2009 (10) TMI 641 - AT - Income Tax

Summary

Issues Involved:
1. Sustenance of penalty u/s 271(1)(c) by CIT(A).
2. Validity of penalty proceedings initiated by the Assessing Officer.
3. Conditional surrender of income by the assessee.
4. Onus of proving concealment of income.

Summary:

1. Sustenance of penalty u/s 271(1)(c) by CIT(A):
The CIT(A) confirmed the penalty imposed by the Assessing Officer, observing that the assessee failed to establish the creditworthiness of the lenders and thus, the purported loans were rightly treated as income from undisclosed sources. The CIT(A) held that penalty was clearly attracted u/s 271(1)(c) due to the filing of inaccurate particulars of income.

2. Validity of penalty proceedings initiated by the Assessing Officer:
The Assessing Officer issued a notice u/s 271(1)(c) for concealment of income/furnishing inaccurate particulars of income. The penalty was imposed on the basis that the assessee had surrendered the loan as a result of the investigation carried out by the department and after issuing notice u/s 148, indicating concealment of income. However, the Tribunal noted that the Assessing Officer did not specify whether the penalty was for concealment of income or furnishing inaccurate particulars, rendering the penalty order invalid as per the decision in New Sorathia Engg. Co. v. CIT.

3. Conditional surrender of income by the assessee:
The assessee had requested the addition of the unsecured loans to her income to avoid litigation and with the condition that no penalty be imposed. The Tribunal observed that the addition was made on the basis of this conditional offer and that the primary onus u/s 68 to prove the identity, creditworthiness, and genuineness of the transaction was on the assessee. However, the Tribunal held that the penalty could not be imposed solely based on the conditional offer, referencing the decision in National Textiles v. CIT.

4. Onus of proving concealment of income:
The Tribunal emphasized that the onus is on the revenue to establish that the assessee concealed income or furnished inaccurate particulars. The Tribunal found that the Assessing Officer did not bring any specific adverse material on record to prove concealment. The Tribunal also referenced the decision in CIT v. Suresh Chand Mittal, where it was held that if the income is surrendered to buy peace and avoid litigation, it could be treated as bona fide, and penalty should not be imposed.

Conclusion:
The Tribunal set aside the order of the CIT(A) and deleted the penalties imposed u/s 271(1)(c), allowing the appeal of the assessee.