2019 (4) TMI 1156 - AT - Income Tax

Penalty u/s 271(1)(c) - unexplained income - CIT-A reducing the penalty in respect of cash component for only 3 units for which evidence was found during the search - HELD THAT - As mentioned earlier the Ld. CIT(A) restricted the addition to the extent of 17% and deleted the balance 83% of estimate. In appeal in assessee s own case for AY 2007-08 have directed the AO to delete the addition made on account of extrapolation in respect of advances received during the year. Observing that such an exaggerated/wild extrapolation in the matter is unjust and unwarranted especially when enquiries were done and nothing adverse was found against the assessee and as the offer of 1 crore made covers all the discrepancies the Tribunal held that no further additions made by the AO/CIT(A) is sustainable. Also in respect of the additional ground filed by the assessee to the effect that notice u/s 143(2) was not issued to the assessee within a period of 12 months from the date of filing of return for the impugned assessment year the Tribunal restored the ground to the file of the AO for deciding afresh as per law after verifying the records. Addition on account of on-money - CIT(A) restricted the addition to the extent of 17% and deleted the balance 83% of estimate basis - HELD THAT - Tribunal directed the AO to delete the addition made on account of extrapolation in respect of advances received during the year. Further observing that such an exaggerated/wild extrapolation in the matter is unjust and unwarranted especially when inquiries were done and nothing adverse was found against the assessee and as the offer of 1 crore covers all the discrepancies the Tribunal held that no further additions made by the AO/CIT(A) is sustainable. Also in respect of the additional ground filed by the assessee to the effect that notice u/s 143(2) was not issued to the assessee within a period of 12 months from the date of filing of return for the impugned assessment year the Tribunal restored the ground to the file of the AO for deciding afresh as per law after verifying the records.

Issues:
- Reduction of penalty by CIT(A) for cash component in certain units
- Addition of unexplained income based on estimation
- Validity of penalty under section 271(1)(c)
- Consistency in assessment for different assessment years

Issue 1: Reduction of penalty by CIT(A) for cash component in certain units
The Appellate Tribunal ITAT Mumbai addressed the issue of reducing the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act. The AO had levied a penalty on concealed income based on an estimation of unaccounted earnings. The CIT(A) observed that the penalty should be reduced as there was evidence of cash receipts only in respect of 3 specific units. The CIT(A) relied on previous decisions and reduced the penalty corresponding to the cash receipts found in those units. The Tribunal upheld the CIT(A)'s decision, emphasizing the importance of specific evidence in determining the penalty amount.

Issue 2: Addition of unexplained income based on estimation
The AO had made an addition to the assessee's income based on an estimation of unaccounted earnings at 77.38% of advances received. The CIT(A) reduced this estimation to 17% considering it as a case of estimation. The Tribunal, in the assessee's own case for the assessment year 2007-08, directed the AO to delete the addition made on account of extrapolation of advances received. The Tribunal found the extrapolation unjust and unwarranted, especially when no adverse findings were discovered against the assessee. The Tribunal emphasized the need for corroborative evidence to support such estimations.

Issue 3: Validity of penalty under section 271(1)(c)
The validity of the penalty imposed under section 271(1)(c) was questioned in the appeal. The CIT(A) reduced the penalty amount based on specific evidence of cash receipts found in certain units. The Tribunal upheld the CIT(A)'s decision, highlighting the importance of evidence and specific findings in determining the penalty amount. The Tribunal emphasized that penalties cannot be levied for the entire unaccounted income assessed based solely on estimations without concrete evidence.

Issue 4: Consistency in assessment for different assessment years
The Tribunal also addressed the issue of consistency in assessment for different assessment years. In the case of the assessment year 2008-09, similar additions were made by the AO based on estimations of unaccounted income. However, following the decision in the assessee's own case for previous assessment years, the CIT(A) deleted the additions made by the AO. The Tribunal upheld the CIT(A)'s decision, emphasizing the need for consistency in assessments and the importance of specific evidence to support additions based on estimations.

In conclusion, the Appellate Tribunal ITAT Mumbai dismissed the appeals, upholding the decisions of the CIT(A) in reducing penalties and deleting additions based on estimations, emphasizing the significance of specific evidence and the need for consistency in assessments across different years.

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