2015 (1) TMI 521 - AT - Income Tax

Penalty imposed u/s 271(1)(c) read with section 274 - assessment u/s 153A - revenue aggrieved by cancelling the penalty on the disallowances made and deleted on the additional profit at the rate of 1% of the sales amounting to ₹ 38,91,422/- - Held that - Mere revision of income to a higher figure does not automatically warrant inference of concealment of income, consequently, it was held that penalty imposed u/s 271(1)(c) of the Act was not valid and thus deleting the penalty by the Tribunal was held to be justified. It is also noted that the ld. Commissioner of Income tax (Appeals), while examining the assessment order/penalty order has dealt with the disallowances/additions, individually/separately and after full analysis of the same came to a particular conclusion holding that the estimation was either not maintainable or towards higher side. It is not the case that the ld. Commissioner deleted the penalty without analyzing the facts and suddenly reached to a particular conclusion. In view of these facts, we find no infirmity in the conclusion drawn by the ld. Commissioner of Income tax (Appeals), consequently, the order of the First Appellate Authority is upheld. - Decided gainst Revenue. Penalty with respect to alleged bogus purchases upheld by CIT - Held that - There is a contradiction in the conclusion arrived at in the assessment order with respect to purchases. The AO made the addition by holding that since the corresponding sales have been made, therefore, the assessee purchased the goods not from M/s Triton Infotech Pvt. Ltd. but from the grey market to avoid local taxes such as sales tax, VAT, etc. Thus, he made disallowance of 20% of the total purchases which resulted into addition of ₹ 55,72,000/-. The ld. Commissioner of Income tax (Appeals) reduced the addition to ₹ 11,20,000/-. However, during search & seizure operation, as per the Revenue, documents were found and seized and it was concluded that the assessee company made purchases from M/s Triton Infotech Pvt. Ltd. The statement of Shri K.K. Gupta was recorded, who tendered that no actual sales were made to the assessee and only accommodation bills were received. What it may be the fact remains that the ld. Assessing Officer relied upon the statement of Shri K.K. Gupta and even no opportunity was provided to the assessee to cross examine him, which is against the principle of natural justice. It seems the whole addition is either based on estimation or on the basis of statement of Shri K.K. Gupta, thus in our view, at least penalty is not imposable. It may be a good case for quantum addition but not for imposing penalty. Estimation is outcome of subjective approach of the individual. If we sustain the part penalty even after a huge surrender made by the assessee then the faith of the assessee will shake. Penalty deleted. - Decided in favour of assessee.

Issues Involved:
1. Sustaining/deleting the penalty imposed under Section 271(1)(c) read with Section 274 of the Income-tax Act, 1961.
2. Penalty on disallowances made amounting to Rs. 67,62,311.
3. Penalty on additional profit at the rate of 1% of the sales amounting to Rs. 38,91,422.
4. Penalty on disallowance of interest.
5. Penalty on alleged bogus purchases.
6. Penalty on withdrawal of foreign traveling expenses.
7. Penalty on disallowance under Section 14A.

Detailed Analysis:

1. Sustaining/Deleting Penalty under Section 271(1)(c):
The Revenue and the assessee both appealed against the order of the First Appellate Authority, which sustained and deleted penalties under Section 271(1)(c). The Revenue contended that the penalty was rightly levied based on the assessee's declaration during a search under Section 132, while the assessee argued that the penalty was unjustified as it was based on a third-party statement without incriminating material from the assessee's premises. The assessee claimed the surrender was voluntary to avoid litigation, with no concealment of income or furnishing of inaccurate particulars.

2. Penalty on Disallowances Amounting to Rs. 67,62,311:
The Revenue was aggrieved by the cancellation of the penalty on disallowances made. The assessee argued that the penalty was imposed based on a third-party statement and no incriminating material was found from the assessee's premises. The First Appellate Authority deleted the penalty, considering the facts and judicial precedents that no penalty is leviable when income is estimated.

3. Penalty on Additional Profit at 1% of Sales Amounting to Rs. 38,91,422:
The assessee disclosed additional income as 1% of sales to avoid litigation. The First Appellate Authority deleted the penalty, stating that the disclosure was voluntary, and there was no concealment of income or furnishing of inaccurate particulars. The penalty was not sustainable as it was based on estimated income.

4. Penalty on Disallowance of Interest:
The assessee argued that the disallowance of interest was deleted by the CIT(A), and thus no penalty was attracted. The First Appellate Authority upheld this view, stating that the penalty is not leviable on estimated disallowances not supported by concrete material.

5. Penalty on Alleged Bogus Purchases:
The Revenue made additions based on the statement of a third party (Director of M/s Triton Infotech Pvt. Ltd.), who claimed that no actual sales were made, only accommodation bills were issued. The assessee argued that payments were made through banking channels and sales were confirmed by the parties. The First Appellate Authority restricted the addition to Rs. 11,20,000 from Rs. 55,72,000, stating that the disallowance was based on estimated local taxes. The penalty was upheld by the CIT(A), but the Tribunal found that the penalty was not sustainable as the addition was based on estimation and conflicting facts.

6. Penalty on Withdrawal of Foreign Traveling Expenses:
The assessee declared Rs. 3,00,000 as additional income due to incomplete documentary evidence. The First Appellate Authority deleted the penalty, stating that the declaration was voluntary and taxes were paid, thus no concealment of income or furnishing of inaccurate particulars occurred.

7. Penalty on Disallowance under Section 14A:
The First Appellate Authority deleted the penalty on disallowance under Section 14A, stating that it was a legal issue and not a case of concealment or inaccurate particulars. The penalty was not sustainable as per the Supreme Court decision in CIT vs. Reliance Petro Products Pvt. Ltd.

Conclusion:
The Tribunal upheld the deletion of penalties by the First Appellate Authority, stating that penalties under Section 271(1)(c) are not leviable on estimated additions or voluntary disclosures made to avoid litigation. The Tribunal emphasized that penalties require concrete evidence of concealment or inaccurate particulars, which was not present in these cases. The appeals of the Revenue were dismissed, and the appeal of the assessee was allowed, resulting in the deletion of penalties.

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