2018 (1) TMI 1328 - AT - Income Tax

Penalty U/s 271(1)(c) - addition on estimated basis - Held that - Addition sustained by the ld. CIT(A) itself was an estimated addition and the same has been sustained to the extent of 50, 000/- only on ad hoc. The penalty is not an automatically leviable wherever addition is sustained. Further where the trading additions are made which has been reduced and sustained on ad hoc basis no penalty imposable on such estimated addition.- Decided in favour of assessee.

Summary

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

Detailed Analysis:

1. Issue: Sustaining Penalty under Section 271(1)(c) of the Income Tax Act
The appeal revolved around the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee contested the penalty on the grounds that the assessment was finalized with a trading addition, which was later reduced to an ad hoc amount by the ld. CIT(A). The assessee argued that the addition was not based on concrete facts and that the books of account were audited as per Section 44AB of the Act. The assessee also cited precedents where penalties were deleted in similar circumstances, emphasizing that no inaccurate particulars of income were furnished, nor was there any deliberate concealment. The ld AR relied on various ITAT decisions and High Court judgments to support the case.

2. Legal Precedents and Interpretations
The judgment referenced the decision of the Hon'ble Supreme Court in CIT v. Reliance Petro Products Pvt. Ltd., emphasizing that for penalty under section 271(1)(c) to apply, there must be concealment of income particulars or furnishing of inaccurate particulars. The Court highlighted that making an incorrect claim does not automatically amount to furnishing inaccurate particulars. The return filed by the assessee is crucial, and unless details are found to be inaccurate or false, the penalty provision cannot be invoked.

3. Tribunal's Decision
After considering the arguments, case laws, and factual aspects, the Tribunal held that the sustained addition was estimated and reduced to an ad hoc amount. The Tribunal concluded that where trading additions are made and sustained on an ad hoc basis, no penalty is imposable on such estimated additions. Consequently, the Tribunal directed the deletion of the penalty of ?15,450 imposed under section 271(1)(c) of the Act, thereby allowing the appeal of the assessee.

In conclusion, the Tribunal's decision to delete the penalty was based on the lack of concrete evidence for inaccurate particulars or deliberate concealment, as well as the reduction of the trading addition to an ad hoc amount. The judgment underscored the importance of accurate details in the return and clarified that not every incorrect claim leads to penalty imposition under section 271(1)(c) of the Income Tax Act, 1961.