2017 (8) TMI 743 - AT - Income Tax

Penalty u/s. 271(1)(c) - estimated the profit element at 2% of the value of the purchase transactions - Held that - When the addition of ₹ 46,831/-(supra) had been struck down by the CIT(A) while disposing of the appeal filed by the assessee against the order passed by the A.O u/s. 143(3) r.w.s. 147, and the same had been substituted by an addition of ₹ 936/- which in itself had been worked out on an estimate basis by applying a profit rate of 2% on the value of the aforesaid purchase transaction of ₹ 46,831/-, and is not found to be backed by any concrete basis, therefore, we find ourselves to be in agreement with the ld. A.R. that no penalty in respect of the addition at ₹ 936/-(supra) which had been sustained in the hands of the assessee on an estimate basis can be sustained in the eyes of law. We thus in light of our aforesaid observations set aside the order of the CIT(A) and quash the penalty imposed by the A.O u/s. 271(1)(c) of the Act in the hands of the assessee. Appeal of the assessee is allowed.

Summary

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

Analysis:
1. The appeal challenged the penalty of ?15,918 imposed under section 271(1)(c) by the Deputy Commissioner of Income Tax. The appellant contended that the Commissioner of Income Tax (Appeals) erred in confirming the penalty without considering certain crucial aspects. The appellant's Chartered Accountant attended hearings and provided relevant information regarding pending appeals, requesting adjournments for fair consideration.

2. The facts of the case revealed that the assessee company filed its income tax return for A.Y. 2009-10, initially assessed under section 143(3) of the Act. Subsequently, based on information about bogus purchases, the assessment was reopened, leading to an addition to the declared income. The penalty under section 271(1)(c) was imposed due to alleged inaccurate particulars of income related to a specific purchase transaction.

3. During the assessment proceedings, the Assessing Officer (A.O) questioned the genuineness of a purchase transaction, resulting in an addition to the income. Subsequently, the penalty proceedings were initiated, and the penalty was imposed based on the A.O's belief that inaccurate particulars were furnished regarding the said purchase.

4. The appellant contested the penalty before the Commissioner of Income Tax (Appeals), who upheld the penalty. The appellant then appealed to the Appellate Tribunal, arguing that the quantum addition related to the purchase had been deleted by the Commissioner of Income Tax (Appeals) in a separate order, reducing the addition to a mere estimation of the profit element.

5. The Tribunal considered the submissions of both parties and reviewed the lower authorities' orders. It noted that the Commissioner of Income Tax (Appeals) had reduced the addition to an estimated profit element of ?936, lacking concrete material evidence. Therefore, the Tribunal agreed with the appellant's argument that no penalty could be sustained based on an estimate. Consequently, the Tribunal set aside the Commissioner of Income Tax (Appeals) order and quashed the penalty imposed by the A.O under section 271(1)(c) in favor of the assessee.

6. The appeal of the assessee was allowed, and the penalty was revoked. The Tribunal pronounced the order in open court on 26/07/2017.