2015 (8) TMI 1440 - AT - Income Tax

Levy of Penalty u/s 271(1)(c) - non specification of charge - Held that - The assessee has made an agreement for no penalty, and at the same time given an explanation for the same which is duly substantiated by the Report of the Inspector of the Department itself. Therefore even by the admission / standards of the CIT(A) also, it is not a fit case for levy of penalty. In the instant case there is no material on record to show that the assessee had concealed the income or had furnished inaccurate particulars of his income. Decision in the case of Careers Education & Infotech (P) Ltd. s case (2011 (3) TMI 602 - PUNJAB AND HARYANA HIGH COURT)is squarely applicable to the facts of present case. Considering the entire facts and circumstances of the present case, hold that it is not a fit case for levy of penalty u/s 271(1)(c) - Decided in favour of assessee

Summary

Issues:
- Confirmation of penalty under section 271(1)(c) by CIT(A)
- Justifiability of penalty based on estimated addition in Assessment Order
- Consideration of reasonable cause by CIT(A)

Analysis:
1. The appeal was against the CIT(A)'s order confirming a penalty under section 271(1)(c) of the Income Tax Act. The assessee, a trader of Iron & Steel Goods, filed a return declaring a loss for the relevant assessment year. The Assessing Officer (AO) initiated penalty proceedings as the assessee agreed to ignore the loss but conditioned it on no penalty imposition. The AO imposed a penalty of Rs. 1,80,805, equating to 100% of the tax sought to be evaded, based on the addition made to the income.

2. The CIT(A) upheld the penalty, citing precedents that emphasized the need for substantiated explanations to avoid penalties. The CIT(A) noted the absence of details supporting the loss claim and highlighted that mens rea is not essential for civil liability of penalties. The CIT(A) concluded that the penalty was rightly levied considering the facts of the case.

3. The Tribunal analyzed the case, noting that the AO accepted the surrender of losses without objection due to the assessee's inability to provide information amidst heavy debt and lack of business activities. The Tribunal found the assessee's explanation for surrendering losses reasonable and plausible, considering the circumstances. It was observed that no adverse material was relied upon for the addition to income, and there was no finding that the assessee had not actually incurred losses.

4. The Tribunal disagreed with the CIT(A)'s view that mere agreement does not absolve penalty liability and emphasized that the assessee's substantiated explanation, supported by a departmental report, should be considered. Citing relevant case law, the Tribunal held that without evidence of concealment or furnishing inaccurate particulars, the penalty was unjustified. Relying on the principle of burden of proof, the Tribunal found no grounds for penalty imposition and deleted the penalty levied under section 271(1)(c) of the Act.

5. Consequently, the Tribunal allowed the assessee's appeal, emphasizing the absence of evidence showing concealment or furnishing inaccurate particulars of income. The decision aligned with the jurisdictional High Court's ruling in a similar case, leading to the deletion of the penalty imposed.