2009 (8) TMI 972 - AT - Income Tax

Summary

Issues Involved:
1. Maintainability of the appeal due to less fee filed by the assessee.
2. Merits of the penalty u/s 271(1)(c) of the Income-tax Act, 1961.

Summary:

1. Maintainability of the Appeal:
During the hearing, the Departmental representative contended that the appeal was not maintainable due to a less fee filed by the assessee. However, the assessee's counsel cited the decision from the Hon'ble High Court of Patna in the case of Dr. Ajit Kumar Pandey v. ITAT [2009] 21 DTR (Pat) 103, which concluded that for the imposition of penalty u/s 271(1)(c) of the Act, there is no connection or bearing with the total income of the assessee. Therefore, the appeal against the levy of penalty u/s 271 is covered by clause (d) of section 253(6) and the fee payable is Rs. 500 only. No contrary decision was cited by the Departmental representative, leading to the withdrawal of the defect memo issued to the assessee.

2. Merits of the Penalty u/s 271(1)(c):
The Tribunal sustained the addition of Rs. 15,00,000 against the addition of Rs. 20 lakhs made by the Assessing Officer and partly sustained by the learned Commissioner of Income-tax (Appeals). The further addition of Rs. 2,44,555 for outstanding labour payable was deleted. The penalty proceedings u/s 271(1)(c) were initiated against the assessee, imposing a penalty of Rs. 8,76,319, which was deleted by the learned Commissioner of Income-tax (Appeals). However, on appeal by the Revenue, it was restored back to the file of the learned Commissioner of Income-tax (Appeals), who dismissed the appeal by following the decision from the Hon'ble apex court in the case of Union of India v. Dharamendra Textile Processors [2008] 306 ITR 277.

The Tribunal noted that the assessee-firm disclosed transportation receipts of Rs. 1,88,54,650 and declared a net profit of Rs. 78,160 after debiting expenses. The Assessing Officer disallowed Rs. 20,00,000 of labour expenses due to incomplete records. The learned Commissioner of Income-tax (Appeals) reduced the addition to Rs. 18,77,480, and the Tribunal further reduced it to Rs. 15,00,000. The Tribunal observed that the assessee had no conscious act leading to the concealment of income or furnishing of inaccurate particulars of income. The decision from the Hon'ble apex court in K. C. Builders v. Asst. CIT [2004] 265 ITR 562 and other cited cases supported the assessee's case.

The Tribunal concluded that there was no justification in imposing the penalty, especially when necessary information/particulars were furnished by the assessee. It was noted that quantum and penalty proceedings are different. Therefore, the Assessing Officer was directed to delete the penalty imposed.

Conclusion:
The appeal of the assessee was allowed, and the penalty u/s 271(1)(c) was directed to be deleted. The order was pronounced in the open court on August 24, 2009.