2014 (7) TMI 952 - AT - Income Tax

Penalty u/s 271(1)(c) Held that - Assessee rightly contended that if an assessee offers an explanation, which is not found to be false, he can save himself - from penalty even if he were not able to substantiate his case as long as the explanation of the assessee is bonafide and as long as he places all the relevant facts material to computation of his total income irrespective of the fact that the same explanation was not accepted for the purpose of assessment Relying upon ACIT vs. Malhotra Mukesh Satpal 2006 (5) TMI 168 - ITAT PUNE-A - The explanation of the assessee has nowhere been alleged to be false or short - penalty ought not to be levied on the assessee, even if the additions have been confirmed in quantum proceedings - assessee is found to have made out the case in light of the decisions relied upon - this is not a fit case for imposition of penalty as none of the ingredients incorporated in the relevant provisions have been fulfilled by the AO before arriving at the conclusion to impose the penalty Decided in favour of Assessee.

Summary

Issues:
Challenge against penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.

Analysis:
1. The appeal was directed against the order of the Ld. Commissioner of Income Tax (Appeals-XI) confirming the penalty imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2003-04.

2. The assessee, engaged in construction activities, filed a return declaring income of Rs. 75,980. Subsequently, after a survey, the revised return declared income of Rs. 1,79,090. The Assessing Officer assessed the income at Rs. 11,40,200, including disallowances of various business expenses.

3. The Assessing Officer imposed a penalty of Rs. 3,02,749 alleging that the assessee had not provided adequate explanation or documentary evidence for the income shown, specifically related to the sale of a flat. The penalty was challenged by the assessee at various levels.

4. The assessee contended that all necessary proofs and documents were provided to establish the absence of malafide intent in the case. The dispute primarily revolved around the allocation of construction costs, with the assessee arguing that the allocation made was bonafide.

5. The Tribunal found that the assessee had made a strong case supported by legal arguments and case laws. It was concluded that the penalty was not justified as the Assessing Officer had not fulfilled the necessary requirements for imposing the penalty under section 271(1)(c). The appeal of the assessee was allowed, and the penalty was directed to be deleted.

This detailed analysis covers the issues involved in the legal judgment, the arguments presented by both parties, and the final decision of the Tribunal to delete the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961.