2017 (1) TMI 111 - AT - Income Tax

Penalty u/s 271(1)(c) - suppression of receipts - discrepancy in accounting the professional receipts found during survey - Held that - The income of the assessee was assessed purely on estimated basis which is further fortified by the fact that addition was reduced by the FAA and also by the tribunal in quantum appeal. In our view, it is trite law that in case difference of opinion, where the addition is made on the basis of estimation, conjecture and surmises, the penalty u/s 271(1)(c) cannot be levied. We are, therefore ,inclined to set aside the order of the ld.CIT(A) and direct the AO to delete the penalty. - Decided in favour of assessee

Summary

Issues: Appeal against penalty confirmation for addition in income based on estimation.

Analysis:
1. Background: The appeal challenges the penalty imposed by the AO on an addition of &8377; 12,19,055/- to the total income of the assessee for the assessment year 2002-03.

2. Assessment and Appeal History: The assessment was framed under section 143(3) of the Income Tax Act, 1961, with an addition of &8377; 27,91,810/- due to discrepancies found during a survey under section 133A. The First Appellate Authority reduced the addition to &8377; 12,19,055/-, further reduced to &8377; 7,00,000/- by the ITAT in a previous decision.

3. Appellant's Arguments: The appellant argued that the addition was based on estimation of income due to discrepancies in receipts issued to patients. It was contended that the fees received could not be explained due to the age of the matter, and a reasonable addition was requested. The appellant challenged the penalty imposition at 100% of the tax sought to be evaded, asserting that penalties cannot be levied on estimation basis.

4. Tribunal's Decision: The Tribunal noted the discrepancies in accounting for professional receipts but observed that no incriminating material was found during the survey. The Tribunal considered the long gap since the survey and the difficulty in verifying amounts with patients. Given the circumstances and the concession by the assessee, the Tribunal confirmed the addition of &8377; 7 lacs as undisclosed income, reducing the total addition. The Tribunal held that penalties cannot be imposed on estimation basis and directed the AO to delete the penalty.

5. Conclusion: The Tribunal allowed the appeal, setting aside the penalty imposed by the AO. The decision was based on the principle that penalties cannot be levied where additions are made on estimation basis. The order was pronounced on 28th December 2016.