2017 (9) TMI 1653 - AT - Income Tax

Partial success in appeal against Income Tax penalty under section 271(1)(c) with turnover and cash deposit considerations

The appeal challenging a penalty under section 271(1)(c) of the Income Tax Act, 1961 was partly allowed. The penalty was confirmed to a certain extent ... Levy of penalty u/s 271(1)(c) in respect of alleged undisclosed income - assessee has deposited cash on various dates in his savings bank account - Held that - the assessee does not have any explanation for not disclosing the reasonable profits and on the business which he stated to have carried out - his return only shows interest income and salary income - the assessee has nothing to say about his business income and therefore deposits represent dealings in connection with business- Thus, against the addition 10% of penalty is justified instead of 100% - decided partly in favor of assessee Issues:Challenge to penalty under section 271(1)(c) of the Income Tax Act, 1961 for alleged undisclosed income added under section 69 on voluntary surrender.Analysis:The appellant challenged the penalty of Rs. 13,00,990 imposed by the CIT(A) for the assessment year 2010-11. The appellant argued that the main source of income was salary and the surrender of borrowed amounts was for valid reasons, hence the penalty should be deleted. The appellant contended that the penalty should not have been levied based solely on the addition of income and that the explanation provided was not false. The appellant also argued that relevant judgments of the High Court and Tribunal were not considered, and the penalty order was illegal and invalid.During scrutiny assessment proceedings, the Assessing Officer noted cash deposits totaling Rs. 43,72,650 in the appellant's bank account based on AIR information. The appellant claimed to be in the used clothes business with a low profit margin, but the entire amount was added to the income. The Assessing Officer imposed a penalty of Rs. 13,00,990, equivalent to 100% of the tax sought to be evaded. The CIT(A) upheld the addition, stating that the appellant failed to provide a satisfactory explanation for the cash deposits.Upon hearing both sides and examining the facts, it was observed that the appellant did not disclose reasonable profits from the business he claimed to be engaged in. The penalty was considered justified to the extent of reasonable profit on the turnover reflected by the cash deposits. The penalty was confirmed for an amount related to the addition of Rs. 4,37,265, while the balance was deleted. The appellant's explanation regarding the business dealings was partially accepted for penalty purposes, resulting in the partial allowance of the appeal.In conclusion, the appeal was partly allowed, and the penalty was confirmed to a certain extent based on the turnover and cash deposits. The judgment was pronounced on September 22, 2017, by the Appellate Tribunal ITAT Ahmedabad.