EDWARDSAM, TRICHY V. ITO, WARD-2(2), TRICHY

ITA 728/CHNY/2023

AI Insights

The case revolves around the penalty imposed on Edward Sam, a retired employee of BHEL, following discrepancies noted in his income tax return for the assessment year 2011-12. Initially, the Assessing Officer added a sum of \\u20b925,00,000 as unexplained cash credit under section 69A of the Income Tax Act, which was later partially relieved by the CIT(A) through the application of the peak credit theory. Despite this relief, a penalty under section 271(1)(c) was imposed for alleged concealment of income, which was upheld by the CIT(A). The assessee contested this penalty at the Tribunal, arguing that the application of the peak credit theory by the CIT(A) indicated no concealment or inaccurate furnishing of particulars, leading to the Tribunal's decision to delete the penalty.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 134960 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 25-07-2023
• Assessment Year: 2011-2012
• Appeal Filed On: 11-06-2023
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Unexplained cash credit; Peak credit
• Section: 271(1)(c); 143(3); 69A

Judgement Text

आयकर अपीलीय अिधकरण, ‘बी’ Ɋायपीठ, चेɄई IN THE INCOME-TAX APPELLATE TRIBUNAL ‘B’ BENCH, CHENNAI ŵी वी. दुगाŊ राव, Ɋाियक सद˟ एवं ŵी मनोज कु मार अŤवाल, लेखा सद˟ के समƗ । Before Shri V. Durga Rao, Judicial Member & Shri Manoj Kumar Aggarwal, Accountant Member आयकर अपील सं./I.T.A. No. 728/Chny/2023 िनधाŊरण वषŊ/Assessment Year: 2011-12 Edward Sam, 4/189, Priyanka Nagar, Kattur Post, Trichy 620 019. [PAN:AAAPE2757N] Vs. The Income Tax Officer, Ward -2(2), Trichy. (अपीलाथŎ/Appellant) (ŮȑथŎ/Respondent) अपीलाथŎ की ओर से / Appellant by : Shri S. Girish Kumar, Advocate ŮȑथŎ की ओर से/Respondent by : Shri D. Hema Bhupal, JCIT सुनवाई की तारीख/ Date of hearing : 26.07.2023 घोषणा की तारीख /Date of Pronouncement : 28.07.2023 आदेश /O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: 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 ₹.5,92,178/- after deducting house property loss of ₹.53,981/-. The case has been selected for scrutiny since I.T.A. No. 728/Chny/23 2 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 recompute 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 I.T.A. No. 728/Chny/23 3 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 I.T.A. No. 728/Chny/23 4 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 28 th July, 2023 at Chennai. Sd/- Sd/- (MANOJ KUMAR AGGARWAL) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER Chennai, Dated, 28.07.2023 Vm/- I.T.A. No. 728/Chny/23 5 आदेश की Ůितिलिप अŤेिषत/Copy to: 1. अपीलाथŎ/Appellant, 2.ŮȑथŎ/ Respondent, 3.आयकर आयुƅ/CIT, 4. िवभागीय Ůितिनिध/DR & 5. गाडŊ फाईल/GF.