AO whether the assessee has concealed the particulars of income or furnished inaccurate particular of income, in this regard we note that the AO has mentioned the specific charge in the penalty order by stating that the assessee has furnished inaccurate particulars of income. Accordingly we hold that, the assessee cannot get the benefit of immunity from the penalty merely there was no specific charge in the penalty notice issued under section 274 of the Act or in the assessment order. - penalty in the present case was correctly levied by the AO which was subsequently confirmed by the learned - Decided against assessee.

Issues Involved:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Specificity of the charge for penalty under section 271(1)(c).
3. Justification of the addition made under section 68 of the Act as unexplained cash credit.

Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c) of the Income Tax Act, 1961:
The primary issue raised by the assessee was the confirmation of the penalty of ?1,61,568/- imposed under section 271(1)(c) of the Act. The assessee, a firm engaged in the business of supplying limestone, had claimed unsecured loans of ?4,80,000/- from 24 different persons in cash. The Assessing Officer (AO) treated these unsecured loans as unexplained cash credits under section 68 of the Act and added them to the total income of the assessee. Despite the ITAT Rajkot setting aside the file to the AO for verification of identity, genuineness, and creditworthiness of the parties/transactions, the assessee failed to appear before the AO. Consequently, the AO continued with the original addition and initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income.

2. Specificity of the Charge for Penalty under Section 271(1)(c):
The assessee contended that the penalty order did not specify the charge for which initiation was specific, arguing that the judicial pronouncements require a specific conclusion of the charge initiated. The penalty order mentioned both charges: furnishing inaccurate particulars of income and concealment of income. The assessee cited various judicial pronouncements to support their argument that the penalty order should clearly state the provision under which the penalty is imposed. The Tribunal, however, noted that the AO had mentioned the specific charge in the penalty order, stating that the assessee had furnished inaccurate particulars of income. Thus, the Tribunal held that the assessee could not claim immunity from the penalty merely because there was no specific charge in the penalty notice issued under section 274 or in the assessment order.

3. Justification of the Addition Made under Section 68 of the Act as Unexplained Cash Credit:
The Tribunal analyzed whether the assessee had furnished inaccurate particulars of income concerning the cash credit treated as unexplained under section 68 of the Act. The term "inaccurate particulars of income" was discussed, referencing the Hon’ble Supreme Court's judgment in Reliance Petroproducts (P) Ltd, which held that the term signifies a deliberate act or omission by the assessee. The Tribunal noted that the assessee failed to furnish basic details such as the identity, creditworthiness of the parties, and genuineness of the transactions despite being provided opportunities. The ITAT had previously restored the issue to the AO for fresh adjudication, directing the assessee to furnish necessary details about the parties from whom it had taken loans. The assessee's failure to provide these details indicated a mala-fide intent to furnish inaccurate particulars of cash credit.

The Tribunal also addressed the argument that the addition made under section 68 does not automatically attract penalty provisions under section 271(1)(c). The onus lies on the Revenue to prove that such deemed income is the real income of the assessee to attract penalty provisions. However, the Tribunal concluded that the assessee's failure to explain or furnish basic details of the parties from whom it had taken loans justified the addition and the penalty.

Conclusion:
The Tribunal upheld the penalty imposed by the AO and confirmed by the learned CIT (A), dismissing the appeal of the assessee. The Tribunal emphasized that the assessee had furnished inaccurate particulars of income by failing to provide necessary details about the cash credits, thereby justifying the penalty under section 271(1)(c) of the Act. The order was pronounced in the Court on 23/01/2020 at Ahmedabad.

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