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www.taxpublishers.in Income Tax Act, 1961, Section 271(1)(c) Penalty under section 271(1)(c)--*Leviability--Alleged* failure of assessee to explain source of cash deposited in bank account *Conclusion:* Where assessee duly explained the source of cash deposit from his uncle and mother and bank statement vouched for withdrawal of cash in the hands of relatives, it could not be said that assessee concealed certain particulars of income or furnished inaccurate particulars of income per se and hence, penalty imposed under section 271(1)(c) would not be sustainable. AO imposed penalty under section 271(1)(c) on account of failure of assessee to explain source of cash deposited in bank account. CIT (A) upheld the penalty. Held: It is trite that burden of proof in penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty under section 271(1)(c). In instant case, assessee took a consistent stand towards source of cash deposits from his uncle and mother and bank statement vouched for withdrawal of cash in the hands of relatives. Thus, assessee offered explanation in respect of source of cash deposits, which might not have been accepted for the purposes of quantum proceedings but sustaining such addition in quantum proceedings could not warrant a conclusion that assessee concealed certain particulars of income or furnished inaccurate particulars of income per se. Hence, penalty imposed under section 271(1)(c) was deleted. *Decision:* In assessee's favour IN THE ITAT, DELHI BENCH CHALLA NAGENDRA PRASAD, J.M. & PRADIP KUMAR KEDIA, A.M. Dipesh Singh v. ITO ITA No. 6434/DEL/2019 21 March, 2024 Appellant by: Deepak Kataria, C.A. Respondent by: R.K. Jain, Sr. D.R. ORDER *Pradip Kumar Kedia, A.M.* The captioned appeal has been filed by the assessee against the order of the Commissioner (Appeals)-II, Gurgaon ('CIT (A)' in short) dated 28-5-2019 in relation to the penalty Order dated 31-3-2018 under section 271(1)(c) of the Income Tax Act, 1961 (the IT Act) concerning assessment year 2013-14. 2. The solitary issue in the captioned appeal is justification of imposition of penalty amounting to Rs. 9,11,340 on account of failure of the assessee to explain the source of cash deposit in the bank account amounting to Rs. 31,93,000. 3. In the matter, the learned counsel for the assessee fairly submits that the Co-ordinate Bench of the Income Tax Appellate Tribunal in ITA No. 6508/DEL/2016 Order dated 30-1-2020 : 2020 TaxPub(DT) 0835 (Del-Trib) has rejected the explanation of the assessee towards source of cash deposit and declined to interfere with the order of the Commissioner (Appeals). The learned counsel further submits that the penalty proceedings under section 271(1)(c) are all together on different footings and is quite distinct in its nature. 3.1 As regards source of cash deposits, the learned counsel submits that the deceased-assessee had received such amount from its relatives. The assessee submits that it is the matter of record that copy of Income Tax Return acknowledgement of uncle showing cash withdrawals in their account and corresponding deposit in the bank account of assessee was furnished. The learned counsel submits that the mother of the deceased-assessee is not taxable since she is a farmer and the amount received on sale of agricultural land a part of which was given to assessee whereas the uncle of the assessee had filed return of income and the bank statement was also furnished. The learned counsel thus submits that while such evidence might not have stood with the test of judicial scrutiny in the quantum proceedings, this by itself will not entitle the assessing officer to impose penalty under section 271(1)(c) as a matter of course. The burden which lay upon the assessee towards source of deposit is broadly explainable when seen in the context of penal liability under section 271(1)(c) of the Act. 4. It is trite that burden of proof in the penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty under section 271(1)(c) of the Act. On facts, we note that the assessee has taken consistent stand towards source of cash deposits from his uncle and mother. The bank statement vouches for withdrawal of cash in the hands of relatives. The assessee thus has offered explanation in respect of source of cash deposit which may not have been accepted for the purposes of quantum proceedings but sustaining such addition in the quantum proceedings could not, in our view, warrant a conclusion that assessee has concealed certain particulars of income or furnished inaccurate particulars of income per se. 5. In the circumstances existing in the present case, we are inclined to agree with the contention on behalf of the assessee that discretion vested with the assessing officer under section 271(1)(c) ought to have been exercised in favour of the assessee and imposition of penalty is not justified. It is trite that imposition of penalty under section 271(1)(c) is not automatic and should not be imposed merely because it is lawful to do so. Some degree of plausibility can be assigned to the plea raised on behalf of the assessee. We also note that the assessee being deceased, it may not be possible on behalf of the assessee to prove the circumstantial facts to the hilt in this independent proceeding. Thus, a soft instance deserves in the present case. 6. In the light of the mitigating circumstances, the first appellate order is set aside and the assessing officer is directed to reverse and delete the penalty imposed in question. 7. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 21-3-2024.

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Income Tax Act, 1961, Section 271(1)(c)

Penalty under section 271(1)(c)--Leviability--Alleged failure of assessee to explain source of cash deposited in bank account

Conclusion: Where assessee duly explained the source of cash deposit from his uncle and mother and bank statement vouched for withdrawal of cash in the hands of relatives, it could not be said that assessee concealed certain particulars of income or furnished inaccurate particulars of income per se and hence, penalty imposed under section 271(1)(c) would not be sustainable.

AO imposed penalty under section 271(1)(c) on account of failure of assessee to explain source of cash deposited in bank account. CIT (A) upheld the penalty. Held: It is trite that burden of proof in penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty under section 271(1)(c). In instant case, assessee took a consistent stand towards source of cash deposits from his uncle and mother and bank statement vouched for withdrawal of cash in the hands of relatives. Thus, assessee offered explanation in respect of source of cash deposits, which might not have been accepted for the purposes of quantum proceedings but sustaining such addition in quantum proceedings could not warrant a conclusion that assessee concealed certain particulars of income or furnished inaccurate particulars of income per se. Hence, penalty imposed under section 271(1)(c) was deleted.

Decision: In assessee's favour

IN THE ITAT, DELHI BENCH

CHALLA NAGENDRA PRASAD, J.M. & PRADIP KUMAR KEDIA, A.M.

Dipesh Singh v. ITO

ITA No. 6434/DEL/2019

21 March, 2024

Appellant by: Deepak Kataria, C.A.

Respondent by: R.K. Jain, Sr. D.R.

ORDER

Pradip Kumar Kedia, A.M.

The captioned appeal has been filed by the assessee against the order of the Commissioner (Appeals)-II, Gurgaon ('CIT (A)' in short) dated 28-5-2019 in relation to the penalty Order dated 31-3-2018 under section 271(1)(c) of the Income Tax Act, 1961 (the IT Act) concerning assessment year 2013-14.

2. The solitary issue in the captioned appeal is justification of imposition of penalty amounting to Rs. 9,11,340 on account of failure of the assessee to explain the source of cash deposit in the bank account amounting to Rs. 31,93,000.

3. In the matter, the learned counsel for the assessee fairly submits that the Co-ordinate Bench of the Income Tax Appellate Tribunal in ITA No. 6508/DEL/2016 Order dated 30-1-2020 : 2020 TaxPub(DT) 0835 (Del-Trib) has rejected the explanation of the assessee towards source of cash deposit and declined to interfere with the order of the Commissioner (Appeals). The learned counsel further submits that the penalty proceedings under section 271(1)(c) are all together on different footings and is quite distinct in its nature.

3.1 As regards source of cash deposits, the learned counsel submits that the deceased-assessee had received such amount from its relatives. The assessee submits that it is the matter of record that copy of Income Tax Return acknowledgement of uncle showing cash withdrawals in their account and corresponding deposit in the bank account of assessee was furnished. The learned counsel submits that the mother of the deceased-assessee is not taxable since she is a farmer and the amount received on sale of agricultural land a part of which was given to assessee whereas the uncle of the assessee had filed return of income and the bank statement was also furnished. The learned counsel thus submits that while such evidence might not have stood with the test of judicial scrutiny in the quantum proceedings, this by itself will not entitle the assessing officer to impose penalty under section 271(1)(c) as a matter of course. The burden which lay upon the assessee towards source of deposit is broadly explainable when seen in the context of penal liability under section 271(1)(c) of the Act.

4. It is trite that burden of proof in the penalty proceedings varies from that in an assessment proceedings. Mere disallowance of expenditure or enhancement of returned income does not ipso facto call for imposition of penalty under section 271(1)(c) of the Act. On facts, we note that the assessee has taken consistent stand towards source of cash deposits from his uncle and mother. The bank statement vouches for withdrawal of cash in the hands of relatives. The assessee thus has offered explanation in respect of source of cash deposit which may not have been accepted for the purposes of quantum proceedings but sustaining such addition in the quantum proceedings could not, in our view, warrant a conclusion that assessee has concealed certain particulars of income or furnished inaccurate particulars of income per se.

5. In the circumstances existing in the present case, we are inclined to agree with the contention on behalf of the assessee that discretion vested with the assessing officer under section 271(1)(c) ought to have been exercised in favour of the assessee and imposition of penalty is not justified. It is trite that imposition of penalty under section 271(1)(c) is not automatic and should not be imposed merely because it is lawful to do so. Some degree of plausibility can be assigned to the plea raised on behalf of the assessee. We also note that the assessee being deceased, it may not be possible on behalf of the assessee to prove the circumstantial facts to the hilt in this independent proceeding. Thus, a soft instance deserves in the present case.

6. In the light of the mitigating circumstances, the first appellate order is set aside and the assessing officer is directed to reverse and delete the penalty imposed in question.

7. In the result, the appeal of the assessee is allowed.

Order pronounced in the open Court on 21-3-2024.