2016 (4) TMI 563 - AT - Income Tax

Tribunal rejects revenue's penalty appeal, emphasizes proof of transaction genuineness

DCIT- Range- 9 (1), Mumbai Versus M/s Amore Jewels P Ltd.

The Tribunal dismissed the revenue's appeal against the cancellation of a penalty imposed under section 271(1)(c) for the assessment year 2007-08. The ... Penalty under section 271(1)(c) - addition on share application money received from five companies - Held that:- during the course of penalty proceedings, the assessee vide letter dated 19th March, 2012 has again furnished the entire details and submitted that, assessee has discharged its onus by submitting the evidences to substantiate its claim; like, copy of confirmation letters from these companies; copies of Bank statement showing the transaction of share subscription money; copies of audited Balance Sheet as on 31st March, 2007 reflecting the share application money applied; Copies of income-tax return filed for the same assessment year along with PAN; return of allotment filed with the ROC; allotment of shares to the respective allottees. All these evidences filed by the assessee has not been rebutted or disputed by the AO. Penalty proceedings are separate and distinct from the assessment proceedings and even if in the quantum proceedings, the matter has attained finality, however in the penalty proceedings, assessee may chose to rely upon the same material to prove that he has not guilty of furnishing of concealment of income. The Explanation 1 to section 271(1)(c) raises rebuttable presumption and once the assessee has furnished all the evidences in support of its explanation and has substantiated his claim then the onus cost upon him is discharged and onus then shifts upon the AO to prove that such an explanation or evidence is false. Here in this case the AO has failed to rebut the assessee’s explanation regarding nature and source of credit by conducting any enquiry or brining any material on record. The degree of burden under section 68 upon the assessee is to prima facie prove the nature of credit and then source which has to be proved by showing the identity, creditworthiness and genuineness of the transaction. Here all these primary ingredient has been discharged. Therefore penalty deleted - Decided in favour of assessee Issues Involved:Penalty under section 271(1)(c) for assessment year 2007-08 on share application money received from five companies.Detailed Analysis:1. Background and Aggrieved Party:The appeal was filed by the revenue against the order passed by the Commissioner of Income Tax (Appeals)-19, Mumbai regarding the penalty proceedings under section 271(1)(c) for the assessment year 2007-08. The revenue contested the cancellation of the penalty of Rs. 12,78,750/- levied by the Assessing Officer on account of addition on share application money received from five companies totaling Rs. 38,75,000/-.2. Facts and Arguments:The assessee had received share application money from various companies, and while relief was granted on a portion of the amount, the share application money from five specific companies was confirmed as unexplained credit. The assessee provided various documents during the quantum proceedings to substantiate the transactions, including forms filed with the Registrar of Companies, confirmation letters, PAN cards, and financial statements of the companies. The assessee argued that the evidence provided discharged their onus, and no further enquiry was conducted by the Assessing Officer to rebut the explanation.3. Contentions of the Parties:The Counsel for the assessee argued that all necessary documents were submitted to prove the genuineness of the transactions, and the penalty should not be levied. On the other hand, the Departmental Representative relied on the confirmation of the addition and supported the penalty imposition.4. CIT(A) Decision and Analysis:The CIT(A) analyzed the documents and bank accounts of the five companies involved in the share transactions. The CIT(A) noted that the Assessing Officer had specific documents indicating the genuineness of the transactions and the creditworthiness of the companies. The CIT(A) highlighted that while there were quantum additions, there was no clear case of inaccurate particulars or concealment of income for levying the penalty. The CIT(A) emphasized that the burden of proof was on the Assessing Officer to show the explanation was false, which was not done in this case.5. Judgment and Conclusion:After considering the submissions and evidence, the Tribunal confirmed the CIT(A)'s decision. The Tribunal noted that the assessee had discharged its onus by providing substantial evidence, and the Assessing Officer failed to rebut the explanation or bring any contradictory material on record. The Tribunal emphasized that penalty proceedings are distinct from assessment proceedings, and the burden shifts to the Assessing Officer once the assessee has substantiated their claim. As the Assessing Officer did not disprove the genuineness of the transactions, the penalty was not justified. Therefore, the appeal of the revenue was dismissed, upholding the decision of the CIT(A).In conclusion, the Tribunal's decision highlighted the importance of substantiating claims with evidence in penalty proceedings and emphasized the burden on the Assessing Officer to disprove the genuineness of transactions.