2017 (7) TMI 98 - AT - Income Tax

Tribunal cancels penalty, assessee's explanations deemed bonafide. Separate penalty from quantum.

The Tribunal canceled the levy of penalty under section 271(1)(c) of the Income Tax Act in favor of the assessee. The Tribunal found that the explanations ... Levy of penalty under section 271(1)(c) - agricultural land purchase - Held that:- This matter was investigated by office of the Director of Income Tax (Investigation) Ludhiana and DDIT (Investigation) Ludhiana vide his report dated 27.08.2009 (PB-24) recommended for dropping of the proceedings because assessee was able to explain source of the money invested in purchase of the agricultural land which is the same explained by the assessee. Therefore, assessee is able to explain the addition of ₹ 14,77,000/- which in the opinion of authorities below, may not be acceptable but it proved that assessee explained this issue and explanation of the assessee appears to be bonafide. Addition on account of agriculture income, the authorities below did not accept contention of assessee regarding ₹ 7,20,000/- on account of agriculture income because agriculture income was not shown in the return of income. But the assessee, time and again explained that agricultural land was held by HUF of which assessee was also one of the co-parcener. The sale proceeds were credited in the account of the assessee. merely because assessee has not shown agriculture income for himself may not be relevant for the purpose of levying the penalty against the assessee. Assessee offered explanation on the additions which were not found to be false. The explanation of the assessee is substantiated through evidence and material on record and assessee is able to prove that his explanation was bonafide and all the facts relating to the same and material to the computation of his total income had been disclosed to the Revenue authorities. Mere making of a claim which is not sustainable in law by itself will not amount to furnishing inaccurate particulars regarding income of the assessee. - Decided in favour of assessee. Issues Involved:1. Levy of penalty under section 271(1)(c) of the Income Tax Act.2. Addition of Rs. 14,77,000.3. Addition of Rs. 7,20,000.4. Addition of Rs. 8,98,528.Issue-wise Detailed Analysis:1. Levy of Penalty under Section 271(1)(c):The central issue in this appeal is the levy of penalty under section 271(1)(c) of the Income Tax Act. The assessee challenged the penalty imposed on the grounds of concealment of income and furnishing inaccurate particulars of income. The Assessing Officer (AO) initiated penalty proceedings after making additions to the assessee's income. The AO and the Commissioner of Income Tax (Appeals) [CIT(A)] held that the assessee had deliberately concealed particulars of income. However, the assessee contended that the explanations provided were not false and were supported by evidence.2. Addition of Rs. 14,77,000:The AO made an addition of Rs. 14,77,000 to the assessee's income, questioning the source of investment in agricultural land. The assessee explained that Rs. 10 lacs was withdrawn from a joint bank account by the assessee's father on the date of the purchase deed, and Rs. 4 lacs was received from M/s Garg Seeds Corporation against the sale of agricultural produce. The AO rejected the explanation, noting inconsistencies in the timing of the transactions and the absence of these amounts in the assessee's balance sheet. However, the Tribunal found that the explanation was supported by bank statements and other documents, and the investigation report had recommended dropping the proceedings, indicating the explanation was bonafide.3. Addition of Rs. 7,20,000:The AO added Rs. 7,20,000 to the assessee's income, citing that the assessee did not declare any agricultural income in the return. The assessee argued that the agricultural income belonged to the HUF (Hindu Undivided Family), of which he was a co-parcener, and the income was shown in the HUF's return. The Tribunal noted that the agricultural income was indeed reflected in the HUF's return and supported by ledger accounts and bank statements. Therefore, the explanation provided by the assessee was considered bonafide, and the addition alone did not justify the penalty.4. Addition of Rs. 8,98,528:The AO made an addition of Rs. 8,98,528, treating the amount received through Western Union Money Transfer from non-resident friends and relatives as unsecured loans. The AO noted that the money was meant for family maintenance, not for property purchase. The assessee provided confirmations and certificates from Western Union to substantiate the claim. The Tribunal observed that the explanation was supported by documentary evidence, and the mere non-acceptance of the explanation by the Revenue did not automatically warrant a penalty.Conclusion:The Tribunal emphasized that penalty proceedings are distinct from quantum proceedings, and the findings in the latter are not conclusive for the former. It concluded that the assessee's explanations were not found to be false and were substantiated by evidence. The Tribunal relied on the Supreme Court's decision in CIT Vs Reliance Petroproducts Pvt. Ltd., which held that merely making an incorrect claim does not amount to furnishing inaccurate particulars. Therefore, the Tribunal set aside the orders of the lower authorities and canceled the levy of penalty, allowing the appeal in favor of the assessee.