2005 (10) TMI 269 - AT - Income Tax

Tribunal upholds CIT(A)'s decisions, dismisses Revenue's appeals on unexplained loans & penalty

The Tribunal dismissed both appeals filed by the Revenue. It upheld the CIT(A)'s decisions to delete the addition of Rs. 2,80,000 on account of ... Burden Of Proof Issues Involved1. Deletion of addition of Rs. 2,80,000 on account of unexplained loans.2. Cancellation of penalty of Rs. 2,40,000 levied under Section 271(1)(c).Issue-wise Detailed Analysis1. Deletion of Addition of Rs. 2,80,000 on Account of Unexplained LoansFacts: The Revenue appealed against the CIT(A)'s order deleting the addition of Rs. 2,80,000 made by the AO on account of unexplained loans. The Tribunal had previously remanded the matter to the AO to allow the assessee to explain the credits for 12 unsecured loans totaling Rs. 6,06,725. The AO accepted loans totaling Rs. 3,26,725 as genuine but treated Rs. 2,80,000 as income under Section 68 due to insufficient evidence.Assessee's Submissions: The assessee provided PAN, names, addresses, and repayment details for the loans in question. The loans were received and repaid via cheques, and all necessary confirmations were submitted.CIT(A)'s Decision: The CIT(A) held that the assessee had discharged the primary onus by providing the necessary details and confirmations. The CIT(A) deleted the addition, noting that the AO did not make further inquiries to disprove the genuineness of the loans.Tribunal's Analysis: The Tribunal noted that the AO accepted five creditors as genuine but rejected the remaining seven without further inquiry, despite detailed information being provided. The Tribunal cited several case laws supporting the assessee's position that the burden shifts to the Department once the assessee provides primary evidence. The Tribunal found no reason to interfere with the CIT(A)'s order and dismissed the Revenue's appeal.2. Cancellation of Penalty of Rs. 2,40,000 Levied Under Section 271(1)(c)Facts: The Revenue appealed against the CIT(A)'s order canceling the penalty of Rs. 2,40,000 levied under Section 271(1)(c) for the assessment year 1997-98. The AO had levied the penalty due to a reduction in the assessed loss.CIT(A)'s Decision: The CIT(A) observed that the amendment to Explanation 4 to Section 271(1)(c) by the Finance Act, 2002, applicable from 1st April 2003, could not be applied retrospectively. The CIT(A) held that the law in force at the time of filing the original return was applicable and canceled the penalty.Revenue's Argument: The Revenue argued that the AO was justified in levying the penalty based on the reduction in loss and cited the decision in Cadbury Schweppes Beverages India (P) Ltd. vs. Jt. CIT to support their case.Assessee's Argument: The assessee contended that penalty could be levied only when tax was sought to be evaded, which was not the case here as the assessed income was a loss. The assessee cited several case laws, including CIT vs. Prithipal Singh & Co., which held that penalty for concealment could only be imposed where tax was evaded.Tribunal's Analysis: The Tribunal agreed with the CIT(A) that the law applicable at the time of filing the return should be applied. The Tribunal noted that the amendment to Explanation 4 to Section 271(1)(c) was not retrospective. The Tribunal found that the Revenue failed to prove concealment of income or furnishing of inaccurate particulars by the assessee. The Tribunal upheld the CIT(A)'s order canceling the penalty and dismissed the Revenue's appeal.ConclusionBoth appeals filed by the Revenue were dismissed. The Tribunal upheld the CIT(A)'s decisions on both the deletion of the addition of Rs. 2,80,000 on account of unexplained loans and the cancellation of the penalty of Rs. 2,40,000 levied under Section 271(1)(c).