2018 (2) TMI 118 - AT - Income Tax

Tribunal overturns penalty under section 158BFA, rules in favor of assessee

The Tribunal allowed the appeal of the assessee, concluding that the penalty imposed under section 158BFA of the Act was not justified solely based on ... Penalty levied u/s 158BFA - explanations of the assessee with regard to small investments - Held that:- As examined the issues on which additions were made by the AO and we find that there were small small amounts invested. Though the assessee has tried to explain the same, but it was not accepted by the Assessing Officer. No doubt for non-acceptance of explanations of the assessee, addition can be made but penalty under section 158BFA could not be sustained. We, therefore, find no merit in the penalty levied by the AO and confirmed by the ld. CIT(A). Accordingly, we set aside the order of the CIT(A) and delete the penalty. - Decided in favour of assessee. Issues:Penalty levied under section 158BFA of the Act based on unexplained investments.Analysis:The appeal was filed against the penalty levied under section 158BFA of the Act, confirmed by the ld. CIT(A). The Assessing Officer made additions totaling Rs. 5,23,895 under various heads, leading to the initiation of penalty proceedings. The assessee contended that the additions were small and explained, but the explanations were not accepted. The penalty of Rs. 3,14,337 was imposed due to non-acceptance of the explanations provided by the assessee.Upon examination, it was found that the Assessing Officer had made small additions under different heads, despite the explanations provided by the assessee. The Tribunal noted that while additions can be made for non-acceptance of explanations, the penalty under section 158BFA of the Act could not be justified solely on that basis. Therefore, the Tribunal concluded that the penalty levied by the Assessing Officer and upheld by the ld. CIT(A) was not justified. Consequently, the Tribunal set aside the order of the ld. CIT(A) and deleted the penalty.In summary, the Tribunal allowed the appeal of the assessee, emphasizing that while additions were made by the Assessing Officer, the penalty under section 158BFA of the Act was not warranted solely based on non-acceptance of explanations provided by the assessee regarding small investments. The Tribunal found no merit in the penalty and decided to delete it, overturning the decision of the lower authorities.