2012 (9) TMI 362 - AT - Income Tax

Penalty u/s 271(1)(c) addition on account of unexplained investment and dis-allowance of agricultural income assessee contended that statement of agricultural income disclosed by the appellant was on estimate basis and the AO has disallowed certain amount of agricultural income on estimate basis - as returned income and assessed income both being on estimate basis, penalty u/s 271(1)(c) is not attracted - Held that - Estimation cannot result in levy of penalty straight way in a mechanical manner. The assessee had neither concealed any income nor furnished any inaccurate particulars. It was a denial of the assessing authorities which was adjudicated upon by the Tribunal, which assessee has submitted as mentioned above. In the light of the same, penalty levied u/s. 271(1)(c) on the part estimation sustained by the Tribunal is cancelled Decided in favor of assessee

Summary

Issues:
Levy of penalty u/s.271(1)(c) of the Income Tax Act, 1961 based on estimation.

Detailed Analysis:

Issue 1:
The appellant challenged the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, contending that the addition made by the Assessing Officer, which was sustained by the ITAT, was solely based on estimation. The appellant argued that the tax computation was inconsistent, indicating confusion in imposing the penalty. The appellant emphasized the bonafides of the disclosed income and share application money, substantiating that no concealment occurred. The appellant highlighted the necessity to fulfill two conditions for penalty imposition: substantiating the explanation and proving bonafides.

Issue 2:
The appellant argued that the Assessing Officer failed to establish concealment of income or inaccurate particulars, as required under the Income Tax Act. The appellant stressed that the disclosed agricultural activities and income were genuine, supported by valid licenses and documentation. Additionally, the appellant pointed out that both returned and assessed income were estimated, rendering penalty under section 271(1)(c) inapplicable. The appellant contended that the Assessing Officer did not provide any satisfaction regarding concealment, leading to the request for penalty to be quashed.

Issue 3:
During the proceedings, the Departmental Representative supported the penalty imposed by the Assessing Officer and CIT(A), citing relevant case laws. However, the Tribunal found that the quantum addition was based on estimation stages, including land holding, cultivation expenditure, and yield. The Tribunal considered various documents presented by the appellant, such as land particulars and assessment orders, to determine that the estimation was related to agricultural income, which is non-taxable. The Tribunal concluded that the appellant did not conceal income and canceled the penalty under section 271(1)(c) based on the estimation sustained by the Tribunal.

Conclusion:
The Tribunal allowed the appeal of the assessee, canceling the penalty of Rs.1,16,000 levied under section 271(1)(c) of the Income Tax Act, 1961. The decision was based on the findings that the estimation made by the Assessing Officer and sustained by the Tribunal did not indicate any concealment of income, especially considering the agricultural nature of the income involved.