2013 (8) TMI 515 - AT - Income Tax

Penalty u/s 271(1)(c) - Confirmation not filed - CIT reduced penalty - Held that - Assessee had furnished stock register to show the day-to-day purchase and sale of goods - addition made by the AO and reduced by the appellate authorities was on estimation basis - Following decision of M/s.Rolex Tin Works Vs. ITO 2013 (7) TMI 824 - ITAT AHMEDABAD - Decided in favour of assessee.

Summary

Issues:
Appeals against orders of CIT(A) for A.Y. 2003-2004 and 2004-2005 - Validity of penalty under section 271(1)(c) - Disallowance made by AO due to alleged bogus purchase - Applicability of various judicial pronouncements.

Analysis:
The appeals were directed against CIT(A) orders for A.Y. 2003-2004 and 2004-2005, challenging the penalty imposed under section 271(1)(c). The grounds raised by the assessee questioned the validity of the penalty, alleging errors in law and fact, including lack of "Satisfaction of Concealment" by the Assessing Officer before issuing show cause notice. The notice of penalty was deemed vague and ambiguous, leading to doubts regarding the basis for penalty imposition.

Merits:
The CIT(A) confirmed the penalty for furnishing inaccurate particulars of income, despite the appellant disclosing details related to the claim under section 44-AB as per audit report. The contention was that the penalty was unjustified given the disclosure made by the appellant. The legal decisions cited by the appellant were ignored by the authorities, leading to the challenge of the penalty imposition.

Disallowance and Estimation:
The disallowance made by the AO due to alleged bogus purchases was reduced by CIT(A) and further by ITAT based on estimation. The disallowance was linked to the failure of the assessee to provide confirmations from suppliers. The Tribunal's decision in a similar case emphasized that penalties based on estimation may not be justified. The arguments presented by both sides were considered, along with various judicial pronouncements.

Judicial Pronouncements:
The judgments cited by the Revenue were analyzed. The Kerala High Court judgment was deemed inapplicable as the disallowance in the present case was based on estimates, unlike the case referenced. The Madras High Court judgment involved different circumstances, as the absence of sworn statements by sellers distinguished it from the present case. The Tribunal decision cited by the Revenue was also found irrelevant due to differences in the facts of the cases.

Final Decision:
After thorough examination, the Tribunal concluded that none of the judgments cited by the Revenue supported the penalty imposition. The Tribunal's decision favoring the assessee in a similar case where only estimated additions were confirmed guided the decision to delete the penalty in the present case. Consequently, both appeals of the assessee were allowed, and the penalty was deleted.

This detailed analysis highlights the issues raised, the arguments presented, the examination of relevant legal provisions, and the application of judicial precedents to arrive at the final decision to delete the penalty imposed under section 271(1)(c) in the given case.