2018 (9) TMI 872 - AT - Income Tax

Penalty u/s 271(1)(c) - assessee disclosed incorrect profit - incorrect GP estimation - Held that - no satisfaction recorded by the ld AO in assessment order that whether the assessee has concealed income or furnished inaccurate particulars of income. Even in the penalty order dated 10.05.2013, the ld AO has held that the assessee is liable for penalty u/s 271(1)(c) of the Act as assessee has furnished inaccurate particulars of his income and concealed particulars of his income. Therefore, the ld AO is not certain about the exact charge on the assessee. Addition on account of gross profit was purely on estimation basis. In view of this it cannot be said that the assessee has furnished any inaccurate particulars of his income or concealed income on this issue. With respect to the addition of the sundry creditors, assessee has explained full details about difference between balance as per the books of assessee as well as the information obtained by the AO and reconciled. The assessee has shown that in some of the cases the customer has been billed certain goods which was not accepted by the assessee. In one of the case, the payment made by the assessee was also not recorded. Out of the total four creditors the addition was upheld only with respect to ₹ 177958/-. Though the addition is confirmed by the first appellate authority, but does not show that the assessee has not recorded any transaction in his books of account or any transaction recorded by him is false. Further the ld CIT(A) has also confirmed the penalty without verifying that whether the assessee is guilty of furnishing inaccurate particulars of income or concealment of income - decided in favour of assessee

Summary

Issues:
1. Penalty u/s 271(1)(c) of the Act confirmed by the ld CIT(A) partially.
2. Addition of &8377; 2 lac on gross profit and &8377; 829832/- on sundry creditors made by ld AO.
3. Contention of the assessee regarding penalty imposition for inaccurate particulars of income and concealment of income.
4. Rejection of adjournment application by the assessee.
5. Support by ld DR for the orders of the lower authorities.
6. Lack of specific charge against the assessee for penalty u/s 271(1)(c) of the Act.

Detailed Analysis:
1. The appeal was filed against the order of the ld CIT(A) confirming a penalty u/s 271(1)(c) of the Act partially. The main grounds of appeal challenged the penalty order. The assessee, engaged in trading of mobile accessories, disclosed a lower gross profit for the year compared to the previous year. The ld AO made additions on gross profit and sundry creditors, leading to a higher total income determination. The penalty notice was issued, and the appeal before the ld CIT(A) resulted in partial deletion of the additions but confirmation of the penalty.

2. In the penalty proceedings, the assessee argued that the lower gross profit was due to being in the retail business and agreed to an adhoc addition. Regarding the sundry creditors, detailed explanations were provided for the differences found. The ld AO and ld CIT(A) held that the assessee furnished inaccurate particulars of income and concealed income, leading to the penalty imposition, which was contested by the assessee.

3. The application for adjournment by the ill assessee was rejected, and the case was decided on its merits. The ld DR supported the lower authorities' orders. Upon careful consideration, the Tribunal found that no specific satisfaction was recorded by the ld AO regarding concealment or inaccurate particulars of income. The additions were made on an estimated basis, without finding any defects in the books of account. The Tribunal quashed the penalty orders as there was no specific charge against the assessee, emphasizing the distinction between penalty and assessment proceedings.

4. The Tribunal allowed the appeal of the assessee, pronouncing the order on 12/09/2018.