2024 (6) TMI 25 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - defective notice - Estimation of income on bogus purchases - whether notice u/s 274 issued in mechanical manner without intimating the charge as to whether the penalty is proposed to be levied for Concealment of income or furnishing inaccurate particulars of income ? - HELD THAT - The entire addition right from the assessment stage to the Tribunal was based merely on estimation and there is no definite finding on the quantum of concealment of income by the assessee. It is accepted legal position that penalty/s 271(1)(c) of the Act levied on additions made purely on estimation is not sustainable. Such a view has been taken by the Hon ble jurisdictional High Court in the case of CIT vs. Subhas Trading Co. 1995 (11) TMI 37 - GUJARAT HIGH COURT , Navjivan Oil Mills 2001 (7) TMI 81 - GUJARAT HIGH COURT AND Valimkbhai H. Patel 2005 (7) TMI 35 - GUJARAT HIGH COURT Thus we hold that penalty u/s 271(1)(c) of the Act is not sustainable in the present case.

Summary

Issues Involved:
The judgment involves the confirmation of penalty u/s 271(1)(c) of the Income-tax Act, 1961 for assessment year 2007-08 based on disputed purchases and estimation of income.

Confirmation of Penalty u/s 271(1)(c) - Issue 1:
The appellant challenged the levy of penalty u/s 271(1)(c) due to the mechanical issuance of notice without specifying the charge for 'Concealment of income' or 'furnishing inaccurate particulars of income'. The appellant also contested the initiation of penalty for dual charges without proper consideration of explanations provided.

Confirmation of Penalty u/s 271(1)(c) - Issue 2:
The appellant objected to the penalty imposed on the addition sustained on estimation basis of disputed purchases, arguing that the penalty cannot be levied on income determined through estimation. The appellant emphasized the complete disclosure of material facts and the genuine nature of transactions.

Confirmation of Penalty u/s 271(1)(c) - Issue 3:
The appellant contended that the penalty should not be imposed on estimated additions, citing various legal precedents. The appellant argued that penalties based on estimations are not sustainable, as confirmed by previous judgments.

The Appellate Tribunal, after considering the arguments presented, upheld the decision of the Ld.CIT(A) and partially allowed the appeal of the assessee. The Tribunal noted that the addition made throughout the assessment process was based on estimation, without a definitive finding on the quantum of concealment of income. Citing legal precedents, the Tribunal concluded that penalties u/s 271(1)(c) based solely on estimations are not sustainable. Therefore, the penalty in the present case was deemed not sustainable, and the decision of the Ld.CIT(A) was upheld. The Assessing Officer was directed to recompute the penalty accordingly.