Penalty under 271AAC for unexplained bank deposits upheld where assessee failed to substantiate investment and comply with notices

Penalty under section 271AAC was considered where income was treated as unexplained investment following additions under provisions for unexplained cash credits and deposits; the assessee failed to substantiate nature or source of the bank deposits and did not cooperate in assessment or penalty proceedings, and notices were shown as served. The tribunal affirmed that penalty may be levied in such cases in addition to tax computed on deemed income and found no infirmity in the appellate authority's conclusion, resulting in dismissal of the appeal.

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Issues: Whether the penalty levied under Section 271AAC(1) (and consequentially under Section 270A) in respect of unexplained investment assessed under Section 69 and additional tax consequences under Section 115BBE(1) is sustainable where the assessee failed to substantiate the nature and source of investments and remained non-compliant during assessment, penalty and appellate proceedings.

Analysis: The assessee had investments/purchases of securities assessed as unexplained to the extent of Rs.11,63,000 and additions were made under Section 69. Penalty proceedings under Section 271AAC(1) were initiated on account of non-compliance with show-cause notices and failure to pay tax under Section 115BBE(1) as applicable. The assessee did not substantiate the nature or source of the investments before the Assessing Officer, did not comply in the penalty proceedings, and did not appear or file submissions before the Appellate Tribunal. The appellate authority upheld the penalty after an ex parte hearing. The statutory scheme permits levy of penalty under Section 271AAC where income is determined under Sections 68 to 69D and tax payable under Section 115BBE(1) has not been paid by the end of the relevant previous year; non-compliance and lack of cogent explanation permits sustaining the penalty. The Tribunal applied these legal propositions to the factual record and affirmed the penalty in absence of contrary evidence or explanation.

Conclusion: Penalty under Section 271AAC(1) (and related penalty consequences) is upheld against the assessee; the appeal is dismissed and the penalty sustained in favour of the Revenue.

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