2011 (12) TMI 651 - AT - Income Tax

Penalty u/s 271(1)(c) - Held that - It is not the case of the Revenue that the gross receipts shown by the assessee are not correct or it is not a case of estimation of income we are of the view that there is no concealment on the part of the assessee which may call for levy of penalty u/s 271(1)(c) of the Act and accordingly, the penalty imposed by the AO and sustained by the ld. CIT (A) is deleted. The grounds taken by the assessee are , therefore, allowed.

Summary

Issues:
1. Estimation of profit for a civil contractor.
2. Imposition of penalty under section 271(1)(c) of the Income Tax Act.

Estimation of Profit:
The case involved a civil contractor who filed an income tax return for the assessment year 2001-02. The Assessing Officer (AO) rejected the books of accounts as incomplete and estimated the profit at 12% of total receipts. The Commissioner of Income Tax (Appeals) reduced the estimated profit to 5%, but the Income Tax Appellate Tribunal (ITAT) increased it to 8% based on section 44AD of the Income Tax Act. The AO then initiated penalty proceedings under section 271(1)(c) alleging concealment of income due to fabricated documents. However, the ITAT held that penalty cannot be levied on estimated income and ruled in favor of the assessee.

Imposition of Penalty:
The ITAT considered the provisions of section 271(1)(c) which require concealment of income particulars and furnishing inaccurate income details. Citing the Supreme Court's judgment in CIT v/s Reliance Petroproducts Pvt. Ltd., the ITAT emphasized that penalty cannot be imposed unless there is inaccurate information in the return. Since there was no finding of incorrect details in the assessee's return and the case did not involve incorrect gross receipts or income estimation, the ITAT concluded that there was no concealment warranting penalty under section 271(1)(c). Consequently, the penalty imposed by the AO and upheld by the CIT (Appeals) was deleted, and the assessee's appeal was allowed.

In conclusion, the ITAT ruled in favor of the assessee, emphasizing that penalty under section 271(1)(c) cannot be levied based on estimated income. The judgment highlighted the importance of accurate information in the return to invoke penalty provisions and concluded that there was no concealment on the part of the assessee in this case.