There is a difference in “facts not proved” and “facts disproved” and penalty u/s 271(1)(c) can be levied only for the latter

In a latest judgment, ITAT Chennai has quashed penalty proceedings u/s 271(1)(c) for concealment holding that  there is a difference in “facts not proved” and “facts disproved” and penalty can be levied only for the latter.

Case Law Details:
ITA No.1730/Mds./2015 Assessment Year :2010-11
Mr.R.A.Palanisamy vs. Income Tax Officer
Date of Order/Judgment: 06/04/2016

Brief Facts of the Case:
An addition was made u/s 68 of the Income Tax Act, 1961 to the income declared by the assessee The assessee gave his explanation with regard to unexplained credits but not accepted by the Department and the Tribunal as well. The issue was pending before the jurisdictional High Court.

Meantime penalty proceedings u/s 271(1)(c) were initiated and penalty was imposed at 100% of tax sought to be evaded on account of the additions made u/s 68. CIT(A) also upheld the penalty.

The assessee challenged the CIT(A) order before ITAT and contended that he had filed all the details and gave explanation with regard to unexplained credit. However, the explanation was not accepted by the Department and that this itself not leads to conclusion that there was a concealment of income or that he furnished inaccurate particulars of income.

Excerpts from ITAT Judgment:

When addition u/s.68 of the Act was made and confirmed by the Tribunal because of unsatisfactory explanation given by the assessee in support of such credit, but it is not a good case for imposition of penalty because it relates to lack of tendering explanation to the satisfaction of the ld. Assessing Officer and not disproving the contention of the assessee to the genuineness of the receipts. As held by the Calcutta High Court in the case of Durga Kamal Rice Mills Vs. CIT reported in [2004] 265 ITR 025 relying on M/s.National Textiles reported in [2001]249 ITR 125(Guj.), there is a difference in “facts not proved” and “facts disproved”. It is further held that penalty can be levied only for the latter. Similar view has been taken in CIT v. Vidyagauri Natverlal & Ors., reported in [1999] 153 CTR 546 (Guj). Being so, in the present case, the explanation given by the assessee not disproved by the ld. Assessing Officer, as such there is no conclusive evidence to show that assessee has concealed particulars of income or furnished inaccurate particulars of income. At this stage, levy of penalty is not proper. The penalty levied u/s.271(1)(c) of the Act is deleted.

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