The Income Tax Appellate Tribunal, Jaipur bench has held that the penalty under section 271(1)(c) of the Income Tax Act, 1961 cannot be solely based on the addition without proving the two requirements of the provisions.
The Sahakari Samiti is engaged in trading of food grain and fertilizers and also doing work of mini bank. The Sahakari Samiti is also a nodal agency for payments made under NAREGA. During the F.Y 2009-10 the Sahakari Samiti has received sum of Rs. 1,81,36,602/- from Government for payments to be made to workers under NAREGA. For making payments to workers Sahakari Samiti withdraws cash from the bank in a lump sum and at the end of the day or a period surplus amount, if any, remains deposited back in the Bank account. The Assessing Officer made addition in respect of the same.
The Assessing Officer also initiated penalty proceedings u/s 274 r.w.s. 271(1)(c) of the Act for concealing of particulars of income. The assessee offered the explanation in respect to the show cause notice stating that mere wrong claim does not amount to concealment of particulars of income or furnishing inaccurate particulars of income.
Dr. S. Seethalakshmi, JM & Shri Rathod Kamlesh Jayantbhai, AM observed that it is well-settled that assessment proceedings and penalty proceedings are separate and distinct and as held by the Supreme Court in the case of Ananthraman Veera singhaiah & Co.Vs. CIT, the finding in the assessment proceedings cannot be regarded as conclusive for the purposes of the penalty proceedings.
“It is, therefore, necessary to reappreciate and reconsider the matter so as to find out as to whether the addition made in the proceedings actually represents the concealment on the part of the assessee as envisaged in section 271(1)(c) and whether it is a fit case to impose the penalty by invoking the said provisions,” the Tribunal said.
Deleting the penalty order, the Tribunal held that “there is no finding of the AO based on some contradictory evidence to disapprove that explanation offered by the assessee was false or the assessee was not able to substantiate the explanation furnished or fails to prove that such explanation is not bona fide and that all the facts relating to the same and material to the computation of his total income has not been disclosed by him. Therefore the order on the CIT(A) is accordingly set aside and thus penalty u/s 271(1)(c) levied by the AO is not in accordance with law therefore same is cancelled. In the result appeal of assessee is allowed.”
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