2014 (8) TMI 936 - AT - Income Tax

Penalty u/s 271(1)(C) - Held that - Penalty under section 271(1)(c) of the Act is leviable in cases where the assessee had either concealed its income or furnished inaccurate particulars of income. Penalty under section 271(1)(c) of the Act has been levied for furnishing of inaccurate particulars of income on two accounts. The first addition made in the case of the assessee was of understatement of value of husk sold wherein the Assessing Officer noted that the assessee had sold rice husk to various parties, out of which the rice husk sold to Indian Acrylic Ltd. was at a higher rate of ₹ 253 per quintal and to other parties was sold at ₹ 60 to ₹ 80 per quintal. The Assessing Officer made addition on account of the said difference. However, the Tribunal restricted the addition to ₹ 2,54,900 by estimating the rate of paddy husk sold in cash - assessee had furnished complete particulars before the authorities below. However, the addition in the hands of the assessee was made by estimating the value of rice husk. In such circumstances where no concrete evidence was found against the assessee and the addition being based on estimation, there is no merit in the levy of penalty under section 271(1)(c) of the Act. Accordingly, we direct the Assessing Officer to delete the penalty levied for concealment under section 271(1)(c) - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income-tax Act, 1961 based on additions made in the assessment year 2007-08.

Analysis:
The appeal pertains to the penalty order passed under section 271(1)(c) of the Act against the order of the Commissioner of Income-tax (Appeals) for the assessment year 2007-08. The primary issue raised in the appeal is the imposition of penalty under section 271(1)(c) of the Act. The Assessing Officer had made additions to the total income of the assessee, which were partly confirmed by the Commissioner of Income-tax (Appeals) and the Tribunal. The additions included understatement of husk sold, low household expenses, and difference in stock of basmati rice and bardana.

The penalty proceedings were initiated based on the sustained additions, and the Assessing Officer issued a show cause notice to the assessee. The Commissioner of Income-tax (Appeals) upheld the penalty on the estimated addition of the value of husk and pilferage of rice, while deleting the penalty on low household expenses and partly on the difference in stock of basmati rice and bardana. The assessee challenged the penalty levy under section 271(1)(c) of the Act.

During the proceedings, it was argued that the penalty was imposed for furnishing inaccurate particulars of income. The first addition was related to understatement of husk sold, where the Tribunal restricted the addition to a specific amount based on estimations. The Tribunal found that since the assessee provided complete particulars and the addition was based on estimation without concrete evidence against the assessee, the penalty for concealment was not justified. Therefore, the penalty on the husk value addition was directed to be deleted.

Similarly, the second addition was made due to non-furnishing of complete evidence regarding the stock of rice. However, as no concrete evidence was found against the assessee and in the absence of proper explanation, the Tribunal concluded that the penalty on this addition was unwarranted. Consequently, the penalty on the stock difference was directed to be deleted. Ultimately, the Tribunal allowed the appeal of the assessee, directing the deletion of the penalties imposed under section 271(1)(c) of the Act.

In conclusion, the Tribunal ruled in favor of the assessee, holding that the penalties imposed on the estimated additions of husk value and stock difference were unjustified due to lack of concrete evidence and proper explanation, thereby deleting the penalties and allowing the appeal.