2021 (5) TMI 242 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Addition on account of unexplained deposit into bank and interest credited on savings bank and Addition on account of unexplained deposit into bank and interest credited on savings bank - HELD THAT - As additions sustained purely on the basis of estimate. Thus, no penalty on these two additions will survive. Estimating the addition at the rate 20% of sales proceeds of shares for want of details in respect of sale transactions, in substitution of the addition as made by the AO alleging unexplained transaction of Shares - We are conscious of the fact that this part of additions were not pressed by assessee in quantum appeal before Tribunal. It is settled position under law that penalty proceedings are separate and independent. The lower authority while deciding the issue of penalty must considered whether, the assessee has provided reasonable explanation and evidences qua the addition, during the penalty proceedings or not. In our view the assessee has reasonably explained the facts regarding the additions before Ld. CIT(A). No findings were given by Ld. CIT(A) on such evidences. Thus, considering the aforesaid factual decision and the submission of ld.AR of the assessee that the two additions are basically made on estimation basis, we find merit in his submission. It is settled law that no penalty under section 271(1)(c) of the Act is leviable on estimated addition. So far as addition no (iii) is concerned, we are of the view that with regard to these additions the assessee has given evidences, on which no findings was given by Ld. CIT(A), in our view, the assessee reasonably explained the facts qua this addition before Ld. CIT(A. Therefore, in our view, this is not a fit case for sustaining the levy of penalty under section 271(1)(c) of the Act, even on third addition. - Decided in favour of assessee.

Summary

Issues involved:
Appeal against penalty under section 271(1)(c) of the Income-tax Act based on additions made during assessment year 2008-09.

Detailed Analysis:

1. Addition on unexplained bank deposits and interest credited:
The case was reopened based on AIR Information regarding cash deposits and share transactions. The AO made three additions totaling &8377; 29,79,258. Ld.CIT(A) upheld an addition of &8377; 19,90,438 and restricted others. The AO imposed a penalty of &8377; 8,66,167, upheld by ld. CIT(A). Assessee appealed, arguing that additions were estimated and penalty shouldn't apply. Tribunal found that only peak credit of &8377; 2,56,590 should be considered due to lack of evidence. Citing precedents, the Tribunal partially allowed this ground.

2. Addition on unexplained share transactions:
The AO made an addition of &8377; 3,05,420, which was reduced to &8377; 2,75,459 by ld.CIT(A). The Tribunal further reduced it to &8377; 1,37,730, considering market fluctuations. Assessee contended that the estimation was high, but Tribunal found 10% of share transactions to be reasonable. This ground was partly allowed by the Tribunal.

3. Addition on unexplained loan transactions:
An addition of &8377; 3,42,400 was made, consisting of various items. Assessee provided explanations and evidence before ld.CIT(A), but no findings were given. The Tribunal noted that penalty proceedings are separate and independent. As the additions were estimated and reasonable explanations were provided, the Tribunal found no grounds for penalty under section 271(1)(c) on this addition. Thus, this ground was allowed.

In conclusion, the Tribunal allowed the appeal of the assessee, considering the estimation basis of the additions and the reasonable explanations provided. The penalty under section 271(1)(c) was found unjustified based on the facts and circumstances of the case.