2019 (4) TMI 1526 - AT - Income Tax

Tribunal upholds penalty for undisclosed income under Income Tax Act, dismissing appeal

The Tribunal upheld the penalty imposed under Section 271(1)(c) of the Income Tax Act, finding that the assessee failed to provide a bona fide explanation ... Penalty u/s 271(1)(c) - non specification of charge - without specifically mentioning the proceedings whether the proceedings are initiated on the ground of concealment of income or on account of furnishing of inaccurate particulars - bonafide belief - Receipt of accommodation entries - HELD THAT:- Keeping in view of the facts and circumstances and following the case laws SHAH RUKH KHAN [2018 (6) TMI 147 - ITAT MUMBAI], the issue relating to validity of the proceeding u/s 271 (1)(c) was rightly held to be not tenable and therefore, this ground was correctly dismissed by the Ld. CIT(A), which does not need any interference on my part, hence, I uphold the action of the Ld. CIT(A) on the issue in dispute and dismiss the ground raised by the Assessee. Even otherwise, the assessee has failed to controvert the facts by the AO that the said amount of ₹ 10 lakhs was an accommodation entry and that it has furnished inaccurate particulars of income resulting in a concealment of income. There is no explanation whatever as envisaged u/s 271 (1)(c) has been adduced. In fact the explanation 1 to section 271 (1)(c) is also not found to be giving any relief to the assessee for accepting the addition of the income. It is not the case of the assessee that it has a bonafide explanation for the said receipt of ₹ 10 lakhs not offered for taxation. In the present case the assessee failed to adduce a bonafide explanation within the scope of explanation 1 to section 271(1)(c), hence, the Ld. CIT(A) has rightly confirmed the penalty in dispute, which does not need any interference, hence,uphold the action of the Ld. CIT(A) on the issue of dispute and reject the grounds. - Decided against assessee. Issues Involved:1. Jurisdiction and validity of the penalty order under Section 271(1)(c) of the Income Tax Act, 1961.2. Legality of the notice issued under Section 271(1)(c) for not specifying the grounds of concealment or furnishing inaccurate particulars.3. Applicability of the Supreme Court judgment in the case of M/s SSA’s Emerald Meadows vs. CIT.4. Validity of the assessment proceedings under Section 147/143(3) and its impact on penalty proceedings.Detailed Analysis:1. Jurisdiction and Validity of the Penalty Order:The Assessee challenged the penalty order dated 25.09.2014, arguing that it was without jurisdiction, illegal, bad in law, and void ab initio. The penalty was imposed for an addition of Rs. 11,31,492/- made to the total income under Section 68 of the Income Tax Act, 1961, due to the receipt of an accommodation entry from M/s Galaxy Mines & Stones Pvt. Ltd. The Assessing Officer (AO) initiated penalty proceedings under Section 271(1)(c) for concealing true particulars of income. The AO observed that the assessee had failed to provide documentary evidence to support the loan transaction, leading to suspicion about the genuineness of the transaction. The AO imposed a minimum penalty of Rs. 3,80,860/- under Section 271(1)(c), which was upheld by the CIT(A) on the grounds that the assessee had failed to provide a bona fide explanation.2. Legality of the Notice Issued Under Section 271(1)(c):The Assessee argued that the notice issued under Section 271(1)(c) was illegal as it did not specifically mention whether the proceedings were initiated on the grounds of concealment of income or furnishing inaccurate particulars. The CIT(A) rejected this argument, noting that the issue had been addressed in various judicial pronouncements, including the case of DCIT vs Shah Rukh Khan, where it was held that the failure to strike off the irrelevant portion in the penalty notice does not invalidate the penalty proceedings.3. Applicability of the Supreme Court Judgment in M/s SSA’s Emerald Meadows vs. CIT:The Assessee contended that the CIT(A) erred by not considering the Supreme Court judgment in the case of M/s SSA’s Emerald Meadows vs. CIT. The CIT(A) and the Tribunal, however, noted that the judgment in SSA’s Emerald Meadows does not apply to invalidate the penalty proceedings in this case. The Tribunal referred to other judgments, including Mak Data vs. CIT, where it was held that voluntary disclosure of concealed income does not absolve the assessee from penalty if the explanation offered is not bona fide.4. Validity of the Assessment Proceedings Under Section 147/143(3):The Assessee raised an additional ground challenging the validity of the assessment proceedings completed under Section 147/143(3), arguing that if the assessment was not valid, the penalty proceedings would also be invalid. The Tribunal dismissed this ground, stating that the legal ground must be related to the issue and proceedings of the impugned order. The Tribunal emphasized that the assessment order's validity cannot be indirectly challenged in the penalty proceedings.Conclusion:The Tribunal upheld the CIT(A)'s decision, confirming the penalty imposed under Section 271(1)(c). It was concluded that the assessee had failed to provide a bona fide explanation for the receipt of Rs. 10 lakhs, and the penalty proceedings were valid despite the alleged defects in the notice. The appeal of the Assessee was dismissed, and the order was pronounced on 24-04-2019.