2016 (8) TMI 1084 - AT - Income Tax

Penalty u/s.271(l)(c) - Held that - aAssessee has declared business loss of 64, 89, 606/- in the return of income duly processed u/s 143(1) of the Act and in the reassessment proceedings u/s 147 of the Act no material record was available before the Assessing Authority to assess the income as the records were destroyed. We also observe that assessee company incurred heavy losses due to which even quantum appeal was also withdrawn due to non-availability of records as well as lack of office data. We also observe that Assessing Officer has not brought on record any material evidence to prove that assessee has concealed any income. It was just due to lack of records and books of account that Assessing Officer has to frame an assessment order by applying net profit rate of 5% on the gross turnover of the assessee. But there was no iota of evidence against the assessee which could prove that there was concealment of income or furnishing of inaccurate particulars. In these circumstances we are of the view that no penalty is required to levied u/s 271(1)(c) except on the unexplained cash credit of 30, 000/-. We find no reason to interfere with the order of ld. CIT(A). This ground of Revenue is dismissed.

Issues Involved:
1. Interpretation of the CIT(A) order regarding the cancellation of penalty levied under Section 271(1)(c) of the IT Act.
2. Validity of penalty levied on concealment of income.
3. Whether the CIT(A) should have upheld the Assessing Officer's order.
4. Request to set aside the CIT(A) order and restore the Assessing Officer's order.

Issue-wise Detailed Analysis:

1. Interpretation of the CIT(A) order regarding the cancellation of penalty levied under Section 271(1)(c) of the IT Act:
The Revenue appealed against the CIT(A)'s order, which directed the cancellation of a penalty of ?25,78,504 levied under Section 271(1)(c). The CIT(A) had determined that the penalty was only applicable to an unexplained cash credit of ?30,000 and not to the estimated net profit of ?3,40,274 or the disallowed loss of ?64,89,606. The Tribunal noted that the CIT(A) had correctly interpreted the facts and circumstances, emphasizing that the penalty could not be levied on income assessed on an estimated basis without concrete evidence of concealment or inaccurate particulars.

2. Validity of penalty levied on concealment of income:
The Tribunal reviewed the facts, noting that the assessee declared a business loss of ?64,89,606 in the original return, which was processed under Section 143(1). During reassessment, the income was estimated due to the unavailability of records, leading to an estimated net profit of ?3,40,274 and an addition of ?30,000 for unexplained cash credit. The CIT(A) had deleted the penalty related to the estimated profit, as it was based on an ad-hoc estimation without evidence of concealment. The Tribunal upheld this view, stating that penalty under Section 271(1)(c) is not leviable when income is assessed on an estimated basis without material evidence of concealment.

3. Whether the CIT(A) should have upheld the Assessing Officer's order:
The Tribunal found that the CIT(A) had correctly interpreted the order and the facts. The CIT(A) had observed that the penalty on the estimated addition of ?3,40,274 was not sustainable, as it was based on an estimation without evidence of concealment. The CIT(A) had also noted that the Assessing Officer had incorrectly computed the penalty on a figure of ?68,59,880, which represented the total turnover, not the estimated profit. The Tribunal agreed with the CIT(A)'s findings and upheld the deletion of the penalty on the estimated profit.

4. Request to set aside the CIT(A) order and restore the Assessing Officer's order:
The Tribunal dismissed the Revenue's request to set aside the CIT(A) order and restore the Assessing Officer's order. The Tribunal emphasized that the Assessing Officer had not brought any material evidence to prove that the assessee had concealed income or furnished inaccurate particulars. The penalty was sustained only on the unexplained cash credit of ?30,000, and the Tribunal found no reason to interfere with the CIT(A)'s order.

Conclusion:
The Tribunal concluded that the penalty under Section 271(1)(c) was only applicable to the unexplained cash credit of ?30,000. The appeal of the Revenue was dismissed, and the CIT(A)'s order was upheld. The Tribunal noted that there was no material evidence against the assessee to prove concealment of income, and the penalty on the estimated profit was rightly deleted by the CIT(A). The order was pronounced in the open Court on 25th July 2016.

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