2019 (2) TMI 275 - AT - Income Tax

Tribunal upholds penalty for income concealment under ITA; AO's satisfaction suffices

Maninder Singh Versus Income Tax Officer, Ward-2 (1), Bathinda

Maninder Singh Versus Income Tax Officer, Ward-2 (1), Bathinda - TMI Issues Involved:1. Validity of the penalty proceedings under section 271(1)(c) of the Income Tax Act, 1961.2. Merits of the penalty imposed for concealment of particulars of income.Detailed Analysis:1. Validity of the Penalty Proceedings under Section 271(1)(c):The assessee argued that the notice under section 274 was invalid as it did not specify the limb under which the penalty was being proposed, citing the decision in SSA’s Emrald Meadows case. However, the Tribunal found this plea inadmissible because the notice was not on record, and the assessee did not take a specific ground regarding this issue. The Tribunal referred to NTPC Ltd. v. CIT, which allows a legal ground to be admitted if the necessary facts are on record and not disputed.Without prejudice, the Tribunal held that the claim was untenable. The satisfaction recorded by the AO in the assessment proceedings was categorical for concealment of particulars of income, which provided the necessary jurisdiction to initiate penalty proceedings. The Tribunal emphasized that the absence of specification in the notice does not invalidate the proceedings, especially when the satisfaction of the AO is not under challenge. The Tribunal cited several judicial precedents, including Kantamani Venkata Narayana & Sons vs. First Additional ITO and CIT v. Manu Engineering Works, to support its stance that a defective notice does not defeat the proceedings.2. Merits of the Penalty Imposed for Concealment of Particulars of Income:The Tribunal examined whether the assessee provided a bona fide explanation for the cash deposits in the undisclosed bank account. The assessee claimed that the cash deposits were sourced from advances given by his younger brother and brother-in-law. However, the Tribunal found inconsistencies in the statements provided by these individuals.The Tribunal noted that the assessee failed to explain why the bank account was not disclosed and why the transactions were not reported to the Revenue. The explanation provided by the assessee was found to be false and unsubstantiated. The Tribunal highlighted that the statements of the assessee's brother and brother-in-law were unconvincing and contrary to the assessee's claims.The Tribunal referred to several Supreme Court decisions, including Mak Data (P.) Ltd. vs. CIT and Union of India v. Dharmendra Textile Processors, which clarify that a plausible explanation saves penalty, but the burden of substantiation lies on the assessee. The Tribunal concluded that both clauses (A) and (B) of Explanation 1 to section 271(1)(c) were attracted in this case, as the assessee failed to furnish a credible explanation and the explanation provided was found to be false.The Tribunal rejected the assessee's claim that the penalty was based on estimation, clarifying that the penalty was for unexplained cash deposits in the bank account.Conclusion:The Tribunal confirmed the levy of penalty under section 271(1)(c) for concealment of particulars of income, but directed the AO to verify the exact amount of addition sustained by the first appellate authority and levy penalty accordingly. The assessee's appeal was dismissed.