2024 (7) TMI 1271 - AT - Income Tax

Penalty u/s. 271(c) - additions of @25% of non-verifiable purchases debited to the trading account - HELD THAT - Addition was made on estimation of total turnover after rejecting the books of accounts. Notice u/s. 133(6) were also issued to the various purchase parties and all the notice were returned by the postal authority and the assessee has not produced the party to confirm the same. These observation of the lower authorities shows that it is not established by the revenue that the assessee had concealed the particulars of income or has submitted inaccurate particulars of income so as to attract Section 271(1)(c) of the Act. Admittedly, the addition has been made on estimate basis, therefore, the ratio of judgment of Parasamal Babulal Jain 2011 (9) TMI 398 - KARNATAKA HIGH COURT and various pronouncements of the judicial ITAT covers the facts of the present case of the assessee. Since the addition was made on the estimate basis and for the aforesaid discussion, the penalty is not sustainable and rightly deleted by the CIT(A). We find no illegality in the order of the Ld. CIT(A) and same is accordingly confirmed. Decided against revenue.

Issues:
Appeal against deletion of penalty u/s. 271(c) of the Income Tax Act, 1961 for A.Y. 2010-11 on the grounds of additions made on estimate basis and concealment of income.

Analysis:

1. The revenue appealed against the order of the Learned Commissioner of Income Tax (Appeals) where the penalty u/s. 271(c) imposed on the assessee was deleted for the A.Y. 2010-11. The case involved the assessee, an individual engaged in trading iron & steel, whose assessment was reopened due to information from the Sales Tax Department, leading to additions in income declared. The penalty was levied for concealing income related to bogus purchases, contested by the assessee. The CIT(A) deleted the penalty based on estimates, citing a previous ITAT decision. The revenue challenged this decision, raising specific grounds of appeal.

2. The arguments presented by the revenue focused on the necessity of estimation due to false accounts and the failure of the assessee to prove the genuineness of purchases from bogus parties. The revenue contended that the penalty was justified based on the onus on the assessee to substantiate the transactions. The reliance was placed on the AO's order to support the legality of the penalty.

3. In response, the assessee's representative argued that since the additions were made on an estimate basis, the penalty under section 271(1)(c) was not legally sustainable. Reference was made to a similar case where penalties were deleted based on estimation. The assessee emphasized that no penalty should be imposed when additions are made on estimates without concrete evidence of concealment.

4. The tribunal considered the arguments and observed that the CIT(A) had confirmed the additions based on estimates, indicating that the penalty was not warranted. Citing a Karnataka High Court decision, it was established that penalties under section 271(1)(c) are not applicable when additions are made on an estimate basis without evidence of concealment. The tribunal noted that the revenue failed to establish that the assessee concealed income or provided inaccurate particulars, leading to the dismissal of the revenue's appeal.

5. Ultimately, the tribunal dismissed both grounds of appeal by the revenue, affirming the decision to delete the penalty imposed under section 271(1)(c) for the A.Y. 2010-11. The judgment highlighted the importance of concrete evidence of concealment before imposing penalties and upheld the principle that penalties are not applicable when additions are made on an estimate basis without proof of deliberate concealment.

This detailed analysis encapsulates the key points and legal principles addressed in the judgment regarding the deletion of the penalty under section 271(1)(c) of the Income Tax Act, 1961.

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