2016 (3) TMI 866 - AT - Income Tax

Penalty levied under section 271(1)(c) - disallowance of expenditure - Held that - Other than particulars furnished by the assessee in the return of income, the Revenue does not have any other material to substantiate that the assessee has concealed the particulars. It is established law that not all additions would justify penalty as a matter of course. But addition is the basis for penalty. Mere admission does not justify penalty even in the light of the Explanation to section 271(1)(c) of the Act in view of the judgement in the case of CIT vs. Saran Khandsari Sugar Works (1999 (9) TMI 15 - ALLAHABAD High Court). In the instant case, the penalty order passed by the Assessingus we are of the opinion that levy of penalty is not warranted in the present case and accordingly, we delete the penalty levied by the Assessing Officer Officer is purely based on the assessment made under section 143(3) of the Act. Thus incurring expenditures during the course of business by the assessee was not rejected by the Assessing Officer, but the assessee could not file any valid evidence for claiming the expenditure before the Assessing Officer and therefore by disallowing 80% of the claim, the Assessing Officer has allowed 20% of expenditure attributable to earn the business income. Thus we are of the opinion that levy of penalty is not warranted in the present case and accordingly, we delete the penalty levied by the Assessing Officer - Decided in favour of assessee

Summary

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

Analysis:
1. The appeal was filed against the order of the Commissioner of Income Tax (Appeals) confirming the penalty under section 271(1)(c) of the Act for the assessment year 2007-08.
2. The assessee, an Individual and Director of a consultancy firm, declared total income but failed to provide proper evidence for claimed expenditures, leading to a substantial disallowance by the Assessing Officer.
3. The Assessing Officer initiated penalty proceedings under section 271(1)(c) due to the lack of supporting evidence, alleging the assessee concealed taxable income by furnishing inaccurate particulars.
4. The assessee contended that no concealment or inaccurate particulars were involved, citing relevant case law to support the appeal against the penalty.
5. The Tribunal considered the submissions, reviewed the assessment details, and noted that the penalty was solely based on the assessment under section 143(3) of the Act.
6. Emphasizing that not all additions automatically justify penalties, the Tribunal highlighted the need for a basis for penalty imposition beyond mere additions, as per legal precedents.
7. The Tribunal differentiated the present case from previous judgments cited by the Revenue, emphasizing the lack of concrete evidence for expenditure claims but acknowledging that some expenditure was allowable.
8. Ultimately, based on the facts, legal principles, and precedents discussed, the Tribunal concluded that the penalty was unwarranted in this case and decided to delete the penalty levied by the Assessing Officer.
9. Consequently, the Tribunal allowed the appeal filed by the assessee, leading to the deletion of the penalty under section 271(1)(c) for the assessment year in question.