2021 (6) TMI 806 - AT - Income Tax

Penalty u/s 271(1)(c) - Unexplained expenditure u/s 69C - Commissioner (Appeals) has restricted the addition @ 5% of such purchases/accommodation entries - HELD THAT - AO imposed penalty under section 271(1)(c) on ad hoc basis without adducing any evidence on record for concealment of income. 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. We are of the considered view that the 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 AO do not call for initiation of penalty. Consequently, we uphold the order passed by the Commissioner (Appeals) by dismissing the grounds of appeal raised by the Revenue.

Summary

Issues:
- Challenge to deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for A.Y. 2011-12 and A.Y. 2010-11.
- Request for disposal of appeals on merit despite being below the taxable limit as per CBDT Circular no.17/2019.

Analysis:
1. Issue 1 - Deletion of Penalty under Section 271(1)(c) for A.Y. 2011-12:
- The Assessing Officer imposed a penalty of ?31,211 for the A.Y. 2011-12 due to unexplained expenditure of ?20,21,986 from suspicious parties providing accommodation entries.
- The Commissioner (Appeals) restricted the addition to 5% of such purchases/accommodation entries.
- The penalty was deleted by the Commissioner (Appeals) citing various judicial precedents where penalties were not levied under similar circumstances.
- The Tribunal upheld the deletion of penalty, emphasizing that penalty under section 271(1)(c) is not sustainable when additions are made on an estimate basis without evidence of concealment or furnishing inaccurate particulars of income.
- The Tribunal referred to relevant case laws supporting the view that penalties are not justified in cases of additions made on an ad-hoc basis.

2. Issue 2 - Deletion of Penalty under Section 271(1)(c) for A.Y. 2010-11:
- The circumstances for the A.Y. 2010-11 were found to be identical to those of A.Y. 2011-12.
- Following the decision on the A.Y. 2011-12 appeal, the Tribunal declined to interfere with the order of the Commissioner (Appeals) and dismissed the grounds raised by the Revenue for the A.Y. 2010-11 as well.
- The Tribunal maintained consistency in its approach by upholding the deletion of the penalty for both assessment years.

3. Overall Decision:
- Both appeals of the Revenue challenging the deletion of penalties under section 271(1)(c) for the A.Y. 2011-12 and A.Y. 2010-11 were dismissed by the Tribunal.
- The Tribunal emphasized the importance of evidence in imposing penalties under section 271(1)(c) and reiterated that penalties are not sustainable when additions are made on an estimate basis without proof of concealment or inaccurate particulars of income.

This detailed analysis highlights the key aspects of the judgment, including the grounds for the imposition and subsequent deletion of penalties under section 271(1)(c) for the specified assessment years, along with the legal reasoning and precedents considered by the Tribunal in making its decision.