2011 (7) TMI 1287 - AT - Income Tax

Summary

Issues involved:
The judgment involves the confirmation of penalty u/s 271(1)(c) of the Income Tax Act, 1961 for assessment year 2004-05 based on an addition made u/s 68 of the Act.

Additional Ground of Appeal:
The assessee challenged the quantum addition made u/s 68 as illegal and contended that penalty could not be imposed due to the absence of maintained books of account. The Counsel argued that the addition was unjustified as the assessee, an individual, only had share income from a partnership firm and did not maintain books of account. Legal precedents were cited to support the argument.

Admission of Additional Ground:
The Tribunal admitted the additional ground of appeal, citing previous cases where the validity of assessment could be challenged in penalty proceedings. The Tribunal emphasized that the question of validity of assessment is a pure question of law and can be raised at any stage of the proceedings.

Validity of Assessment in Penalty Proceedings:
Referring to legal precedents, the Tribunal held that the validity of the addition u/s 68 could be challenged in penalty proceedings. The Tribunal noted that the assessee's only income was from a partnership firm, and as there was no evidence of maintaining books of account, the addition made u/s 68 was deemed bad-in-law. Citing a High Court judgment, the Tribunal concluded that the penalty imposed could not be sustained and thus deleted the penalty levied by the Assessing Officer.

Conclusion:
The Tribunal allowed the assessee's appeal, pronouncing the order on 29.7.2011, and deleted the penalty imposed u/s 271(1)(c) based on the invalid addition made u/s 68.