2022 (7) TMI 119 - AT - Income Tax

Penalty u/s 271(1)(c) - addition as assessee indulged in providing accommodation entries - reopening u/s 147 on the basis of information received from Investigation Wing that a search action was conducted on Rajendra Jain and his group that certain incriminating material was found leading to conclusion that Rajendra Jain group was indulged in providing accommodation entries in the name of bogus sales and unsecured loans and the assessee was one of the concern controlled by Rajendra Jain group - HELD THAT - Considering the fact that addition in the assessment order, on the basis of which the penalty was levied, is purely an estimated addition. It is settled position in law that no penalty under section 271(1)(c) can be levied on additions made on estimation. The similar view was taken in Manish Dhirajlal Mehta 2014 (11) TMI 939 - GUJARAT HIGH COURT , Vijay Proteins Ltd. 2015 (1) TMI 828 - GUJARAT HIGH COURT , Vijay Proteins 2015 (1) TMI 828 - GUJARAT HIGH COURT and other various cases. No contrary facts or law is brought to our notice by the ld. Sr. DR for the revenue at the time of hearing of these appeals. Therefore, considering the totality of facts and circumstances, we direct to delete the penalty levied under Section 271(1)(c) of the Act. - Decided in favour of assessee.

Summary

Issues:
1. Penalty levied under Section 271(1)(c) of the Income Tax Act, 1961 for assessment years 2007-08 and 2014-15.

Analysis:

Issue 1: Penalty under Section 271(1)(c) for AY 2014-15

The case involved appeals against penalty orders under Section 271(1)(c) for AY 2014-15. The Assessing Officer initiated penalty proceedings based on estimated additions made during assessment. The penalty was upheld by the CIT(A), leading to the appeal before the Tribunal. The AR argued that penalties cannot be levied on estimated additions, citing legal precedents. The Tribunal agreed, referencing various decisions, including Manish Dhirajlal Mehta Vs. ACIT and Vijay Proteins Ltd. Vs. CIT. The Tribunal concluded that no penalty could be imposed on estimated additions, ultimately directing deletion of the penalty under Section 271(1)(c).

Issue 2: Penalty under Section 271(1)(c) for AY 2007-08

Similarly, for AY 2007-08, the Assessing Officer imposed penalties based on estimated additions during assessment. The Tribunal, following the same reasoning as in the AY 2014-15 case, held that penalties cannot be levied on estimated additions. The Tribunal applied the findings from the previous appeal and allowed the appeal for AY 2007-08 as well.

In both cases, the Tribunal emphasized that penalties under Section 271(1)(c) cannot be imposed on estimated additions, aligning with established legal principles. The appeals were allowed, and the penalties were deleted for both assessment years, 2007-08 and 2014-15.