2023 (1) TMI 317 - AT - Income Tax

Penalty passed u/s 271(1)(c) - unexplained cash credit addition u/s 68 - HELD THAT - Admittedly, the assessee has shown receipt of unsecured loan which was treated as unexplained cash credit u/s 68 of the Act and same was also confirmed by the learned CIT (A). The AO also initiated the penalty proceeding under section 271(1)(c) of the Act and levied penalty for furnishing inaccurate particular of income. Penalty proceedings are different from assessment proceeding. Any addition made under the assessment proceeding will not automatically lead to concealment of income or furnishing inaccurate particular of income. As such, the AO has to reach at independent finding that the assessee has concealed income or furnished inaccurate particular of income. In holding so we find support and guidance from the judgment of Hon ble supreme court in case of T Ashok Pai 2007 (5) TMI 199 - SUPREME COURT Assessee during the penalty proceedings furnished documentary evidences in support of identity, genuineness and credit worthiness of parties by stating that same were not furnished earlier due non-cooperation from the parties. The above explanation of the assessee was not found to be incorrect by the AO. The AO neither made any independent inquiry with regard to fact whether the loan credit indeed represent income of the assessee and the consciously furnished inaccurate particulars of income. As such, the entire basis of the AO treating such credit as unexplained was based on the doubt and human probabilities. There was no cogent material brought on record by the AO that assessee furnished inaccurate particular of income and the explanation furnished by the assessee is not true. Therefore, merely an addition made during the quantum proceeding will not attract penalty under section 271(1)(c) - Appeal of the assessee is hereby allowed.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Year 2012-13.

Analysis:
1. The appeal was filed by the assessee against the penalty order passed under section 271(1)(c) of the Act. Despite multiple hearing opportunities, the assessee did not appear, leading to an ex parte hearing. The primary issue raised was the confirmation of the penalty of Rs. 3,46,390. The AO added Rs. 11,21,000 as unexplained cash credit under section 68 of the Act, initiating penalty proceedings.

2. During the penalty proceedings, the assessee submitted necessary documents to prove the genuineness of the loan credit, citing non-cooperation from the creditors earlier. However, deficiencies were found in the evidence presented during the penalty proceedings, including identical confirmation letters, fabricated signatures, missing bank statements, and mismatched ITRs.

3. The AO concluded that the assessee failed to prove the credit entries' genuineness, leading to the levy of penalty under section 271(1)(c). The CIT(A) upheld the penalty, emphasizing the lack of evidence during the assessment and appellate proceedings, which were only presented during the penalty phase.

4. The Tribunal noted that penalty proceedings require an independent finding of concealment or furnishing inaccurate particulars of income. Citing legal precedent, the Tribunal emphasized that an addition during assessment does not automatically warrant a penalty. The AO's doubts about the credit's genuineness were not supported by concrete evidence of inaccurate particulars furnished by the assessee.

5. Relying on the Supreme Court's decision in CIT v. Reliance Petroproducts, the Tribunal held that mere disagreement on claimed expenditures does not justify a penalty under section 271(1)(c). Insufficient evidence was presented by the Revenue to establish that the assessee intentionally furnished inaccurate particulars of income.

6. Consequently, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty imposed under section 271(1)(c) of the Act, allowing the appeal of the assessee. The judgment was pronounced on 04/01/2023 at Ahmedabad.