2016 (9) TMI 651 - AT - Income Tax

Tribunal Upholds Penalties, Deletes Others under Section 271(1)(c)

Shri Rohit C. Parikh Versus DCIT, Cir. 1 (2), Baroda

Shri Rohit C. Parikh Versus DCIT, Cir. 1 (2), Baroda - TMI Issues:1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961.Detailed Analysis:The appeal before the Tribunal was against the order of the ld.CIT(A)-IV, Baroda dated 20.2.2013 for the Asstt.Year 2004-05, specifically regarding the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessment resulted in additions to the income of the assessee, leading to the initiation of a penalty of &8377; 83,000. Notably, the disallowance of brokerage amounting to &8377; 1,42,890 was deleted by the Tribunal, affecting the penalty decision. The ld.CIT(A) highlighted the lack of a cash flow statement and failure to substantiate arguments regarding interest-free funds advanced as deposits, leading to the confirmation of penalty on certain additions. The Tribunal's observations emphasized the incorrectness and lack of genuineness in the appellant's claims, particularly concerning interest expenditure against salary income, which attracted the provisions of section 271(1)(c) of the IT Act.The Tribunal's decision was influenced by the appellant's failure to establish a nexus between interest paid and borrowed funds, ultimately confirming the penalty on the net disallowance of interest. The Tribunal's detailed analysis and subsequent orders provided a basis for confirming penalties on specific additions while deleting penalties on others. The Tribunal's rationale focused on the correctness and genuineness of the appellant's claims, aligning with the provisions of the IT Act. The appellant's arguments regarding interest expenditure against salary income were scrutinized, leading to a nuanced decision on penalty imposition based on the merits of the case.The Tribunal's assessment considered the appellant's actions and intentions regarding interest expenditure and income, emphasizing the need for a valid explanation and substantiation of claims. The penalty imposition under section 271(1)(c) was deemed unsustainable due to insufficient evidence of concealing income, as highlighted in the penalty order. The Tribunal's decision to allow the appeal and delete the penalty was supported by legal precedents, including the Karnataka High Court's ruling in a similar case. The final outcome of the appeal favored the assessee, resulting in the deletion of the penalty under section 271(1)(c) of the IT Act.