2018 (7) TMI 462 - AT - Income Tax

ITAT overturns penalty for income concealment in hawala transactions

Shri K.V. Joy Versus The Assistant Commissioner of Income-tax, Circle-2 (1), Thrissur

The ITAT overturned the penalty imposed on the assessee under section 271(1)(c) of the Income Tax Act for alleged concealment of income from hawala ... Levy of penalty u/s. 271(1)(c) - huge cash deposited in bank account - as per CIT-A concrete information procured from Enforcement Directorate and CBI wing of the Department was available with Assessing Officer regarding routing of money - Held that:- Addition sustained by the CIT(A) is merely by estimation of income made by the Assessing Officer. Assessing Officer proceeded to levy penalty u/s. 271(1)(c) on the basis of the findings under the quantum proceedings and had not independently examined the matter in the penal proceedings for levy of penalty u/s. 271(1)(c). Even on this procedural count, the penalty levied cannot be sustained. Though the CIT(A) had sustained the addition, the assessee had not filed any appeal against that order, that by itself does not prove that there is any conclusive material to suggest that the assessee has earned additional income determined by the Assessing Officer. Penalty cannot be levied in this kind of situation. The addition was only on account of assessment of income on the deposits made into the account of the assessee’s bank. The assessee could not prove that there was willful or gross negligence on the part of the assessee, resulting thereby the assessee concealed the income to that extent. There was no deliberate concealment on the part of the assessee. - No penalty levy - Allahabad High Court in the case of CIT vs. Raj Bans Singh (2004 (8) TMI 73 - ALLAHABAD HIGH COURT), that when income is estimated by different authorities right from Assessing Officer to Tribunal and it was a simple case of one estimate against another estimate, and therefore, penalty cannot be levied. - Decided in favour of assessee. Issues:Levy of penalty under section 271(1)(c) of the Income Tax Act for concealment of income related to hawala transactions.Analysis:The appeal was against the order confirming the penalty imposed on the assessee under section 271(1)(c) of the Act for the assessment year 2000-01. The Assessing Officer found that the assessee facilitated the transfer of a substantial amount through his bank account, which did not belong to him, resulting in an income determination of Rs. 75,912. The CIT(A) relied on circumstantial evidence to establish the assessee's involvement in hawala activities, rejecting his claim of ignorance and lack of mens rea. The CIT(A) referred to relevant legal provisions and Supreme Court judgments to support the penalty imposition. The ITAT heard the submissions and observed that the penalty was based on an estimated addition to the assessee's income without evidence of willful concealment. The ITAT cited various High Court judgments where penalties were not imposed in cases of estimated additions. Consequently, the ITAT deleted the penalty levied by the Assessing Officer and confirmed by the CIT(A).The ITAT's decision was based on the lack of conclusive evidence of deliberate concealment by the assessee. The ITAT noted that the penalty was imposed solely on the estimated income added to the assessee's account without proof of willful negligence or intentional concealment. Citing precedents from different High Courts, the ITAT emphasized that penalties should not be levied on estimated additions alone. The ITAT highlighted judgments where penalties were not imposed when the additions were based on estimates without clear evidence of concealment or inaccurate particulars. Therefore, the ITAT concluded that the penalty imposed on the assessee was unwarranted and decided in favor of the assessee, leading to the dismissal of the Stay Petition as well.In conclusion, the ITAT's detailed analysis focused on the lack of concrete evidence supporting willful concealment by the assessee, leading to the deletion of the penalty imposed under section 271(1)(c) of the Income Tax Act. The decision was based on legal principles and precedents emphasizing the requirement for proof of deliberate concealment or inaccurate particulars before levying penalties related to estimated income additions.