2017 (5) TMI 1616 - AT - Income Tax

Addition u/s 68 - difference in the cash in bank and bank balances - Held that - Before the confirming the addition the CIT(A) after considering the written submissions of the assessee called for a remand report from the AO. In the remand report also AO categorically stated that the assessee agreed for the addition as he was unable to submit confirmation letters from the creditors. The CIT(A) after considering the remand report as well as considering the facts of the case confirmed the addition made by the AO. There is no infirmity in the order of the CIT(A) in confirming the addition made by the AO as the assessee himself agreed for the said addition and therefore we hereby uphold the order of the CIT(A) - Decided against assessee. Penalty levied u/s 271(1)(c) - voluntary disclosure by assessee - Held that - When the assessee is not able to furnish the details about the difference in cash in hand and bank balance to buy peace of mind he agreed for the addition of Rs. 32, 00, 000/-. In view of the accepted addition voluntarily it neither amounts to concealing the income nor furnishing inaccurate particulars of income. When the AO asked the assessee to show the source of bank deposits the assessee failed to substantiate the same and agreed for the addition. The case of the assessee is not a fit a case to attract the provisions of section 271(1)(c) and levy penalty hence we delete the penalty levied by the AO. Accordingly we allow the grounds raised by the assessee.

Summary

Issues:
1. Addition of unexplained income under section 68 of the Income-tax Act, 1961.
2. Confirmation of penalty levied under section 271(1)(c) of the Act.

Issue 1: Addition of unexplained income under section 68 of the Income-tax Act, 1961:
The appellant, a civil contractor, had discrepancies in the cash in bank and bank balances in the balance sheet for the AY 2010-11. The AO found a significant difference of Rs. 31,91,851, leading to a notice to explain the variance. The appellant initially explained the discrepancy by referring to transactions with trade creditors but later agreed to the addition without providing details of the creditors. The CIT(A) upheld the AO's addition, noting the appellant's failure to substantiate the claim. The ITAT concurred, emphasizing the appellant's agreement to the addition and lack of evidence to support the claimed transactions. Thus, the ITAT upheld the CIT(A)'s decision, dismissing the appellant's appeal.

Issue 2: Confirmation of penalty levied under section 271(1)(c) of the Act:
In a related matter, the AO imposed a penalty under section 271(1)(c) due to the appellant's failure to provide documentary evidence for the addition of Rs. 32,00,000 and discrepancies in the balance sheet. The appellant argued that the addition was voluntary to avoid penalties and maintained a cooperative stance during proceedings. The CIT(A) upheld the penalty, citing willful concealment by the appellant. However, the ITAT disagreed, considering the voluntary nature of the addition and the lack of evidence of deliberate concealment. The ITAT concluded that the penalty was unwarranted, given the appellant's cooperation and voluntary agreement to the addition. Consequently, the ITAT allowed the appellant's appeal, overturning the penalty levied by the AO.

In conclusion, the ITAT dismissed the appeal in ITA No. 1024/Hyd/16 regarding the unexplained income addition and allowed the appeal in ITA No. 1025/Hyd/2016 concerning the penalty confirmation. The judgments were pronounced on 26th May 2017 by the ITAT Hyderabad.