2016 (8) TMI 467 - AT - Income Tax

Penalty levied u/s 272A(1)(c) - period of limitation - GP rate determination - Held that - In the face of the fact that penalty order dated 26.11.2012 has been passed after about one year and five months from the date of passing order by the Appellate Tribunal, the same is hopelessly time barred. Though date of receipt of order dated 17.06.2011passed by ITAT by the Principal Chief Commissioner / Commissioner is not available on record but factual position as to passing the penalty order after expiry of the six months from the receipt of the order of the ITAT has not been disputed by the ld. DR. So, we hereby quash the penalty order having been passed beyond the period of limitation u/s 275(1)(a) of the Act. Also on merits so far as question of applying the gross profit rate of 10%, further reduced to 4% by the Appellate Tribunal, after rejecting the books of account by the AO on estimation basis is concerned, the same does not amount to concealment of income by the assessee because the assessee during the assessment proceedings put forth book results, audited balance sheets, etc. before the AO but the same has been rejected by AO by invoking the provisions contained u/s 145(2) of the Act. In case, books of account have been rejected, the AO has to assess the income on the basis of comparative study and not on the basis of guesswork and estimation. So, to our mind, this cannot be concealment of income by any stretch of imagination even. Disallowance of expenditure for argument sake even if assumed to be wrongly claimed by the assessee, does not amount to concealment of income in any manner, because allowability of expenditure claimed by the assessee is to be examined by the AO and mere claim of assessee is not concealment. Thus penalty order affirmed by the ld. CIT (A) is not sustainable - Decided in favour of assessee

Summary

Issues involved:
1. Whether the penalty order passed against the assessee is barred by limitation under section 275(1)(a) of the Income Tax Act, 1961?
2. Whether the assessee has furnished inaccurate particulars of income or concealed the particulars of income from the tax authorities?

Issue 1: The penalty order's limitation:
The Appellate Tribunal considered whether the penalty order, dated 26.11.2012, imposed on the assessee was within the time limit prescribed by section 275(1)(a) of the Income Tax Act, 1961. The Tribunal noted that the penalty order was passed after about one year and five months from the date of the Appellate Tribunal's order, rendering it time-barred. As per the provisions of section 275(1)(a), the penalty order should have been passed within six months from the receipt of the Appellate Tribunal's order by the Commissioner. Since the penalty order was issued beyond this period, the Tribunal quashed the penalty order due to being time-barred.

Issue 2: Accuracy of income particulars and concealment:
Regarding the accuracy of income particulars and concealment, the Tribunal analyzed the two conditions required under section 271(1)(c) of the Act to impose a penalty. Firstly, the Tribunal discussed the addition made by the Assessing Officer based on undisclosed sales and the disallowed expenditure claimed by the assessee. The Tribunal concluded that the application of a gross profit rate by the AO, subsequently reduced by the Appellate Tribunal, did not constitute concealment as the assessee had provided relevant documents, which were rejected by the AO. Additionally, the disallowance of expenditure did not amount to concealment as the AO has the authority to examine the allowance of claimed expenses. Therefore, the Tribunal held that the penalty order was not sustainable in law, and consequently, the appeal was allowed, leading to the quashing of the penalty order.

In summary, the Appellate Tribunal ITAT DELHI, in its judgment, addressed the issues of the penalty order's limitation under section 275(1)(a) and whether the assessee furnished inaccurate income particulars or concealed income. The Tribunal found the penalty order to be time-barred and ruled that the penalty was not sustainable as the conditions for imposing a penalty under section 271(1)(c) were not met. The appeal was allowed, and the penalty order was quashed.