Case Law Details
Edward Sam Vs ITO (ITAT Chennai)
In the case of Edward Sam Vs. Income Tax Officer (ITO) heard at ITAT Chennai, The appeal challenges the penalty under section 271(1)(c) of the Act imposed on the taxpayer for alleged concealment of income. Tribunal analyzes the application of penalty provisions and the use of peak credit theory for quantum additions.
Edward Sam, a retired BHEL employee, filed his return for AY 2011-12, showing an income of 2,92,178/- after deducting house property loss. The assessment was completed under section 143(3) by adding ₹.25,00,000/- under section 69A for cash deposits. The CIT(A) partly allowed the appeal, considering peak credit and personal cash consumption. Subsequently, the Assessing Officer initiated penalty proceedings under section 271(1)(c), which were confirmed by the CIT(A). The taxpayer contended that peak credit theory was applied, and no concealment occurred.
The ITAT Chennai allowed the appeal, stating that once the CIT(A) had determined unexplained cash credit using peak credit estimation, penalty provisions u/s 271(1)(c) had no application. This case clarifies the scope of penalty provisions and highlights the importance of considering the methodology used for quantum additions.
FULL TEXT OF THE ORDER OF ITAT CHENNAI
This appeal filed by the assessee is directed against the order of the ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre [NFAC], Delhi dated 29.04.2023 for the assessment year 2011-12.
2. Brief facts of the case are that the assessee is a retired employee of BHEL and filed his return of income for the assessment year 2011-12 on 06.07.2011 admitting an income of 2.5,92,178/- after deducting house property loss of 2.53,981/-. The case has been selected for scrutiny since the assessee had a cash deposit of ₹.27,31,700/- in BHEL Employees Co-operative Bank Ltd., Trichy. After considering the submissions and details against statutory notices, the Assessing Officer has completed the assessment under section 143(3) of the Act dated 27.02.2014 assessing total income of the assessee at ₹.29,92,180/- by making addition of ₹.25,00,000/- under section 69A of the Act. Against the quantum addition, the assessee had preferred an Appeal before the ld. CIT(A). After considering the submissions of the assessee, the ld. CIT(A) partly allowed the appeal of the assessee by sustaining the addition to the extent of ₹.9,73,250/- as peak credit and ₹.3,00,000/- as personal cash consumption and directed to re-compute the income.
3. Subsequently, the Assessing Officer has initiated penalty proceedings under section 271(1)(c) of the Act by issuing a letter on 16.10.2019 seeking explanation from the assessee as to why a penalty shall not be levied. Since the assessee could not respond to the notice, based on the details, the Assessing Officer levied penalty of ₹.3,95,137/-under section 271(1)(c) of the Act. On appeal, the ld. CIT(A) confirmed the penalty levied under section 271(1)(c) of the Act.
4. On being aggrieved, the assessee is in appeal before the Tribunal. The ld. Counsel for the assessee has submitted that against quantum addition, by applying peak credit theory, the ld. CIT(A) has granted relief on estimated basis based on the details furnished by the assessee and therefore, provisions under section 271(1)(c) of the Act has no application and prayed for deleting the penalty levied by the Assessing Officer and confirmed by the ld. CIT(A).
5. On the other hand, the ld. DR has supported the orders of authorities below.
6. We have heard both the sides, perused the materials available on record and gone through the orders of authorities below. During the course of assessment proceedings, the Assessing Officer noted that the assessee had a cash credit of ₹.25,00,000/- with BHEL Employees Cooperative Bank account and such credit was made on 03.02.2011, 04.02.2011, 08.02.2011 & 10.02.2011. Since the assessee has not offered any convincing explanation, the Assessing Officer added the entire sum of credit in the BHEL Employees Cooperative Bank account of ₹.25,00,000/- under section 69A of the Act. On appeal, by restricting the addition to the extent of ₹.12,73,250/-, the ld.CIT(A) added the peak credit of ₹.9,73,250/- to the declared income and moreover granted relief of ₹.3,00,000/- being personal and house hold expenses, which was accepted by the assessee and no further appeal was preferred against the order of the ld. CIT(A). However, the Assessing Officer initiated penalty proceedings and levied penalty under section 271(1)(c) of the Act, which was confirmed by the ld. CIT(A).
6.1 Before us, the ld. Counsel for the assessee has contended that by applying peak credit theory, the ld. CIT(A) has granted relief on estimated basis based on the details furnished by the assessee and therefore, there was no concealment of income or furnishing of inaccurate particulars and thus, the provisions of section 271(1)(c) of the Act has no application. We find force in the argument of the ld. Counsel. Against the quantum addition, once the ld. CIT(A) has determined the unexplained cash credit by considering the peak credit amount deposited, which is nothing but an estimated credit, the Assessing Officer was not legally and factually correct to levy penalty under section 271(1)(c) of the Act. Accordingly, the penalty levied under section 271(1)(c) of the Act stands deleted.
7. In the result, the appeal filed by the assessee is allowed.
Order pronounced on 28th July, 2023 at Chennai.
