2022 (10) TMI 1115 - AT - Income Tax

Penalty u/s 271(1)(c) - Addition u/s. 68 - unexplained cash credit in bank accounts of the directors advancing the share application money to the Assessee just before advancing the share application amount - HELD THAT - Addition was made on cash deposit, which was used for share application money. We observe that the Assessee has clearly made adequate disclosure of all facts and it is also not a case here, of submitting a claim which is incorrect in law. There is also nothing on record either to suggest that the Assessee had not acted in a bona fide manner and committed conscious defaultand concealed any income or furnished inaccurate particulars. Simply the Assessee did not prefer any appeal against the said quantum order, ifso facto would not lead to imposition of penalty.On the aforesaid analyzations, in our considered view, the Assessee cannot be held guilty of furnishing of particulars of income, for the purpose of levy of penalty u/s 271(1)(C) of the Act, hence we are inclined to delete the penalty under consideration. - Decided in favour of assessee.

Summary

Issues:
Assessment of income, addition of unexplained cash credit, disallowance of interest on TDS, penalty proceedings under section 271(1)(c) of the Income-tax Act, 1961.

Analysis:

1. Assessment of Income:
The assessment order under section 143(3) determined the Assessee's income at a different amount than declared. The addition of Rs. 8,10,000 under section 68 of the Act was made due to unexplained cash credit in bank accounts of directors advancing share application money. Additionally, a disallowance of Rs. 2,155 was made for interest on TDS.

2. Penalty Proceedings:
The Assessing Officer initiated penalty proceedings under section 271(1)(c) for furnishing inaccurate particulars of income. The Assessee failed to justify the expenses related to the cash deposit component of share application money and interest on TDS. The Assessing Officer imposed a penalty of Rs. 2,50,955 based on the additions made, considering that the Assessee would have benefited from incorrect claims if not scrutinized.

3. First Appeal:
The Assessee appealed, providing evidence of the genuineness of the share application money transaction. The Assessee argued that the penalty was unjust as it had proven identity, creditworthiness of depositors, and genuineness of the transaction. The Assessee also cited various judgments in support.

4. Decision of the Ld. Commissioner:
The Ld. Commissioner affirmed the penalty related to the cash deposit component of the share application money but deleted the penalty on the disallowance of interest on TDS. The Ld. Commissioner relied on the judgment of CIT v Zoom Communication (P) Ltd to support the penalty imposition.

5. Appellate Tribunal's Decision:
The Appellate Tribunal found that the Ld. Commissioner's reliance on the Zoom Communication case was not applicable as the Assessee's case was factually different. The Tribunal observed that the Assessee had made adequate disclosure, acted bona fide, and did not commit any conscious default. Therefore, the Tribunal deleted the penalty imposed under section 271(1)(c) as the Assessee was not guilty of furnishing inaccurate particulars of income.

In conclusion, the appeal filed by the Assessee was allowed, and the penalty under consideration was deleted based on the findings that the Assessee had acted in good faith and had adequately disclosed all relevant facts.