2023 (6) TMI 119 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on account of agricultural income on the basis of average income of two years - HELD THAT - Admittedly such addition is based on estimation of two years average income and on such estimation no penalty is leviable. As it is settled law that on estimation addition no penalty is leviable. Interest as obtained through interest bearing fund and used for non-business purposes - Assessee has voluntarily offered such interest expenditure during the assessment. Thus the assessee is not to be penalized on such addition as he himself has offered before assessment proceedings. Direct the AO to delete the entire penalty levied under section 271(1)(c) - Grounds of appeal raised by the assessee are allowed.

Summary

Issues involved:
The appeal concerns the penalty levied by the Assessing Officer u/s 271(1)(c) of the Income Tax Act, 1961, based on additions made to the assessee's income for assessment year 2016-17. The grounds of appeal include challenging the confirmation of the penalty by the National Faceless Appeal Centre, Delhi.

Addition of Agricultural Income:
The Assessing Officer noted that the assessee's declared agricultural income for the year appeared inflated compared to previous years, based on the cultivated area and income per bigha. Consequently, an addition of Rs.1,57,600/- was made. The assessee contended that this addition was estimated and voluntarily offered to buy peace, hence no penalty should apply. The Tribunal agreed, citing established law that no penalty is leviable on estimated additions.

Addition of Interest Expenses:
The Assessing Officer also added Rs.3,31,118/- for interest-bearing funds utilized for non-business purposes. The assessee voluntarily offered this amount for taxation, arguing that no penalty should be imposed. The Tribunal concurred, stating that the assessee should not be penalized for self-offered additions made before assessment proceedings. Consequently, the entire penalty u/s 271(1)(c) was directed to be deleted.

Judicial Review and Decision:
Upon reviewing submissions from both parties and relevant case law, the Tribunal found that the Assessing Officer's additions were based on estimation and voluntary disclosures by the assessee. As such, no penalty was warranted on these grounds. The Tribunal allowed the appeal, directing the deletion of the penalty levied under section 271(1)(c) of the Act. The order was pronounced on 31st May, 2023, in open court.