2019 (10) TMI 985 - AT - Income Tax

Penalty levied u/s 271(1)(c) - addition on account of salary claimed by the assessee which was found to be bogus and false - HELD THAT - Tribunal has confirmed the additions made by the AO and also observed that even after the addition made by the AO the net profit rate comes to 0.12% which is comparable to the another case which has been considered by the Coordinate Benches of this Tribunal. Hence, the said finding of the Tribunal cannot be said to be an addition based on estimation but while upholding and confirming the additions made by the AO, the Tribunal has just verified the reasonableness of the income assessed and not granted any relief to the assessee on the claim of salary expenses found to be bogus and false. Accordingly, when the assessee has claimed a bogus salary expenditure and the addition was made specifically and independently by the AO on account of disallowance of salary then the penalty levied by the AO u/s 271(1)(c) in respect of the said addition is justified and valid. The decisions relied upon by the assessee will not help the case of the assessee when the addition was based on false claim made by the assessee. Accordingly, we do not find any error or illegality in the impugned order of the ld. CIT(A) confirming the levy of penalty u/s 271(1)(c) of the Act. Appeal filed by the assessee is dismissed.

Summary

Issues:
1. Confirmation of penalty under section 271(1)(c) of the Income Tax Act by the CIT(A).
2. Justification of the penalty imposition based on disallowance of salary claim.
3. Interpretation of whether the penalty was based on estimation of income or false claim.

Issue 1:
The appeal challenges the penalty of ?11,38,321 imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act for the assessment year 2012-13, which was confirmed by the CIT(A). The appellant contests the legality and justification of the penalty.

Issue 2:
The penalty was imposed by the AO solely on the disallowance of a salary claim amounting to ?36,83,887, which the appellant had admitted to be bogus and false. The AO found discrepancies in the claimed salary payment for 24 employees when only two were actually employed. The CIT(A) upheld this disallowance, leading to the penalty imposition.

Issue 3:
The appellant argued that since the disallowance was based on an estimation of income, the penalty under section 271(1)(c) should not apply. However, the Tribunal clarified that the disallowance was specifically due to the false claim made by the appellant regarding salary expenses. The Tribunal affirmed the additions made by the AO and dismissed the appeal, stating that the penalty imposition was valid and justified given the circumstances.

In conclusion, the Tribunal upheld the penalty under section 271(1)(c) imposed by the AO, confirming the disallowance of the salary claim as false and justifying the penalty based on the appellant's misleading information. The Tribunal's decision was based on the specific circumstances of the case, distinguishing between estimation-based additions and those arising from inaccurate particulars of income.