2015 (9) TMI 1469 - AT - Income Tax

Tribunal confirms income addition but deletes penalty for undisclosed sources and old debtors, emphasizing proof requirements.

The Tribunal confirmed the addition of income from undisclosed sources for the assessment year 2007-08 due to lack of concrete evidence supporting cash ... Penalty u/s 271(1)(c) - Addition u/s 68 - Held that:- Failure of M/s G.R. Overseas to appear before the Assessing Officer after denying the payment had a most crucial angle which the Assessing Officer simplistically ignored’. The above recording amply proves that the assessee did require the cross examination of M/s G.R. Overseas, which has eventually not taken place. As regards the other two parties, the assessee contended that they were small parties, whose whereabouts were not ascertainable. This has again not been demolished by the AO. These circumstances need to be seen in the backdrop of the fact that the amounts were in fact, receivable from these trade debtors. The above discussion divulges that the explanation given by the assessee for receipt of the amount from its old debtors has not been disproved by the AO. Though the assessee could not satisfactorily explain the receipt of cash from these three parties, the fact that this amount was actually receivable, which was claimed to have been received during the year, goes to show that the explanation of the assessee about the receipt of such amount was a possible one albeit not satisfactory. The Tribunal has also noticed in the quantum order that: ‘it was obligatory on its part to produce the parties or give their proper addresses to the Department.’ It further observed that: ‘it failed to discharge its burden cast by section 68.’ The above observations of the Tribunal along with the position as discussed above, makes it clear that though the addition u/s 68 was properly made as has also been confirmed by the Tribunal because of unsatisfactory explanation given by the assessee in support of the receipt of the amounts, but, it is not a good case for imposition of penalty because it relates to lack of tendering explanation to the satisfaction of the AO and not disproving the contention of the assessee about the genuineness of receipts. We, therefore, order for the deletion of penalty. - Decided in favour of assessee. Issues:1. Addition of income from undisclosed sources for assessment year 2007-08.2. Confirmation of penalty imposed under section 271(1)(c) for assessment year 2006-07.Issue 1: Addition of income from undisclosed sources for assessment year 2007-08:The appeal pertains to the confirmation of an addition of Rs. 15,25,000 as income from undisclosed sources taxable under section 68 of the Income Tax Act. The assessee received cash amounts from two parties, but upon inquiry, one party denied making any payment to the assessee. The assessee failed to provide sufficient evidence to prove the receipt of the cash amount. The Tribunal upheld the addition based on the unsatisfactory explanation provided by the assessee and the similarity of circumstances to a previous assessment year where a similar addition was confirmed. The Tribunal concluded that the addition was justified due to the lack of concrete evidence supporting the cash receipts. The appeal against the addition was dismissed.Issue 2: Confirmation of penalty imposed under section 271(1)(c) for assessment year 2006-07:The second appeal challenges the confirmation of a penalty imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2006-07. The Tribunal upheld the penalty based on the denial of cash payments by one party and the failure of two other parties to provide confirmations or their postal addresses. However, the Tribunal clarified that the parameters for imposing a penalty are different from confirming an addition. The Tribunal emphasized that the mere confirmation of an addition does not automatically warrant the confirmation of a penalty. It was noted that if an explanation provided by the assessee remains unproved, it does not necessarily indicate concealment. In this case, the explanation given by the assessee regarding the receipt of cash from old debtors was not disproved by the Assessing Officer. Therefore, the Tribunal ordered the deletion of the penalty, considering the lack of disproval of the assessee's explanation. The appeal against the penalty imposition was allowed.This detailed analysis of the judgment provides insights into the reasoning behind the decisions made by the Tribunal regarding the addition of income from undisclosed sources and the imposition of a penalty under section 271(1)(c) for the respective assessment years.