2018 (4) TMI 181 - AT - Income Tax

Tribunal upholds tax penalty for concealing income with forged documents.

M/s. Shaan Construction P Ltd Versus ITO, Ward-8 (1), New Delhi

The Tribunal upheld the quantum addition of Rs. 50 lakhs under Section 68 of the Income Tax Act and the penalty of Rs. 16.83 lakhs under Section 271(1)(c) ... Addition u/s 68 - unexplained share capital and share premium - Held that:- As whole exercise carried out by the assessee is simply a devise to introduce unaccounted money through various shell companies in the form of share capital at a premium. The manner of issue of the shares through these companies, the manner of providing confirmation on the letter pad, the manner of maintaining the annual accounts and the manner of submitting the bank accounts on the letter pad or on a computerized print out to give it a semblance of originality to defraud the revenue, proves much more than what is under challenge before us. It shows the whole picture how the accommodation entries are routed through shell companies as share capital to evade the taxes. The whole façade created by assessee shows the real purpose of introducing the unaccounted money of the assessee without payment of taxes. The finding of the ld CIT(A) also demonstrates this fact. We do not want to interfere in the findings of the lower authorities in confirming the above addition of ₹ 50 lacs. Therefore, the findings of the lower authorities are confirmed the ground No. 4 to 10 of the appeal of the assessee are dismissed. Penalty u/s 271(1)(c) - Held that:- No infirmity in the order of the ld CIT(A) in confirming the penalty u/s 271(1)(c) of the Act. The facts of the present case are similar to the issue decided by the Hon'ble Supreme Court in case of Makdata Pvt. Ltd vs. CIT [2013 (11) TMI 14 - SUPREME COURT] wherein, when certain documents with respect to the share applicants were found and the assessee surrendered that amount even then Hon'ble Supreme Court confirmed the penalty u/s 271(1)(c) of the Act. In the present case before us the assessee has submitted the forged bank statement of the depositors before the ld Assessing Officer to prove the creditworthiness and genuineness of the transaction. Therefore, the case of the assessee was in much worse situation then the issue before Hon'ble Supreme Court, therefore, we confirm the orders of the ld CIT(A) confirming the penalty u/s 271(1)(c) levied by AO - Decided against assessee. Issues Involved:1. Quantum addition under Section 68 of the Income Tax Act.2. Penalty under Section 271(1)(c) of the Income Tax Act.Detailed Analysis:Quantum Addition under Section 68:1. Background:- The assessee, engaged in trading plots and agricultural land, filed its return of income for the assessment year 2006-07.- The authorized capital increased from Rs. 5 lakhs to Rs. 20 lakhs, with 50,000 shares allotted at a premium of Rs. 90 per share to five companies.- The assessee provided confirmations, bank statements, and other documents to the Assessing Officer (AO).2. Assessment Proceedings:- The AO found discrepancies between the bank statements submitted by the assessee and those obtained directly from the banks.- The AO issued a notice to the assessee, highlighting the discrepancies and questioning the genuineness of the transactions.- The AO concluded that the assessee failed to prove the creditworthiness and genuineness of the transactions, leading to an addition of Rs. 50 lakhs under Section 68.3. Appeal Before CIT(A):- The CIT(A) confirmed the addition, noting that the assessee failed to provide satisfactory explanations or produce necessary evidence.- The CIT(A) emphasized the importance of proving the identity, creditworthiness, and genuineness of the transactions, which the assessee failed to do.4. Tribunal’s Findings:- The Tribunal examined the bank statements and found them to be forged.- The Tribunal noted that the assessee’s claim of not needing to prove the 'source of the source' was invalid given the forged documents.- The Tribunal upheld the addition, agreeing with the CIT(A) that the transactions were not genuine and were a means to introduce unaccounted money.Penalty under Section 271(1)(c):1. Background:- Following the addition of Rs. 50 lakhs under Section 68, the AO initiated penalty proceedings under Section 271(1)(c) for furnishing inaccurate particulars of income.2. CIT(A) Proceedings:- The CIT(A) confirmed the penalty, stating that the assessee failed to prove the creditworthiness of the parties and provided forged documents.- The CIT(A) emphasized that the explanation provided by the assessee was not bona fide.3. Tribunal’s Findings:- The Tribunal agreed with the CIT(A), noting that the assessee submitted forged bank statements and the financial capacity shown in the returns of the companies was inadequate.- The Tribunal cited the Supreme Court’s decision in Makdata Pvt. Ltd. vs. CIT, which upheld penalties in similar circumstances.- The Tribunal confirmed the penalty of Rs. 16.83 lakhs under Section 271(1)(c), concluding that the assessee furnished inaccurate particulars of income with the intent to conceal income.Conclusion:The Tribunal dismissed the appeals, confirming both the quantum addition of Rs. 50 lakhs under Section 68 and the penalty of Rs. 16.83 lakhs under Section 271(1)(c), based on the assessee’s failure to prove the genuineness and creditworthiness of the transactions and the submission of forged documents.