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Facts
The assessee appealed against a CIT(A) order confirming penalty u/s 271(1)(c) for AY 2010-11. The penalty was levied on an addition of Rs. 8,14,238/-, representing unexplained cash deposits in a bank account, which was sustained after applying the peak credit theory in appeal proceedings, following an assessment originally completed u/s 144/147.
Held
The Tribunal held that despite the benefit of peak credit theory, the assessee failed to explain the source of the sustained cash deposit of Rs. 8,14,238/-. Consequently, the assessee is liable for penalty u/s 271(1)(c) for concealment, and the Assessing Officer was directed to levy the penalty on this amount.
Key Issues
Whether penalty under section 271(1)(c) can be levied on unexplained cash deposits, even after the addition is reduced based on the peak credit theory.
Sections Cited
271(1)(c), 144, 147
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Income Tax Appellate Tribunal, DELHI ‘F’ BENCH,
Before: SHRI N.K. BILLAIYA, & MS ASTHA CHANDRA
PER N.K. BILLAIYA, ACCOUNTANT MEMBER:-
This appeal by the assessee is preferred against the order of the ld. CIT(A) - 34, New Delhi dated 23.08.2019 pertaining to A.Y. 2010-11.
The sum and substance of the grievance of the assessee is that the ld. CIT(A) erred in confirming the levy of penalty u/s 271(1)(c) of the Income-tax Act, 1961 [the Act, for short] on account of addition of cash deposits in the bank.
The roots for levy of penalty lie in the assessment order dated 11.03.2015 framed u/s 144/147 of the Act. Assessment was completed by making addition as under: a) estimated business income Rs. 5,00,000/- b) cash found to be deposited in the bank Rs. 1,00,73,767/- c) on account of house hold withdrawals Rs. 3,00,000/-
Quantum additions were challenged before the appellate authorities and the ld. CIT(A) restricted the addition on account of cash deposit to Rs. 8,14,238/- on the basis of peak credit theory. Low withdrawals for household expenses of Rs. 3 lakhs was confirmed but no appeal was filed before the Tribunal for the smallness of the amount and addition on account of estimated business profit Rs. 5 lakhs was deleted.
Penalty has been levied u/s 271(1)(c) of the Act on account of cash found to be deposited in the bank account. No penalty was levied on the addition on account of low household withdrawals and since the estimated business profit of Rs. 5 lakhs was deleted, no penalty was levied. Thus, penalty has been levied on the addition survived amounting to Rs. 8,14,238/-.
Before us, the ld. counsel for the assessee vehemently stated that since addition was on account of peak credit theory, no penalty is leviable u/s 271(1)(c) of the Act. Strong reliance was placed on the decision of the co-ordinate bench in order dated 07.02.2020 and ITA No. 728/Chny/2023 order dated 28.07.2023.
We have carefully considered the orders of the authorities below.
There is no dispute that cash was found to be deposited in the bank account to the tune of Rs. 1,00,73,767/-. The assessee, in the appeal proceedings, pleaded for benefit of peak credit theory which was accepted by the appellate authority and addition was reduced to Rs. 8,14,238/-.
In our considered view, even if benefit of rotation of money has been granted to the assessee, still, he has to explain the source of deposit of Rs. 8,14,238/-, which he has grossly failed. Therefore, in our humble opinion, to the extent of cash deposit which remains unexplained, amounting to Rs. 8,14,238/-, the assessee is liable for penalty for concealment u/s 271(1)(c) of the Act. We, accordingly, direct the Assessing Officer to levy penalty on the addition of Rs. 8,14,238/-.
In the result, the appeal of the assessee in is partly allowed.
The order is pronounced in the open court on 21.02.2024.