2012 (7) TMI 428 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Discrepancies were noticed in the accounts and that the assessee has not at all maintained stock register - books of account of the assessee were, therefore, rejected u/s.145 of the Act and made addition on the basis of estimating profit Held that - When the matter has been restored back to the A.O. and still pending as claimed by the assessee and one of the addition has been deleted by the co-ordinate Bench - penalty u/s 271(1)(C) is not justifiable and accordingly is deleted - revenue s appeal is dismissed

Summary

Issues:
1. Deletion of penalty under section 271(1)(c) on various additions made to the total income for assessment year 2004-05.

Analysis:

1. The main issue in this case is the deletion of the penalty under section 271(1)(c) by the ld. CIT(A) for various additions made to the total income of the assessee. The first ground of appeal relates to the deletion of penalty on additions amounting to Rs. 28,43,907/- under section 271(1)(c) of the Income Tax Act. The revenue contended that the penalty was justified as the assessee concealed particulars of income by not maintaining proper accounts and providing incorrect information. However, the ld. CIT(A) deleted the penalty considering the discrepancies in the accounts and the estimated basis of additions, which led to the rejection of books of account under section 145 of the Act.

2. Another issue pertains to the penalty levied on unexplained expenditure amounting to Rs. 8,65,000/- covered under section 69C of the Act. The revenue argued that the assessee failed to furnish details of these expenditures, leading to the concealment of income. However, the ld. CIT(A) deleted the penalty on this amount, citing double taxation in the hands of the assessee and the debatable nature of the issue.

3. The next issue concerns the penalty imposed on the cession of liabilities of Rs. 71,860/-. The revenue contended that the assessee did not provide sufficient details to support the claim of payment of the liability, rendering it unreliable. The ld. CIT(A) confirmed the quantum addition but deleted the penalty, stating that the issue was debatable and not warranting a penalty.

4. Additionally, the penalty on the disallowance of interest under section 36(1)(iii) amounting to Rs. 2,88,678/- was challenged. The revenue argued that the diversion of interest-bearing business funds for non-business purposes was detected during scrutiny assessment proceedings. However, the ld. CIT(A) deleted the penalty, considering the estimated basis of the addition and the debatable nature of the issue.

5. The Appellate Tribunal, after considering the orders of the authorities below and the submissions of both sides, upheld the deletion of penalties on various additions made to the total income. The Tribunal noted that some additions had been set aside for re-examination by the Assessing Officer, and one addition had been deleted by a co-ordinate Bench. Therefore, the penalty under section 271(1)(c) was deemed not justifiable and was consequently deleted. The Tribunal directed the Assessing Officer to consider initiating penalty proceedings at the time of deciding the set-aside proceedings.

In conclusion, the Appellate Tribunal dismissed the revenue's appeal, upholding the deletion of penalties on various additions made to the total income for assessment year 2004-05.