Mere sustaining of addition on the basis of Entries in the Credit Card Account would not attract Penalty: ITAT [Read Order]

The Kolkata bench of ITAT, in the case of Joy Barman vs. Income Tax Officer, ruled that mere sustaining of addition on the basis of entries in the credit card account would not attract penalty under section 271(1)(c) of the Income Tax Act, 1961 (Act).

In this appeal the assessee has challenged the order of CIT(A) whereby the CIT(A) deleted the penalty imposed by the AO on the assessee under section 271(1)(c) of the Income Tax Act, 1961 (Act).

Assessee engaged in the distributorship business of herbal cosmetic items of different companies. During the proceedings AO found certain undisclosed cash deposit by which Assessee submitted that those amounts were withdrawn from credit cards which were deposited in the saving bank accounts for the purpose of payment. However, additions were made and initiated penalty proceedings u/s 271(1)(c) of the Act.

During the penalty proceedings Assessee agreed for the penalty on its interest income, since it was an undisclosed one.

When this matter carried to the first appellate authority wherein CIT (A) confirmed the action of AO. Henceforth penalty u/s 271(1)(c) of the Act was imposed on the assessee for Rs.2,81,550.00 being @ 100% of tax sought to be evaded by the assessee.

Further aggrieved assessee carried the matter before Tribunal, the bench while hearing both the parties contention observed “addition has been made by the AO on account of unexplained money and cessation of liability on basis of lack of evidence. Though the assessee’s explanation in respect of the credit card transactions and cessation of liability in the absence of sufficient proof was not accepted, that would not mean that the assessee made any deliberate attempt towards concealment of particulars of income. Mere sustaining of addition on the basis of entries in the credit card account would not warrant a conclusion that the assessee had concealed certain particulars of income”.

Finally bench including N.V.Vasudevan (Judicial Member) and Waseem Ahmed (Accountant Member) held that this is not a fit case for levy of penalty u/s 271(1)(c) of the Act since addition on the basis of entries in the credit card account would not warrant a conclusion that the assessee had concealed certain particulars of income.