2023 (11) TMI 78 - AT - Income Tax

Penalty u/s 271(1)(c) - estimation on income on Unexplained cash deposits in the saving bank account -assessee had stated that he was earning agricultural income from last many years and he has deposited the said cash from earning from the agricultural activities - AO has partly accepted assessee submission and estimated the income - HELD THAT - The issue involved in the present appeal is no longer res integra. The question as to whether the penalty u/s 271(1)(c) of the Act, on estimated addition is sustainable or not, was considered by various judicial forums across India. As find in the case of Gipilon Texturising Pvt. Ltd. Vs. ITO 2021 (4) TMI 860 - ITAT SURAT held that penalty on estimated addition is not sustainable in the eye of law - Penalty deleted - Decided in favour of assessee.

Summary

Issues:
The appeal pertains to the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2014-15, based on the addition of cash deposits made by the assessee in their bank account.

Grounds of Appeal:
1. The assessing officer erred in levying penalty u/s 271(1)(c) without specifying whether it was for concealment of income or furnishing inaccurate particulars.
2. The CIT(A) erred in confirming the penalty imposed by the assessing officer.
3. The penalty levied should be deleted.
4. Appellant reserves the right to modify grounds during the appeal.

Facts of the Case:
- The assessee, engaged in agriculture activities, deposited cash in their bank account.
- The assessing officer added Rs. 10,00,000 on an estimated basis, treating it as unexplained income.
- Penalty proceedings u/s 271(1)(c) were initiated based on this addition.
- The assessing officer concluded that the assessee furnished inaccurate particulars of income and concealed Rs. 5,45,000.
- The penalty of Rs. 3,09,062 was imposed.

Arguments:
- The appellant argued that penalty on estimated addition is not sustainable, citing relevant case law.
- The assessing officer initiated penalty on both limbs without invoking Explanation-1 of Section 271(1)(c).
- The Revenue supported the penalty order, stating it was correctly initiated on both limbs and on estimated addition.

Judgment:
- The Tribunal found that penalty on estimated addition is not sustainable in law, following a Co-ordinate Bench judgment.
- The penalty imposed on estimated income was deleted, as the assessing officer further estimated the income during penalty proceedings.
- Other arguments became irrelevant after the deletion of the penalty.

Conclusion:
The Tribunal allowed the appeal, deleting the penalty imposed u/s 271(1)(c) based on the plea that penalty on estimated addition is not legally valid. The judgment was pronounced on 30/10/2023.