Penalty under Income Tax Act section 271(1)(c) deleted for lack of inaccurate particulars

The ITAT Pune allowed the appeal, finding the penalty under section 271(1)(c) of the Income Tax Act unjustified. The court emphasized that the rejection of explanations alone does not warrant a penalty and highlighted the necessity of inaccurate particulars to invoke the penalty provision. As there was no finding of incorrect or false details provided by the appellant, the penalty was deemed unwarranted, leading to the deletion of the penalty amounting to &8377; 9,51,170.

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Issues:
Levy of penalty u/s 271(1)(c) of the Income Tax Act, 1961 based on unexplained cash deposits and interest on savings bank account.

Analysis:
The appellant, engaged in the business of builders and land promoters, filed an appeal against the order of the CIT(A) confirming the penalty under section 271(1)(c) of the Act for the assessment year 2011-12. The Assessing Officer made additions totaling &8377; 29,50,000/- for unexplained cash deposits and &8377; 1,472/- as interest from savings bank accounts. The CIT(A) further added &8377; 9,55,000/- on account of unexplained credit transfers through ATM. The penalty proceedings were initiated, and the Assessing Officer levied a penalty of &8377; 9,51,170/- despite the appellant's explanation that the cash deposits were made from ATM withdrawals. The appellant cited the decision in CIT vs. Reliance Petroproducts Pvt. Ltd., emphasizing that mere rejection of an explanation does not warrant a penalty under section 271(1)(c) of the Act.

The ITAT Pune analyzed the case and noted that the appellant had provided explanations for the cash deposits, which were rejected due to lack of documentary evidence. Referring to the Supreme Court's decision, the ITAT emphasized that the mere rejection of an explanation does not automatically lead to the imposition of a penalty. The court highlighted that the particulars in the return must be inaccurate to invoke the penalty provision. As there was no finding that the details supplied by the appellant were incorrect or false, the penalty under section 271(1)(c) was deemed unjustified. The ITAT concluded that the case did not warrant a penalty and directed the Assessing Officer to delete the penalty of &8377; 9,51,170/-.

Therefore, the ITAT allowed the appeal of the assessee, emphasizing that the conditions under section 271(1)(c) were not met, and the penalty was unjustified. The order was pronounced on June 1, 2021.

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