2001 (8) TMI 277 - AT - Income Tax

Penalty upheld for concealment of income under Income-tax Act

The appeal was dismissed, and the penalty of Rs.2,59,653 under section 271(1)(c) of the Income-tax Act was upheld by the ITAT. The Assessing Officer found ... Penalty, For Concealment Of Income Issues Involved:1. Justification of the penalty imposed u/s 271(1)(c) of the Income-tax Act.2. Validity of the assessee's alternative plea regarding the source of cash credits.3. Assessment of the conduct of the assessee in providing evidence and explanations.4. Evaluation of the procedural aspects of penalty initiation and imposition.Summary:1. Justification of the penalty imposed u/s 271(1)(c) of the Income-tax Act:The core issue in this appeal is whether the CIT (A) was justified in upholding the penalty of Rs.2,59,653 imposed by the Assessing Officer u/s 271(1)(c) for the assessment year 1982-83. The assessee declared an income of Rs.29,600 and showed credits of Rs.4,08,300 in the names of 51 parties as advances for goods. The Assessing Officer found these credits suspicious due to lack of infrastructure, non-existent firms, improbability of cash advances, and physically impossible transactions. Despite multiple requests, the assessee failed to produce the parties or sufficient evidence to prove the genuineness of the credits. The Assessing Officer concluded that the amount represented undisclosed income and initiated penalty proceedings u/s 271(1)(c).2. Validity of the assessee's alternative plea regarding the source of cash credits:During the appeal, the assessee argued that the amounts were out of intangible additions made in the case of M/s Jindal Udyog, where the assessee was a partner, and acted merely as a conduit. However, the CIT (A) rejected this plea, noting that the advances appeared in the names of third parties in the assessee's books and the alternative plea was an after-thought. The ITAT, upon reviewing the case, restored the matter to the Assessing Officer to redecide in accordance with the Settlement Commission's directions. The Settlement Commission rejected the application, stating that the assessee was abusing the process to escape the situation.3. Assessment of the conduct of the assessee in providing evidence and explanations:The ITAT noted the shifting stands of the assessee, initially claiming the advances were for supply of tools, then through agents, and finally as amounts belonging to M/s Jindal Udyog. The Tribunal found the assessee's explanations inconsistent and unsupported by evidence. The CIT (A) and the ITAT upheld the addition of Rs.4,08,300 as undisclosed income, leading to the confirmation of the penalty. The Tribunal emphasized that the assessee failed to establish the identity, capacity, and genuineness of the creditors, and the conduct was contumacious.4. Evaluation of the procedural aspects of penalty initiation and imposition:The assessee argued that the Assessing Officer did not record specific satisfaction for initiating penalty proceedings and that the penalty under section 271(1)(c) was not justified merely because the addition was upheld. The Tribunal, however, found that the Assessing Officer had recorded satisfaction in the assessment order and issued a notice for penalty proceedings. The Tribunal also noted that the penalty could be imposed for both concealment of income and furnishing inaccurate particulars, and the facts of the case justified such imposition. The Tribunal upheld the CIT (A)'s order confirming the penalty, noting that the assessee's explanations were found to be false, and the conduct indicated concealment of income.Conclusion:The appeal of the assessee was dismissed, and the penalty of Rs.2,59,653 u/s 271(1)(c) was upheld by the ITAT, confirming the findings of the CIT (A) and the Assessing Officer.