Unexplained cash deposit will not amount to furnishing inaccurate particulars: ITAT deletes penalty u/s 271(1)(c)

The appellant is an individual engaged in the business of dealing in lands. The return of income for the assessment year 2008-09 was filed on 24.10.2010 declaring a total income of Rs.4,77,360. Against the said return of income, the assessment was completed by the Assistant Commissioner of Income Tax, Circle-2, Pune (‘the Assessing Officer’) vide order dated 30.03.2016 passed u/s 143(3) of the Income Tax Act, 1961 (‘the Act’) at the total income of Rs.5,22,550. Subsequently, on receipt of the information that the assessee made cash deposits to the extent of Rs.18,32,000 and Rs.16,10,000 totaling to Rs.34,42,000 in the two bank accounts held by the appellant with the Axis Bank, Baner Road Branch, Pune, the Assessing Officer issued a notice u/s 148 on 23.03.2015 and finally, the assessment was completed by the Assessing Officer vide order dated 30.03.2016 passed u/s 143(3) at the total income of Rs.39,64,550 after making addition on account of unexplained cash deposit of Rs.34,42,000. On appeal before the ld. CIT(A), the ld. CIT(A) vide order dated 02.08.2017 had partly allowed the appeal by restricting the addition to Rs.15,00,000 thereby granting relief of Rs.19,42,000.

While matter stood thus, the Assessing Officer initiated penalty proceedings by issuing of show-cause notice u/s 274 r.w.s. 271(1)(c) of the Act. However, the assessee had not filed any explanation in response to the said show-cause notice. In the circumstances, the Assessing Officer had proceeded with the levy of penalty u/s 271(1)(c) by holding that the appellant had furnished inaccurate particulars of income and levied a penalty of Rs.4,44,018 vide order dated 27.03.2018.

Being aggrieved by the above penalty order, an appeal was filed before the ld. CIT(A) contending that the appellant is not guilty of furnishing inaccurate particulars of income. However, the ld. CIT(A) vide impugned order dated 20.09.2019 confirmed the levy of penalty u/s 271(1)(c) of the Act.

Being aggrieved by the above decision of the ld. CIT(A), the appellant is in appeal before Income Tax Appellate Tribunal (ITAT).

Contention of Taxpayer

Before ITAT, ld. AR submitted that the appellant is not guilty of furnishing inaccurate particulars of income as the addition was made based on the information furnished by the assessee before the Assessing Officer. Merely because the addition was made for inability of the assessee to explain the source of cash deposit in the bank accounts, it does not mean that the appellant furnished inaccurate particulars of income.

Contention of Department

On the other hand, ld. Sr. DR opposed the submissions made by the ld. AR before us. Placing reliance on the orders of the lower authorities, the ld. Sr. DR submitted that even the appellant had not submitted any explanation in support of source of cash deposits nor availed the opportunity of filing the explanation in response to the show-cause notice issued u/s 274 r.w.s. 271(1)(c) of the Act.

ITAT Order:

The issue in the present appeal relates to the levy of penalty u/s 271(1)(c) of the Act. The Assessing Officer sought to levy penalty in respect of addition of Rs.15,00,000 being unexplained cash deposits in the bank accounts held by the appellant. The addition was purportedly made u/s 69 or section 69A of the Act. Merely because, the Assessing Officer made addition does not lead to conclusion that the appellant is guilty of furnishing inaccurate particulars of income. The Assessing Officer had not rendered any finding as to what kind of particulars had been found to be false resulting in the addition to returned income. In the circumstances, we are of the considered opinion that it is not a fit case for levy of penalty u/s 271(1)(c) of the Act. Hence, we direct the Assessing Officer to delete the penalty of Rs.4,44,018 made u/s 271(1)(c) of the Act. Accordingly, the grounds of appeal filed by the assessee stand allowed.

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