2004 (9) TMI 313 - AT - Income Tax

Tribunal Cancels Penalty on Unexplained Income, Assessee's Explanation Deemed Sufficient

The Tribunal upheld the addition of Rs. 8,000 and Rs. 35,000 as unexplained income but cancelled the penalty under section 271(1)(c), finding the ... For Concealment Of Income Issues Involved:1. Addition of cash credits as unexplained income.2. Imposition of penalty under section 271(1)(c) for concealment of income.Detailed Analysis:1. Addition of Cash Credits as Unexplained Income:The case involved two cash credits in the books of the assessee:- Smt. Gurdev Kaur: Rs. 23,000- Sh. Amarjit Singh: Rs. 35,000Smt. Gurdev Kaur's Credit:- The assessee provided an affidavit stating that the loan was from agricultural income.- Upon investigation, it was found that Smt. Gurdev Kaur did not own agricultural land in her name.- The bank account showed a deposit of Rs. 25,000, claimed to be from past savings.- The Assessing Officer found the explanation unsatisfactory and added Rs. 23,000 as unexplained income.- The Tribunal, after reviewing the evidence, considered Rs. 15,000 as explained and Rs. 8,000 as unexplained, sustaining an addition of Rs. 8,000.Sh. Amarjit Singh's Credit:- The loan was given by cheque and repaid by cheque.- The source of the Rs. 35,000 deposit was claimed to be from agricultural income and the sale of a cow.- The Assessing Officer did not believe the genuineness of the credit due to the timing of the cash deposit and withdrawal.- The CIT(A) confirmed the addition of Rs. 35,000 as income from undisclosed sources.- The Tribunal sustained the addition on the grounds that the cash deposit was not satisfactorily explained, although the claim of agricultural income was not questioned.2. Imposition of Penalty under Section 271(1)(c):- The Assessing Officer imposed a penalty of Rs. 30,386, later reduced to Rs. 21,794 by the CIT(A) after partial relief from the ITAT.- The assessee argued that the primary onus of establishing the identity, creditworthiness, and genuineness of the credits was discharged.- The assessee relied on various judicial precedents to argue that once the primary onus is discharged, further explanation of the source of credit in the creditor's bank account is not required.- The Department argued that the penalty was justified under the Explanation to section 271(1)(c), which shifts the burden of proof to the assessee.Tribunal's Findings on Penalty:- The Tribunal reviewed several Supreme Court and High Court judgments, establishing that the burden of proof shifts to the assessee under the Explanation to section 271(1)(c).- The Tribunal noted that the explanation provided by the assessee must be plausible and not merely a fantastic or unacceptable explanation.- In this case, the assessee provided affidavits, statements, and evidence of the creditors' identity and creditworthiness.- The Tribunal found the explanation plausible, noting that part of the credit from Smt. Gurdev Kaur was accepted, and Sh. Amarjit Singh's creditworthiness was established.- The Tribunal concluded that the facts and circumstances were equally consistent with the hypothesis that the amounts did not represent the assessee's income.- Therefore, the penalty under section 271(1)(c) was not justified and was cancelled.Conclusion:The Tribunal upheld the addition of Rs. 8,000 and Rs. 35,000 as unexplained income but cancelled the penalty under section 271(1)(c), finding the assessee's explanation plausible and the evidence sufficient to discharge the onus of proof.