2017 (11) TMI 1213 - AT - Income Tax

Penalty u/s 271(1)(c) - surrendered income - Held that - AO made the addition merely on the ground that the surrender was not to his satisfaction rather proceeded to estimate the disallowance @ 0.25%. When the assessee company has produced account books before the AO during assessment proceedings, AO was required to compute the income on the basis of documentary evidence and not on the basis of estimation. But the AO proceeded to guesswork the additional income on the basis of some defects in the account books and on the ground that the income offered is not adequate. In the given circumstances, we are of the considered view that there is no question of furnishing of inaccurate particulars to attract the provisions contained u/s 271(1)(c) of the Act. - Decided in favour of assessee. Penalty u/s 271AAA - assessee company has surrendered income u/s 132 (4), paid taxes along with interest which the assessee company has disclosed in profit & loss account under the head other income - Held that - AO has not put any specific query to the assessee to further specify the manner in which such income was derived and to substantiate the manner in which such income was derived. Furthermore AO has nowhere recorded any finding in the assessment order that it is undisclosed income of the assessee sufficient to attract the provisions contained u/s 271AAA. Coordinate Bench while dealing with the identical issue in case cited as Neerat Singal vs. ACIT (2013 (6) TMI 762 - ITAT DELHI) also held that the AO was not justified in imposing penalty u/s 271AAA when authorized officer has not raised any query during course of recording of statement u/s 132 (4) about the manner in which the undisclosed income has been derived and about its substantiation. There is no illegality or perversity in the findings returned by ld. CIT (A) in deleting the penalty imposed u/s 271AAA - Decided in favour of assessee.

Summary

Issues:
- Appeal against the deletion of penalties under section 271(1)(c) for assessment years 2008-09, 2009-10, and 2010-11.
- Appeal against the deletion of penalty under section 271AAA for the assessment year 2010-11.

Analysis:

Penalty under section 271(1)(c):
- The Deputy Commissioner of Income-tax appealed against the deletion of penalties imposed under section 271(1)(c) for the mentioned assessment years. The penalties were levied due to discrepancies found during assessment proceedings, resulting in additional income being added based on turnover percentages.
- The Assessing Officer (AO) imposed penalties, alleging concealment by the assessee company after discrepancies were pointed out during account checks, leading to additional income offers by the company.
- The Commissioner of Income-tax (Appeals) (CIT (A)) deleted the penalties, citing the decision in Reliance Petro Products Pvt. Ltd. case by the Supreme Court, emphasizing that incorrect claims do not necessarily constitute inaccurate particulars for penalty under section 271(1)(c).
- The Tribunal upheld the CIT (A)'s decision, stating that the AO's estimation of additional income based on defects in account books did not warrant penalties under section 271(1)(c) as there was no inaccurate furnishing of particulars.

Penalty under section 271AAA:
- The penalty under section 271AAA for the assessment year 2010-11 was challenged by the Deputy Commissioner of Income-tax. The penalty was imposed due to alleged failure by the assessee company to specify and substantiate the undisclosed income derived during search and seizure operations.
- The assessee surrendered a specific amount during the operation but faced penalties as purchase bills for raw materials were not provided, despite tax deposits and interest payments.
- The Tribunal found that the conditions under section 271AAA(2) were met by the assessee, as the undisclosed income was declared, taxes paid, and the manner of income derivation specified and substantiated.
- Additionally, the AO's failure to query the specific manner of income derivation and lack of findings on undisclosed income in the assessment order led to the deletion of penalties under section 271AAA by the CIT (A) and subsequently upheld by the Tribunal.

Conclusion:
- The Tribunal dismissed all appeals by the Revenue, upholding the decisions of the CIT (A) in deleting penalties under sections 271(1)(c) and 271AAA. The judgments were based on the lack of inaccurate particulars and fulfillment of conditions under the respective penalty sections.