2013 (11) TMI 268 - AT - Income Tax

Levy of penalty u/s 271(1)(c) of the Income Tax Act Held that - Reliance has been placed upon the assessee s own case 2013 (9) TMI 201 - ITAT HYDERABAD - Penalty on ad-hoc disallowance of expenses like jointing, labour, supervision charges, site preparation, etc., this was disallowed on the reason that the expenditure was not properly vouched and the disallowance of expenditure is on ad-hoc basis. There is no conclusive proof that the assessee has furnished inaccurate particulars of income or concealed the particulars of income. The assessee was not able to file all vouchers and bills and that led to disallowance and the lump sum disallowance was made on estimate basis which cannot be a reason for levy of penalty. The AO could not point out which item of expenditure was not verifiable. Had the AO pinpointed the particular expenditure that is not verifiable then the case will be different. The Assessing Officer without examining the recipients of the payments, it is not appropriate to come to the conclusion that the assessee has concealed any particulars of income or furnished inaccurate particulars of income. The penalty proceedings are quasi criminal proceedings and the consideration that arise in penalty proceedings are different from those arising in the assessment proceedings. Though the finding given in the assessment order is a good finding, the same is not conclusive in penalty proceedings Decided against the Revenue.

Summary

Issues Involved:
Cross appeals by Revenue and assessee against CIT(A)'s order for assessment year 2006-07 regarding penalty u/s. 271(1)(c) for disallowance of depreciation and unvouched expenditure.

Analysis:
1. Revenue's Grounds:
- Revenue contended CIT(A) erred in granting relief to the assessee, holding penalty cannot be levied on estimated disallowance, and not considering addition made due to concealment of facts.
- AO made additions for depreciation claim and unvouched expenditure. Penalty u/s. 271(1)(c) was imposed based on these discrepancies.

2. Assessee's Grounds:
- Assessee challenged CIT(A)'s order based on suspicion and lack of tangible evidence, especially regarding penalty u/s. 271(1)(c) on disallowance of depreciation.
- CIT(A) upheld penalty on depreciation disallowance, alleging inaccurate particulars of income, which the assessee disputed.

3. Detailed Analysis:
- The Tribunal reviewed penalty imposition on depreciation disallowance for AYs 2003-04 and 2004-05, citing the absence of concealment or inaccurate particulars by the assessee. The claim was based on a lease agreement, reflecting assets in the Balance Sheet.
- Relying on Supreme Court precedent, the Tribunal emphasized that a disallowed claim doesn't automatically warrant a penalty, as long as the assessee acted in good faith and disclosed relevant facts.
- The Tribunal also addressed the ad-hoc disallowance of expenses, emphasizing the need for conclusive proof of inaccurate particulars or income concealment for penalty imposition.
- It highlighted that penalties are quasi-criminal and require concrete evidence of intentional wrongdoing, not mere estimation or lack of verifiable vouchers.
- The Tribunal confirmed the deletion of penalties based on lack of concrete evidence supporting income concealment or inaccurate particulars, upholding the principle that penalties should be imposed judiciously based on clear evidence.

4. Conclusion:
- Following the Tribunal's precedent, penalties were deleted for both depreciation disallowance and ad-hoc expenditure, emphasizing the importance of concrete evidence in penalty proceedings.
- The Revenue appeal was dismissed, while the assessee's appeal was allowed, reflecting the Tribunal's commitment to fair and evidence-based decision-making in penalty matters.