2021 (6) TMI 807 - AT - Income Tax

Penalty u/s 271(1)(c) - addition made by the AO on the basis of information received from the Sales Tax Department - unexplained expenditure under section 69C - HELD THAT - AO imposed penalty u/s 271(1)(c) on ad hoc basis without adducing any evidence on record for concealment of income. Penalty u/s 271(1)(c) 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 find support from the series of decisions by different High Courts as well the decision of the Co ordinate Benches of the Tribunal, wherein it was held that when addition is made on estimate basis, penalty is not sustainable in the eyes of law. 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. Revenue s appeal is dismissed.

Summary

Issues:
- Appeal filed by Revenue challenging penalty confirmation under section 271(1)(c) of the Income Tax Act, 1961.
- Ex-parte disposal of appeal due to absence of assessee's representation.
- Dispute regarding taxable limit and request for appeal disposal on merit.
- Assessment completion under section 144 r/w section 147, penalty imposed under section 271(1)(c).
- Deletion of penalty by Commissioner (Appeals) based on judicial precedents.
- Revenue's contention on unexplained expenditure under section 69C.
- Imposition of penalty on ad-hoc basis without evidence for concealment of income.
- Legal precedents supporting the non-sustainability of penalty on estimate basis.
- Justification of Commissioner (Appeals) in deleting the penalty.

Analysis:
1. The appeals were filed by the Revenue challenging the penalty confirmation under section 271(1)(c) of the Income Tax Act, 1961. The absence of representation by the assessee led to an ex-parte disposal of the appeal, and the Revenue requested the disposal of the appeal on merit despite being below the taxable limit as per a CBDT Circular.

2. The assessment was completed under section 144 r/w section 147, with a penalty of ?81,485 imposed under section 271(1)(c). The Commissioner (Appeals) deleted the penalty by citing judicial precedents, emphasizing that the addition made on an estimation basis does not warrant the imposition of a penalty under section 271(1)(c).

3. The Revenue contended that the unexplained expenditure under section 69C was based on information from the Sales Tax Department, alleging that the parties involved were engaged in providing accommodation entries. However, the imposition of penalty on an ad-hoc basis without concrete evidence for concealment of income was deemed unjustified.

4. The Tribunal upheld the decision of the Commissioner (Appeals) in deleting the penalty, citing legal precedents such as CIT v/s Norton Electronics Systems and Dilip N. Shroff v/s JCIT, which support the non-sustainability of penalties imposed on an estimate basis. The absence of evidence for concealment of income and the additions made on estimation by the Assessing Officer were key factors in dismissing the Revenue's appeal.

5. Ultimately, the Tribunal dismissed the Revenue's appeal, affirming the deletion of the penalty by the Commissioner (Appeals) due to the lack of proof of income concealment and the non-sustainability of penalties imposed solely on an estimate basis.