2019 (7) TMI 26 - AT - Income Tax

Appeals allowed for penalties under Income Tax Act; case remanded for further evidence on contract receipts

Shri Kulwant Singh Versus The ITO, Ward – 2 (4), Ropar.

Shri Kulwant Singh Versus The ITO, Ward – 2 (4), Ropar. - TMI Issues:Appeals challenging penalty under section 271(1)(c) of the Income Tax Act for assessment years 2007-08 and 2008-09.Analysis:The appeals contested the penalty imposed by the Assessing Officer and upheld by the CIT(A) for undisclosed deposits in the bank account of the assessee, a labor contractor. The argument centered on the nature of these deposits, claimed by the assessee to be contract receipts. However, the authorities found insufficient evidence to support this claim. The CIT(A) partially allowed relief in the quantum proceedings by taxing peak amounts in the bank account, reducing the additions made by the Assessing Officer. Despite this, penalty proceedings were initiated due to the lack of evidence supporting the claim of contract receipts. The assessee failed to provide substantial evidence in both quantum and penalty proceedings, leading to the confirmation of additions as undisclosed income. The CIT(A) dismissed the argument that the penalty was wrongly levied, emphasizing the failure to demonstrate that the deposits were indeed business receipts.In the quantum proceedings, the CIT(A) granted partial relief by considering withdrawals made and taxing peak amounts in the bank account. The orders in both assessment years highlighted the lack of evidence to substantiate the claim of contract receipts. The CIT(A) dismissed the assessee's arguments based on legal precedents and emphasized the importance of disclosing details and sources of cash deposits. The penalty order was confirmed based on the failure to prove that the deposits represented business receipts.The judgment acknowledged the need for the assessee to provide supporting evidence to demonstrate that the deposits were indeed contract receipts. The court emphasized the importance of addressing the issue of undisclosed deposits in the bank account, especially in the context of potential misuse. The judgment highlighted the necessity for the assessee to prove that the deposits were business receipts, suggesting the submission of supporting evidence such as affidavits. The order set aside the penalty and directed the case back to the CIT(A), allowing for the submission of additional evidence. The judgment stressed the importance of substantiating the claim of contract receipts to potentially quash the penalty orders.In conclusion, the appeals were allowed for statistical purposes, and the case was remanded back to the CIT(A) for further consideration based on the submission of additional evidence by the assessee to support the claim of contract receipts.