No Penalty 271(1)(c) even if quantum proceedings upheld additions. Merely because a bona fide explanation did not find favour, penalty not justified

No Penalty 271(1)(c) even if quantum proceedings upheld additions. Merely because a bona fide explanation did not find favour, it would not justify the levy of concealment penalty-ITAT

ABCAUS Case Law Citation:
1034 (2016) (10) ITAT

Brief Facts of the Case:
A search operation u/s 132 of the Income Tax Act, 1961 was carried out in a group cases in 2006. Additions were made on account of unexplained cash found from the bank lockers. The additions made in the assessment travelled up to the Tribunal and the Tribunal in 2016 deleted the addition in the hand of one party but confirmed the addition of Rs. 40,000/- in the hands of the appellant assessee.

The relevant findings of the Tribunal was as under:-

Regarding the addition of Rs. 40,000/- of the cash receipt which were found from residence of Mahesh Varma claimed to be kept for household purpose. The explanation given by asessessee was not accepted by Assessing Officer as well as ld. CIT(A). Taking all facts and circumstances, this addition made by authorities below is confirmed.

Observations made by ITAT:
The Tribunal observed that during the course of the search proceedings an amount of Rs. 56,750/- was found. When the assessee was asked to explain the source, it was explained that the money was out of saving, received on various social occasions as gifts and also reference was made to the social status of the assessee. However, this explanation was not accepted to the extent of Rs. 40,000/- and accordingly addition of Rs. 40,000/- was made which was confirmed by the Tribunal.

However, the ITAT opined that in their considered opinion, merely because a bona fide explanation did not find favour in the quantum proceedings would not justify the levy of penalty u/s. 271(1)(c) of the Act.

Held:
The Tribunal directed the Assessing Officer (AO) to delete the penalty so levied.