2021 (7) TMI 877 - AT - Income Tax

Penalty u/s 271(1)(c) - Addition of 12.5% of the bogus purchases - HELD THAT - It is now well settled that because the assessee has not contested the quantum addition made by the Assessing Officer, the penalty under section 271(1)(c) of the Act for furnishing inaccurate particulars of income by the Assessing Officer is unsustainable in the eyes of law. Assessing Officer imposed penalty under section 271(1)(c) of the Act on estimation 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 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 - Decided against revenue.

Summary

Issues:
1. Penalty imposed under section 271(1)(c) of the Income Tax Act for concealing income.
2. Validity of penalty imposition based on estimation without evidence of concealment.
3. Application of precedents and case laws in determining penalty imposition.

Issue 1: The appeal involved a challenge by the Revenue against the order directing the deletion of a penalty of ?2,22,860 imposed under section 271(1)(c) of the Income Tax Act for the assessment year 2010-11. The Assessing Officer had imposed the penalty based on the belief that the assessee had concealed income by making bogus purchases from suspicious dealers.

Issue 2: The Commissioner (Appeals) deleted the penalty, citing precedents and the absence of evidence proving concealment of income. The Tribunal upheld this decision, emphasizing that the penalty under section 271(1)(c) is unsustainable when additions are made on an estimation basis without concrete proof of concealment. Various court decisions were referenced to support this stance, including cases such as CIT v/s Norton Electronics Systems and Dilip N. Shroff v/s JCIT.

Issue 3: The Tribunal, in alignment with previous judgments, concluded that the penalty was not warranted as the assessee did not contest the quantum addition made by the Assessing Officer. It was established that penalties under section 271(1)(c) are applicable only when there is clear evidence of concealing income or furnishing inaccurate particulars. The Tribunal dismissed the Revenue's appeal, affirming the decision to delete the penalty based on the lack of evidence of income concealment and the reliance on estimation for penalty imposition.

In summary, the judgment revolved around the deletion of a penalty under section 271(1)(c) of the Income Tax Act due to the absence of concrete evidence of income concealment, the reliance on estimation for penalty imposition, and the application of relevant precedents and case laws to support the decision.