S.KRISHNA KUMAR,CHENNAI vs. ITO, CHENNAI

This appeal of the assessee is directed against the order of the Commissioner of Income Tax (Appeals)-4, Chennai, dated 08.01.2016 and pertains to assessment year 2009-10, confirming the penalty levied by the Assessing Officer under Section 271(1)(c) of the Income-tax Act, 1961 (in short 'the Act').

Shri S. Sridhar, the Ld.counsel for the assessee, submitted that the Assessing Officer found that there was deposit of `31,22,930/- in Kotak Mahindra Bank. The assessee explained during the assessment proceeding that the money was withdrawn from Indian Overseas Bank, Muthialpet Branch and same was deposited in Kotak Mahindra Bank. The Assessing Officer levied penalty on the ground that the assessee has not submitted any explanation with regard to merit of the issue under consideration.

Referring to penalty order, the Ld.counsel for the assessee submitted that the Assessing Officer has not recorded any reason whether the assessee has furnished inaccurate particulars or concealed any part of his income. The Assessing Officer simply levied penalty at 100% on the ground that the assessee is changing his stand often. According to the Ld. counsel, the penalty can be levied only for furnishing inaccurate particulars of income or concealing any part of the assessee’s income. Merely because the assessee is changing his stand that may not be a reason for levying penalty. However, the penalty cannot be levied unless there was concealment of income. According to the Ld. counsel, the details of cash credit were available before the Assessing Officer, therefore, the Assessing Officer cannot say that there was concealment of income or furnishing of inaccurate particulars of such income.

On the contrary, Shri A.V. Sreekanth, the Ld. Departmental Representative, submitted that initially the assessee claimed before the Assessing Officer that the money withdrawn from Indian Overseas Bank, Muthialpet Branch was deposited in Kotak Mahindra Bank. Subsequently, the assessee changed his stand and submitted before the Assessing Officer that whenever there was financial difficulty for making payment to the suppliers, he received money from buyers in cash and the same was deposited in the bank account. The entire amount received by the assessee from the respective buyers was also repaid subsequently. The assessee has filed all the details of the bank account of Kotak Mahindra Bank, Indian Overseas Bank, etc. before the lower authorities. Therefore, according to the Ld. D.R., the CIT(Appeals) has rightly confirmed the penalty levied by the Assessing Officer.

We have considered the rival submissions on either side and perused the relevant material available on record. Admittedly, there was cash deposit in Kotak Mahindra Bank. Therefore, it is for the assessee to explain the source for making such deposits. Since the assessee has not satisfactorily explained the source of money in Kotak Mahindra Bank, the Assessing Officer made addition under Section 68 of the Act. The Assessing Officer has also levied penalty under Section 271(1)(c) of the Act.

We have carefully gone through the provisions of Section 271(1)(c) which reads as follows:-

For the purpose of levying penalty under Section 271(1)(c) of the Act, there should be a finding that the assessee has concealed the particulars of income or furnished inaccurate particulars of such income. In the case before us, the assessee has furnished all the details of the bank accounts before the Assessing Officer. The assessee claimed before the Assessing Officer that the money withdrawn from Indian Overseas Bank and also the money received from the buyers were used in making deposits since the assessee had to repay the same to the suppliers. This explanation of the assessee was rejected by the Assessing Officer.

The question arises for consideration is when the assessee explained before the Assessing Officer by furnishing all the details of the bank accounts and deposits, merely because the Assessing Officer rejected the explanation of the assessee, whether there can be penalty under Section 271(1)(c) of the Act? This issue was examined in the judgment of Apex Court in CIT v. Reliance Petroproducts (P.) Ltd. (2010) 322 ITR 158 and the Apex Court found that when all the details were made available before the Assessing Officer, merely because the explanation was not accepted, there cannot be any concealment of income or furnishing of inaccurate particulars of such income. In view of the above judgment of Apex Court in Reliance Petroproducts (P.) Ltd., this Tribunal is of the considered opinion that levy of penalty is not called for in the present case. Accordingly, the orders of the authorities below are set aside and the penalty levied under Section 271(1)(c) of the Act is deleted.

In the result, the appeal filed by the assessee is allowed.