2021 (7) TMI 1230 - AT - Income Tax

Penalty u/s 271(1) (c) - Addition on ad hoc basis - HELD THAT - AO imposed penalty under section 271(1)(c) of the Act 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) 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 CIT(A) 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.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-11.

Analysis:
1. Background and Facts:
- The appeal was filed by the Revenue challenging the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-11.
- The assessee, an individual and proprietor of a trading business, filed the return of income declaring total income.
- The Assessing Officer reopened the case under section 147 based on information received regarding suspicious transactions involving hawala transactions for purchases.
- The AO concluded that the purchases were fictitious, not reflecting true financial states, and added the amount to the total income, initiating penalty proceedings under section 271(1)(c).

2. Assessing Officer's Findings and Penalty Imposition:
- The AO held that the purchases were not genuine, treated them as fictitious, and added the amount to the total income.
- Penalty proceedings were initiated under section 271(1)(c) for concealment of income and furnishing inaccurate particulars, imposing a penalty amount.

3. CIT(A)'s Decision:
- The CIT(A) deleted the penalty imposed by the AO under section 271(1)(c) based on various case laws and observations.
- The appellant contended that purchases were genuine and supported by valid documents, and the AO's estimation did not prove the purchases were bogus conclusively.
- CIT(A) cited case laws stating that when additions are made on estimation, no penalty is leviable for concealment or furnishing inaccurate particulars.
- The CIT(A) found that the AO imposed the penalty on an ad-hoc basis without evidence for concealment, and such penalties are not sustainable when additions are made on an estimate basis.

4. Conclusion:
- The Tribunal upheld the CIT(A)'s decision, stating that the penalty under section 271(1)(c) was not justified as there was no proof of concealment of income by the assessee.
- The Tribunal referenced various case laws supporting the view that penalties are not sustainable when additions are made on an estimate basis.
- The Revenue's appeal against the deletion of the penalty was dismissed, affirming the CIT(A)'s decision.

This comprehensive analysis highlights the key aspects of the legal judgment regarding the appeal against the deletion of the penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2010-11.