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Income Tax Appellate Tribunal, ‘A’ BENCH, CHENNAI
Before: SHRI MAHAVIR SINGHAND SHRI MANOJ KUMAR AGGARWAL
आदेश /O R D E R PER MAHAVIR SINGH, VP: This appeal by the assessee is arising out of the order of Commissioner of Income Tax (Appeals), National Faceless Appeal Centre, Delhi in Appeal No. CIT(A), Salem/10130/2019-20 dated 14.12.2021. The assessment was framed by the ACIT, Circle 1, Namakkal for the assessment year 2016-17 u/s.143(3) of the Income Tax Act, 1961 (hereinafter the ‘Act’) vide order dated
2 12.12.2018. The penalty under dispute u/s.271(1)(c) of the Act was levied by the ACIT, Circle-1, Namakkal vide order dated 28.06.2019.
The only issue in this appeal of assessee is against the order of CIT(A), NFAC sustaining the levy of penalty by the AO u/s.271(1)(c) of the Act on the treatment of income disclosed from ‘income from other sources’ to unexplained cash credits u/s.68 of the Act and there is no tax sought to be evaded as there is no difference between the returned income and the assessed income.
Brief facts are that the assessee is an individual and filed his return of income on 21.01.2017 declaring total income of Rs.20,00,170/- for the assessment year 2016-17. The AO noticed that the assessee had declared an amount of Rs.6,50,000/- under the head ‘income from other sources’ but assessee failed to provide any details. Hence, the AO treated this amount of Rs.6,50,000/- as unexplained cash credit and taxed the same u/s.68 of the Act. But there is no change in the returned income and assessed income. The AO initiated penalty proceedings u/s.271(1)(c) of the Act. The AO issued show-cause notice dated 10.12.2018 and assessee claimed that she was lending amount to various parties on getting security of jewels and offered this income under ‘income from other
3 sources’. The assessee stated that she has not suppressed any income or evaded any tax. The AO was of the view that this credit amount of Rs.6,50,000/- (the AO wrongly mentioned in the penalty order as Rs.4,20,000/- which is subsequently corrected by CIT(A)) as unexplained cash credit and added the same u/s.68 of the Act as the assessee was unable to establish the source of this income. According to AO, the assessee has furnished inaccurate particulars of income and AO has detected the above income. The AO levied penalty u/s.271(1)(c) of the Act by holding that the assessee has concealed his tax liability on the income of Rs.6,50,000/- by furnishing inaccurate particulars of income and therefore imposed penalty of Rs.1,29,780/-. Aggrieved, assessee preferred appeal before CIT(A).
The CIT(A) also confirmed the action of AO by observing in para 5.3 as under:- “5.3 The appellant has submitted that since the returned income as well as assessed income were same, no penalty can be levied. This contention of the appellant is misplaced. The machinery provisions of the Income Tax Act provide that the minimum penalty levied will be 100% of the tax sought to be evaded or maximum of 300% of the tax sought to be evaded. Since in the present case, as the appellant has tried to pass all his unexplained income under the guise of income from other sources, the A.O has correctly assessed such income as Unexplained income u/s68 of the I.T. Act. This would automatically result in “tax sought to be evaded” as unexplained income u/s 68 of the Act is taxed on a different footing than income declared from “explained sources”. Therefore even if the returned income and assessed income are the same as in the present case, still there is “tax
4 sought to be evaded”. Since Penalty u/s.271(1)(c) is levied on the “tax sought to be evaded”, and not on the difference between the returned income and assessed income, the AO has correctly levied the penalty u/s.271(1)(c). Aggrieved, now assessee is in appeal before the Tribunal.
We have heard rival contentions and gone through the facts and circumstances of the case. We noted that there is no difference between assessed income and returned income. There is simpliciter change of head of income. The assessee declared this income under the head ‘income from other sources’ as this income has been earned by assessee as interest earned on jewel loans made to various parties but could not submit the evidences. In our view, the primary condition of the provisions of section 271(1)(c) of the Act i.e., tax sought to be evaded is a must for levying penalty u/s.271(1)(c) of the Act. This issue has been dealt by the Hon’ble Supreme Court in the case of CIT vs. Reliance Petroproducts Pvt. Ltd., (2010) 322 ITR 158 (SC), wherein the Hon’ble Supreme Court has considered the term ‘particulars’ used in section 271(1)(c) of the Act, which would embrace the details of the claim made. The Hon’ble Supreme Court stated that where no information given in the return was found to be incorrect or inaccurate, the assessee cannot be held guilty of furnishing inaccurate particulars nor expose the assessee to penalty, unless the case is strictly covered by the 5 provisions, the penalty provision cannot be invoked. Hence, in the present case the result of assessing the income either under the head ‘income from other sources’ or u/s.68 of the Act, the liability to pay any additional tax does not arise and once there is no tax sought to be evaded, penalty u/s.271(1)(c) of the Act cannot be levied. Accordingly, we reverse the orders of lower authorities and allow this appeal of assessee.
In the result, the appeal filed by the assessee is allowed.