2024 (11) TMI 362 - AT - Income Tax

Penalty u/s 271(1)(c) - Addition made u/s 50C on difference between the stamp duty value and sale consideration as deemed income of the assessee and addition on account of negative cash in the books Addition u/s 50C - HELD THAT - Question as to whether the penalty u/s 271(1)(c) of the Act could be levied on this kind of addition made on account of deeming fiction came to be examined in the case Madan Teatres Ltd. 2013 (6) TMI 96 - CALCUTTA HIGH COURT wherein it was held that the addition made on account of deeming fiction would not lead to levy of penalty u/s 271(1)(c) of the Act, when the assessee has not actually received any money over and above the sale consideration declared in the sale deed. The facts prevailing in this case are identical with the facts of the above said case. There is no finding that the assessee has actually received any money over and above the actual sale consideration declared in the sale deed. Accordingly, the impugned addition has been made on account of deeming fiction only and penalty u/s 271(1)(c) of the Act is not leviable. Penalty levied on negative cash balance found in the books of account - We notice that the assessee could not offer any explanation with regard to the cash deposited into the bank account over and above the cash balance available in the books of account. As held in the case of MAK Data P. Ltd. 2013 (1) TMI 574 - DELHI HIGH COURT that voluntary disclosure does not release the assessee from mischief of penalty proceedings u/s 271(1)(c) of the Act. However, in this case, the surrender was after being found out that there was negative cash balance. Hence, it cannot be said that it was a case of voluntary surrender of income. Hence, it is a clear case of warranting addition. penalty u/s 271(1)(c) of the Act was rightly levied by the AO and confirmed by the Ld. CIT(A). Decided partly in favour of assessee.

Summary

Issues:
1. Penalty levied under section 271(1)(c) of the Income-Tax Act on additions made under section 50C and on account of negative cash balance.

Analysis:
The appeal was against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income-Tax Act for the assessment year 2009-10. The first issue pertained to the addition made under section 50C of the Act, where the AO added the difference between the stamp duty value and sale consideration as deemed income of the assessee. The Commissioner of Income-tax (Appeals) (CIT(A)) confirmed the penalty. However, the Tribunal referred to a case where it was held that the penalty cannot be levied on additions made on account of deeming fiction if the assessee did not actually receive any money over and above the declared sale consideration. Since there was no evidence of the assessee receiving additional money, the Tribunal held that the penalty was not applicable in this scenario. The penalty on this addition was directed to be deleted.

Moving to the second issue, the penalty was also imposed on an agreed addition made due to a negative cash balance found in the books of account. The assessee had deposited a significant amount into the bank account, resulting in a negative cash balance as per the books. The Tribunal noted that the assessee did not provide a satisfactory explanation for the discrepancy. While the Supreme Court has held that voluntary disclosure does not exempt an assessee from penalty proceedings, in this case, the surrender of income was only after the negative cash balance was discovered. Therefore, the Tribunal deemed it a clear case warranting the addition and upheld the penalty imposed by the AO and confirmed by the CIT(A).

Conclusively, the Tribunal partly allowed the appeal, setting aside the penalty on the addition made under section 50C but upholding the penalty on the addition due to the negative cash balance. The order was pronounced in the open court on 06.11.2024.