2011 (12) TMI 624 - AT - Income Tax

ITAT dismisses Revenue's appeal, no penalty under s. 271(1)(c) justified. Assessee's appeal allowed.

Marathon Nextgen Reality & Textiles Ltd. Versus Deputy Commissioner of Income Tax

The ITAT dismissed the Revenue's appeal and allowed the assessee's appeal, concluding that no penalty under s. 271(1)(c) of the IT Act was justified on ... - Issues Involved:1. Sustaining the penalty levied by the AO under s. 271(1)(c) of the IT Act in respect of 'on-money' receipt of Rs. 1.63 crore.2. Deleting the penalty levied by the AO under s. 271(1)(c) of the IT Act in respect of addition of Rs. 110.50 lakhs.Issue-Wise Detailed Analysis:1. Sustaining the penalty levied by the AO under s. 271(1)(c) of the IT Act in respect of 'on-money' receipt of Rs. 1.63 crore:The AO initiated penalty proceedings under s. 271(1)(c) due to the concealment of income and furnishing inaccurate particulars by the assessee. A search under s. 132 revealed various documents indicating 'on-money' receipts. The AO noted discrepancies in the amounts declared and actual 'on-money' receipts. The assessee claimed certain amounts as unaccounted business expenses and payments to middlemen but failed to substantiate these claims with evidence. The AO, therefore, treated Rs. 2,78,68,800 as 'undisclosed income' and levied a penalty of Rs. 1,01,97,891 under s. 271(1)(c).Before the learned CIT(A), the assessee argued that the additional income was surrendered to buy peace and avoid prolonged litigation, with a specific condition that no penalty should be levied. The CIT(A) sustained the penalty on Rs. 1.63 crore, noting that the assessee failed to provide evidence for the claimed expenses. The CIT(A) observed that there was material evidence indicating the receipt of 'on-money,' but no evidence was found to support the claimed expenditures.Upon appeal, the ITAT found merit in the assessee's submission that the nature of the expenditure explained was common in real estate business. The ITAT noted that the Revenue did not bring any material to suggest that the amount was not spent or utilized for acquiring other assets. The ITAT emphasized that the addition based on the assessee's admission does not automatically attract penalty under s. 271(1)(c). The ITAT concluded that the penalty on Rs. 1.63 crore was not justified as the assessee had made a conditional offer and the Revenue failed to disprove the assessee's explanation.2. Deleting the penalty levied by the AO under s. 271(1)(c) of the IT Act in respect of addition of Rs. 110.50 lakhs:The AO levied a penalty on Rs. 110.50 lakhs, which the assessee claimed was not received as 'on-money' since it did not bear the initials of any family member. The CIT(A) deleted the penalty, noting that the seized document did not contain signatures as a token of receipt of money. Statements from Shri Virendra Shetty and Shri Mayyur Shah supported the non-receipt claim. The AO did not provide contrary evidence to disprove these statements.The ITAT upheld the CIT(A)'s decision, agreeing that the absence of initials on the seized document and the statements from responsible persons substantiated the assessee's claim. The ITAT found no infirmity in the CIT(A)'s order deleting the penalty on Rs. 110.50 lakhs, as the Revenue failed to bring any material evidence against the findings.Conclusion:The ITAT concluded that no penalty under s. 271(1)(c) was warranted on both Rs. 1.63 crore and Rs. 110.50 lakhs. The appeal by the Revenue was dismissed, and the appeal by the assessee was allowed.