2021 (8) TMI 1079 - AT - Income Tax

Penalty u/s 271(1)(c) - disallowance to 12.5% of the alleged non-genuine purchases - HELD THAT - Ultimately, the additions leading to the imposition of penalty were made on estimate basis - as evident from the assessment order, in response to the notice issued under section 133(6) of the Act, some of the selling dealers responded and furnished the details of sales made by them. Thus, the admitted factual position is, some of the dealers alleged to be non-genuine have confirmed the transactions with the assessee. Thus, from these facts, neither concealment of income nor furnishing of inaccurate particulars of income is proved. Therefore, in such scenario, no penalty under section 271(1)(c) of the Act could have been imposed. Maintainability of appeal on monetary limits - It is the case of the revenue that the appeals are protected under paragraph 10(e) of CBDT Circular No. 2/2018 dated 11.07.2018 - a careful reading of the relevant clause of the circular makes it clear that it is only applicable to the additions made based on information received from external sources like law enforcement agencies in the category of CBI, DRI etc. Presently, we dealing with proceeding for imposition of penalty u/s 271(1)(c) of the Act which is independent from the assessment proceedings. Therefore, it cannot be said that the penalty imposed is based on information received from external sources as contemplated under paragraph 10(e) of the foretasted circular. That being the case, the present appeals are not maintainable due to low tax effect as well. In view of the aforesaid, we uphold the order of learned Commissioner (Appeals) while dismissing the grounds raised.

Summary

Issues:
Appeals against deletion of penalty under section 271(1)(c) for assessment years 2009-10 and 2010-11.

Analysis:
The appeals were filed against the deletion of penalties imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2009-10 and 2010-11. The Assessing Officer (AO) had reopened the assessment under section 147 of the Act due to suspicions regarding the genuineness of certain purchases claimed by the assessee. The AO added back certain amounts to the income of the assessee, which was contested by the assessee before the learned Commissioner (Appeals). The Commissioner partially accepted the submissions and restricted the disallowance percentages. Both the assessee and revenue appealed to the Tribunal. The Tribunal granted partial relief to the revenue by restricting the disallowance percentages further. Subsequently, the AO imposed penalties under section 271(1)(c) based on the disallowances sustained by the Tribunal. The penalties were challenged by the assessee, and the learned Commissioner (Appeals) deleted the penalties imposed.

The first issue raised was the maintainability of the appeals due to the low tax effect. The learned Counsel for the assessee argued that the appeals filed by the revenue were not maintainable due to the low tax effect. The Departmental Representative referred to CBDT Circulars and exceptions provided therein. The Tribunal considered the submissions and observed that the appeals were not maintainable due to the low tax effect as the quantum in dispute was below the monetary limit specified in the circulars.

The second issue involved the merits of the penalty imposition. The AO treated certain purchases as non-genuine, leading to additions in the income of the assessee. However, the Commissioner and Tribunal restricted the disallowances to the profit element embedded in the alleged non-genuine purchases. The Tribunal noted that the additions leading to the penalties were made on an estimate basis. It was highlighted that no concealment of income or furnishing of inaccurate particulars of income was proved, as some dealers confirmed transactions with the assessee. Therefore, the Tribunal held that no penalty under section 271(1)(c) could be imposed in such circumstances.

In conclusion, the Tribunal dismissed the appeals, upholding the order of the learned Commissioner (Appeals) and emphasizing that the penalties were not justified due to the lack of evidence of concealment or inaccurate particulars of income. The maintainability of the appeals was also rejected based on the low tax effect criterion outlined in the CBDT Circulars.