2018 (12) TMI 1139 - AT - Income Tax

Penalty u/s. 271(1)(C) - deemed income u/s. 2(22)(e) - Held that - Additions on which the penalty in dispute was levied, has already been deleted by the ITAT, except the addition of ₹ 13,634/- which was not pressed by the assessee in quantum appeal in assessee s own case as aforesaid, hence, the penalty in dispute will not survive on the additions in dispute, except the penalty on the addition of ₹ 13,634/- which was not pressed by the assessee in quantum appeal before the Tribunal 2018 (11) TMI 1008 - ITAT DELHI . Accordingly, we delete the penalty in dispute and sustain the penalty on the addition. - Decided partly in favour of assessee.

Summary

Issues:
1. Validity of show cause notice under section 271(1)(c) of the Income Tax Act.
2. Penalty imposition on deemed income under section 2(22)(e) of the Income Tax Act.
3. Justification for penalty imposition under section 271(1)(c) on merits.

Issue 1: Validity of Show Cause Notice:
The appeal challenged the order of the Ld. CIT(A) regarding the validity of the show cause notice issued under section 271(1)(c) of the Income Tax Act. The appellant contended that the notice was fatally defective as it did not specify whether it was issued for concealment of income or furnishing inaccurate particulars of income, rendering it illegal and unsustainable. The penalty of ?12,96,955/- was deemed to be without jurisdiction and illegal. The Tribunal noted that the appellant's own case had seen quantum additions being deleted, except for an amount of ?13,634/-. Consequently, the penalty on the disputed additions was not sustainable, except for the amount of ?13,634/-, which was not pressed by the appellant during the quantum appeal.

Issue 2: Penalty on Deemed Income:
Regarding the imposition of penalty on deemed income under section 2(22)(e) of the Income Tax Act, the Tribunal analyzed the facts and circumstances of the case. It was observed that the appellant had received amounts related to tenanted property, an Agreement to Sell, and an imprest, which were claimed to be ordinary business transactions benefiting the Company. The Tribunal referred to legal precedents and confirmed that the transactions did not attract the provisions of section 2(22)(e) of the Act. The Tribunal found that the amounts were not given for the personal benefit of the appellant but for the benefit of the Company, constituting ordinary business transactions. Consequently, the Tribunal set aside the orders of the authorities below and deleted the additions, thereby partly allowing the appeal of the Assessee.

Issue 3: Justification for Penalty Imposition:
On the merits of the penalty imposition under section 271(1)(c), the Tribunal considered the submissions and records. Given that the additions on which the penalty was levied had been deleted by the ITAT, except for the amount of ?13,634/-, the penalty in dispute was deemed not to survive on the disputed additions. Therefore, the penalty was deleted except for the amount of ?13,634/-, which was not pressed by the assessee during the quantum appeal. Consequently, the appeal filed by the Assessee was partly allowed, with the penalty on the addition of ?13,634/- being sustained.

In conclusion, the Tribunal's judgment addressed the issues of the validity of the show cause notice, penalty imposition on deemed income, and the justification for penalty imposition under section 271(1)(c) comprehensively. The decision was based on a detailed analysis of the facts, legal precedents, and the specific circumstances of the case, resulting in the partial allowance of the Assessee's appeal.