2016 (8) TMI 1502 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee earned commission in the range of 1.5% to 3.5% on various kinds of accommodation entries provided by it - HELD THAT - As decided in MIHIR AGENCIES PVT. LTD., MUKESH CHOKSI VERSUS DCIT-CC-46, MUMBAI 2016 (7) TMI 1343 - ITAT MUMBAI Tribunal has adopted a particular rate for estimating the income of the assessee for the year under consideration, we hold that the FAA was not justified in confirming the order passed by the AO u/s. 271(1)(c) of the Act. Therefore, reversing his order, we decide the effective ground of appeal in favour of the assessee.

Summary

Issues involved:
- Appeal against confirmation of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Ld. CIT(A) for the assessment years 2004-05 to 2009-10.

Detailed Analysis:
1. The appeals were filed by the assessee against a common order passed by the Ld. CIT(Appeals)-38, Mumbai, confirming the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2004-05 to 2009-10. The appeals were clubbed and heard together due to the common issue raised by the assessee regarding the penalty imposition.

2. In the case of the lead assessment year 2004-05, it was revealed during search and seizure operations that the group companies were involved in providing accommodation entries for various financial transactions. The AO estimated the commission earned by the assessee on these entries and added it to the income. The Ld. CIT(A) upheld this addition, leading to the initiation of penalty proceedings under section 271(1)(c) of the Act.

3. The AO imposed a penalty of ?22,43,000 on the assessee, which was confirmed by the Ld. CIT(A). The assessee contended that similar cases had been decided in favor of the assessee by the Tribunal, citing specific cases of M/s Mihir Agencies Pvt. Ltd. and Mr. Mukesh Choksi where penalties were deleted.

4. The Co-ordinate Bench had previously decided in favor of the assessee in cases involving similar issues, emphasizing that penalty proceedings should not be automatically imposed based on estimated additions made during assessment. The Tribunal referred to specific legal precedents, such as the Aero Traders P. Ltd. case, highlighting the distinction between quantum proceedings and penalty imposition.

5. Considering the identical nature of the present case with the cases where penalties were deleted, the Tribunal held in favor of the assessee for the lead assessment year 2004-05. Consequently, the Tribunal allowed all six appeals filed by the assessee for the assessment years 2004-05 to 2009-10, overturning the penalties imposed by the authorities.

6. The Tribunal's decision was based on the principle that penalty should not be automatically imposed based on estimated additions in assessment proceedings, especially when similar cases had been decided in favor of the assessee previously. The judgments cited by the Tribunal emphasized the need for conclusive evidence of concealment of income before levying penalties, ensuring a fair and just application of tax laws.