2021 (6) TMI 656 - AT - Income Tax

Penalty u/s 271(1)(c) - Disallowance u/s 69C - HELD THAT - Penalty under section 271(1)(c) of the Act is liable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income. Departmental Authorities has not brought any cogent material to prove otherwise warranting interference at the instance of the Revenue. In this view of the matter, we are of the considered view that the learned Commissioner (Appeals) was indeed justified in deleting the penalty, as there was no concealment of income on the part of the assessee have been proved by the Revenue and additions made on estimation by the Assessing Officer do not call for initiation of penalty. - Decided against revenue.

Issues:
Challenge to deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner (Appeals) for the assessment year 2011-12.

Analysis:

1. Background and Assessment:
The appeal was filed by the Revenue against the order of the Commissioner (Appeals) deleting a penalty of ?3,15,000 imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessment year in question was 2011-12. The assessee, engaged in the business of builders and developers, had filed a return of income declaring total income of ?6,47,93,146. The assessment was completed with a total income of ?6,74,32,940 after an addition of ?26,39,791 on account of unexplained investment under section 69C of the Act.

2. First Appellate Authority's Decision:
The first appellate authority partly allowed the claim of the assessee, stating that if sales were not doubted, there was no basis to doubt purchases alone. The addition should have been made only to the extent of gross profit. The gross profit rate was determined at 38.5%, resulting in a profit of ?10,16,320 on unexplained purchases. Subsequently, penalty proceedings were initiated under section 271(1)(c) of the Act.

3. Deletion of Penalty by Commissioner (Appeals):
The Commissioner (Appeals) deleted the penalty after considering the submissions of the appellant. It was noted that the addition was made on an estimated/ad-hoc basis, and there was no evidence of concealment of income. The Commissioner (Appeals) referred to previous cases where penalties were deleted under similar circumstances. The Tribunal upheld the Commissioner's decision, citing that penalty under section 271(1)(c) is not sustainable when additions are made on an estimate basis.

4. Legal Precedents and Rulings:
The Tribunal relied on various judicial precedents to support its decision, including cases where penalties were deleted due to lack of conclusive evidence or when additions were made on estimation basis. The Tribunal also referred to decisions by different High Courts and Co-ordinate Benches supporting the principle that penalty is not sustainable when additions are made on an estimate basis.

5. Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the decision of the Commissioner (Appeals) to delete the penalty. It was emphasized that there was no proof of concealment of income, and the additions made on estimation by the Assessing Officer did not warrant the imposition of a penalty. The order was pronounced on 10.06.2021, in favor of the assessee.

This comprehensive analysis outlines the key aspects of the legal judgment, including the background, assessment details, decisions of the authorities involved, legal precedents cited, and the final conclusion reached by the Tribunal.

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