Appeal Dismissed, Penalty Upheld for Non-disclosure of Cash Credits

Santosh Manikchand Raisoni Versus The Income Tax Officer, Ward - 2 (1), Pune

Santosh Manikchand Raisoni Versus The Income Tax Officer, Ward - 2 (1), Pune - TMI Issues Involved:
1. Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961.
2. Addition under section 68 for unexplained cash credits.
3. Explanation and evidence provided by the assessee.
4. Burden of proof and bona fide explanation.
5. Distinction between assessment and penalty proceedings.

Detailed Analysis:

1. Levy of Penalty under Section 271(1)(c):
The primary issue in this appeal is the levy of penalty amounting to Rs. 13,80,438/- under section 271(1)(c) of the Income Tax Act, 1961. The CIT(A) confirmed the penalty on the grounds that the assessee had concealed particulars of income by not disclosing material facts related to unexplained cash credits.

2. Addition under Section 68 for Unexplained Cash Credits:
The assessee had shown credit balances in the names of three persons totaling Rs. 40,98,148/-. The Assessing Officer (AO) made an addition under section 68 of the Act as the assessee failed to provide confirmations or PAN numbers of the creditors. The Tribunal had earlier upheld this addition, noting that the assessee did not discharge the burden of proving the identity, genuineness, and creditworthiness of the creditors.

3. Explanation and Evidence Provided by the Assessee:
The assessee argued that the amounts were paid by the creditors on behalf of the assessee for purchasing scrap from auctions, supported by receipts from MSRTC. However, the CIT(A) found that the explanation was not substantiated with valid evidence such as confirmatory letters or valid PAN numbers. The addresses provided were incomplete, preventing further verification.

4. Burden of Proof and Bona Fide Explanation:
The CIT(A) emphasized that under Explanation 1 to section 271(1)(c), the onus is on the assessee to prove that the explanation offered is bona fide and that all material facts have been disclosed. In this case, the explanation was found to be false and not bona fide. The CIT(A) cited various judicial precedents to support the view that the burden of proof lies on the assessee and that failure to provide a plausible and acceptable explanation leads to a presumption of concealment.

5. Distinction between Assessment and Penalty Proceedings:
The CIT(A) noted that penalty proceedings are distinct from assessment proceedings. The merits of the quantum addition had already been considered and upheld at various stages, including by the Tribunal. The jurisdiction in penalty proceedings is limited to the issue of penalty, and the assessee cannot contest the merits of the addition during these proceedings.

Conclusion:
The CIT(A) concluded that the assessee had not disclosed all material facts relevant to the assessment and had failed to provide a bona fide explanation for the unexplained cash credits. Consequently, the conditions for levying penalty under section 271(1)(c) were satisfied. The appeal of the assessee was dismissed, and the penalty was upheld.

Order:
The appeal of the assessee is dismissed. The order was pronounced on the 25th day of November, 2016.