2024 (7) TMI 341 - AT - Income Tax

Penalty u/s 271(1)(c) - payment of cash on account of purchase of Baner land on the ground that the assessee has not explained the source of such unaccounted cash paid to Tapadiya family members - HELD THAT - The seized paper is dated 07.10.2010 which is the basis for making addition and the statements recorded from Ajay Tapadiya, the key person of Tapadiya group does not specifically mention as to in which year or date the cash was received by them from the assessee, there is ambiguity relating to the assessment year involved for levying penalty for the payment of unaccounted cash. It is the settled principle of law that the assessment proceedings and penalty proceedings are separate and distinct and the assessee can always make a new plea during penalty proceedings although addition has been sustained in quantum proceedings. We are of the considered opinion that although it may be a case for making addition u/a 69B of the Act, however, penalty cannot be levied because of the ambiguity i.e. the assessment year involved. In this view of the matter, we are of the considered opinion that the CIT(A) / NFAC is not justified in sustaining the penalty levied by AO u/s 271(1)(c) - Decided in favour of assessee.

Issues Involved:
1. Confirmation of penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Validity of assessment reopening under Section 147 of the Act.
3. Admissibility and relevance of seized documents and statements.
4. Distinction between assessment proceedings and penalty proceedings.

Issue-wise Detailed Analysis:

1. Confirmation of Penalty under Section 271(1)(c):
The primary issue in this case was whether the penalty of Rs. 32,89,952/- levied under Section 271(1)(c) for concealment of income was justified. The penalty was based on the alleged cash payment of Rs. 97,74,069/- made by the assessee for the purchase of land, which was not reflected in the return of income. The Tribunal noted that the seized document dated 07.10.2006, which was the basis for the addition, related to the assessment year 2007-08, not 2006-07. Furthermore, the statements recorded did not clearly specify the financial year in which the cash payments were made. Given these ambiguities, the Tribunal concluded that while the addition under Section 69B might be justified, the penalty could not be sustained due to the lack of clarity regarding the assessment year. Thus, the Tribunal set aside the penalty order.

2. Validity of Assessment Reopening under Section 147:
The assessment was reopened based on information from a search action under Section 132, which revealed that the assessee had allegedly made cash payments for land purchases that were not accounted for in the return of income. The Tribunal did not specifically address the validity of the reopening under Section 147 in the judgment, focusing instead on the penalty proceedings. However, it implicitly accepted the reopening as it discussed the subsequent proceedings and the addition made by the Assessing Officer.

3. Admissibility and Relevance of Seized Documents and Statements:
The seized documents and statements played a crucial role in the assessment and penalty proceedings. The Tribunal examined the statement of Shri Ajay Bhagwandas Tapadiya, which indicated that cash payments were received over and above the cheque amount for the land sale. However, the Tribunal found that the documents and statements did not clearly indicate the relevant assessment year for the cash payments. This lack of specificity was a key factor in the Tribunal's decision to cancel the penalty, as it created ambiguity about the exact period of the alleged concealment.

4. Distinction between Assessment Proceedings and Penalty Proceedings:
The Tribunal emphasized the legal principle that assessment proceedings and penalty proceedings are separate and distinct. It noted that while the addition might be sustained in the quantum proceedings, the penalty proceedings require a higher degree of certainty. The Tribunal cited previous decisions, including its own in the assessee's case for the assessment year 2010-11, where it had canceled the penalty under similar circumstances. The Tribunal reiterated that the assessee could make new arguments during the penalty proceedings, even if the addition was upheld in the assessment proceedings.

Conclusion:
The Tribunal concluded that the penalty of Rs. 32,89,952/- under Section 271(1)(c) was not justified due to the ambiguity regarding the assessment year of the alleged cash payments. It set aside the order of the CIT(A) / NFAC and directed the Assessing Officer to cancel the penalty. The appeal filed by the assessee was allowed.

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