2023 (9) TMI 889 - AT - Income Tax

Levy of penalty u/s. 271 (1)(c) - While scrutinizing return of income the AO accepted the commission received on providing accommodation entries but disallowed 25% of the expenses claimed by the assessee for want of evidences - HELD THAT - AO has initiated the penalty proceedings for concealment of income and while levying the penalty the AO has levied it for furnishing the inaccurate particulars of income. This shows that the AO was not certain under which limb of section 271 (1)(c) the penalty was levied. Secondly if the AO was of the opinion that the assessee is engaged in a clandestine business then he ought not to have allowed 75% of the expenses and instead should have disallowed the entire expenditure. The action of the AO shows that he was satisfied with the genuineness of 75% of the expenses and levied the penalty on the balance amount disallowed. We are of the considered view that the captioned cases are not fit for levy of penalty u/s. 271 (1)(c) therefore, the AO is directed to delete the impugned penalty. Appeals of the assessee are allowed.

Summary

Issues: Appeal against penalty under section 271(1)(c) of the Act for A.Y. 2013-14 to 2016-17.

Summary:
The Appellate Tribunal ITAT DELHI heard four separate appeals by the assessee against the orders of the CIT(A)-24, New Delhi, pertaining to different assessment years. The common grievance in all appeals was the levy of penalty under section 271(1)(c) of the Act, although the quantum of penalty varied each year. The Tribunal considered the identical underlying facts in all appeals and decided to dispose of them together for convenience. The appeals revolved around the nature of the assessee's business, which involved providing accommodation entries to beneficiaries.

During the assessment, the AO accepted the commission received by the assessee but disallowed 25% of the claimed expenses due to lack of evidence. Subsequently, penalty proceedings were initiated for concealing income, and the penalty was levied at 100% of the tax on the income sought to be evaded by furnishing inaccurate particulars. Upon review, the Tribunal found discrepancies in the AO's approach. It noted that the penalty was imposed for furnishing inaccurate particulars, despite the initial penalty proceedings being for concealment of income. Additionally, the AO's allowance of 75% of the expenses indicated satisfaction with their genuineness, raising questions about the penalty imposition on the remaining disallowed amount.

After careful consideration of the assessment order, penalty levy, and the first appellate authority's decision, the Tribunal concluded that the cases were not suitable for penalty under section 271(1)(c) of the Act. Therefore, the AO was directed to delete the penalty, and the appeals of the assessee were allowed. The order was pronounced in open court on 18.09.2023.