2022 (8) TMI 736 - AT - Income Tax

Penalty u/s 271(1)(c) - HELD THAT - As in the assessee s own has allowed complete relief to the assessee in quantum proceedings, accordingly, we hereby direct that the order imposing penalty u/s 271(1)(c) of the Act be set aside. Appeal of the assessee is allowed.

Summary

Issues:
Appeal against penalty under section 271(1)(C) of the Income Tax Act, 1961 for concealment of income.

Analysis:
The case involved an appeal by the assessee against the penalty imposed under section 271(1)(C) of the Income Tax Act, 1961. The assessee, engaged in share trading, was found to have shifted profits to another client code, resulting in an addition to their total income. The AO initiated penalty proceedings, which were confirmed by the CIT(A) and based on the concealment of income. The penalty amount was determined between 100% and 300% of the tax sought to be evaded. The CIT(A) upheld the penalty, stating that the appellant failed to provide any submission or evidence supporting their claim, indicating concealment of income. The AO had found that the appellant took artificial losses to reduce income and evade taxes, justifying the penalty under section 271(1)(C) of the Act.

In the appeal before the ITAT, the assessee argued that in a previous quantum appeal, all additions leading to the penalty imposition had been deleted by the ITAT in the assessee's own case. The ITAT noted that client code modifications were made, but it was unclear whether they were done at the assessee's instance or due to errors by the share broker. The ITAT emphasized the need for detailed investigations and corroborative evidence to establish wrongdoing in such cases. As no such verification was conducted by the authorities, the ITAT set aside the findings of the lower authorities and directed the AO to delete the addition. Consequently, since complete relief was granted to the assessee in the quantum proceedings, the ITAT set aside the penalty imposed under section 271(1)(C) of the Act.

In conclusion, the ITAT allowed the appeal of the assessee, directing that the penalty order be set aside. The decision highlighted the importance of thorough investigations and the need for concrete evidence to establish concealment of income before levying penalties under section 271(1)(C) of the Income Tax Act, 1961.