2019 (11) TMI 998 - AT - Income Tax

Tribunal cancels penalty on HUF account, upholds addition; Revenue's appeal dismissed

DCIT, Cir. 1 (2) Baroda. Versus Smt. Indramati C. Pandey Widow & L.H. of Late Shri Chandrabhan R Pandey Prop: M/s. Shekti Enterprise

The Tribunal allowed the appeal of the assessee against the penalty imposed under section 271(1)(c) of the Income Tax Act, deleting the penalty amount of ... Penalty u/s 271(1)(c) - Addition u/s 68 - HELD THAT:- The bank account is in the name of HUF, and the HUF is a separate taxable independent entity. If an account is being maintained by the HUF, then the assessment in the hands of HUF ought to have been made. In the present case that has not been done. Since the quantum is not open before us, we cannot touch it. The assessee has to pay tax on the addition made by the AO. But penalty is a separate proceedings, and on account of any technical issue, if an assessee can absolve himself from visiting with penalty, then, all those plea are available with the assessee. Since the addition itself ought not have been made in the hands of the assessee, because this bank account did not belong to the assessee, rather it belonged to HUF, therefore, for the purpose of penalty, we are satisfied that the assessee does not deserves to be visited with penalty in these circumstances. We allow the appeal of the assessee, and delete penalty - Decided in favour of assessee. Issues:1. Appeal against order of CIT(A) challenging penalty under section 271(1)(c) of the Act.2. Appeal against addition made by the AO and confirmed by CIT(A).3. Application of CBDT Circular No.17 of 2019 regarding tax effect below Rs. 50 lakhs.4. Interpretation of section 271(1)(c) of the Income Tax Act in penalty proceedings.Issue 1: Appeal against penalty under section 271(1)(c) of the Act:- The assessee challenged the penalty amount of Rs. 2,76,012 levied by the AO under section 271(1)(c) of the Act.- The AO had made an addition of Rs. 8,20,000 under section 68 of the Act based on unexplained cash deposits in a bank account.- The CIT(A) confirmed the addition, leading to the assessee filing a CO in the appeal of the Revenue.- The penalty proceedings are independent, and the assessee contended that the addition was not sustainable, thus penalty should not be imposed.- Section 271(1)(c) states the conditions for imposing a penalty for concealment of income or furnishing inaccurate particulars.- The Tribunal found that since the bank account belonged to HUF and not the assessee, the penalty was not justified.- The appeal of the assessee against the penalty was allowed, and the penalty of Rs. 2,76,012 was deleted.Issue 2: Appeal against addition made by the AO:- The AO had added Rs. 8,20,000 under section 68 of the Act based on unexplained cash deposits in a bank account.- The CIT(A) confirmed the addition, leading to the assessee filing a CO in the appeal of the Revenue.- The CO was time-barred and not pressed, resulting in the addition being confirmed.- Since the bank account belonged to HUF and not the assessee, the Tribunal found that the addition in the hands of the assessee was not justified.- The appeal against the addition was dismissed.Issue 3: Application of CBDT Circular No.17 of 2019:- The assessee pointed out that the tax effect of the addition confirmed by the CIT(A) was less than Rs. 50 lakhs.- The CBDT Circular No.17 of 2019 directed the Department not to file appeals before the Tribunal where the tax effect is below Rs. 50 lakhs.- The Tribunal, after considering the circular and the tax calculation, dismissed the Revenue's appeal due to the low tax effect.Issue 4: Interpretation of section 271(1)(c) in penalty proceedings:- Section 271(1)(c) of the Income Tax Act allows for penalties if the assessee conceals income or furnishes inaccurate particulars.- The penalty can range from 100% to 300% of the tax sought to be evaded.- The deeming provisions under Explanation 1 to section 271(1)(c) cover situations where the assessee fails to offer explanations or fails to substantiate them.- The Tribunal interpreted the section in light of the facts of the case and concluded that the penalty was not justified due to the bank account belonging to HUF.- The appeal of the assessee against the penalty was allowed, and the penalty amount was deleted.---