2024 (11) TMI 157 - AT - Income Tax

Levy of penalty u/s. 271(1)(c) - AO rejected the books of account of the assessee and computed the income of the assessee by applying gross profit rate of 8% and assessed the income of the assessee on estimate basis - HELD THAT - We observe that in this case, assessee who was handling the assessment proceedings before the AO has agreed that the books of account of the assessee may be rejected subject to non-initiation of penalty proceedings. Assessing Officer has partly accepted the reply of assessee, as evident from the fact that he has rejected the books of account, however, he initiated penalty proceedings, which means, part of the submission made by assessee has not been accepted by the AO, which in our view, is not permissible, since it is settled position that an admission made has to be accepted and acted as whole and not in parts. The reasoning on the basis of which, additions have been made in assessment proceedings may be good so far as framing of assessment is concerned. However, these reasonings on standalone basis are not enough for levying penalty u/s. 271(1)(c) of the Act. Thus penalty in the facts of present case is not leviable. Further, we observe that in this case the assessee has neither furnished inaccurate particulars of income nor concealed the particulars of its income and the income has been determined on estimate basis only. Thus no penalty is leviable against the assessee - Decided in favour of assessee.

Summary

Issues: Justification of levy of penalty u/s. 271(1)(c) of the Income-tax Act, 1961

The judgment by the Appellate Tribunal ITAT Agra involved the appeal of an assessee against the penalty levied under section 271(1)(c) of the Income-tax Act, 1961. The assessee, a partnership firm, had filed its return of income declaring an amount. During the assessment proceedings, it was observed that the assessee could not produce bills and vouchers for claimed expenses or confirmation of sundry creditors. Consequently, the Assessing Officer rejected the books of account and assessed the income on an estimated basis, also initiating penalty proceedings. The penalty was upheld by the CIT(Appeals) relying on Supreme Court judgments. The assessee appealed to the tribunal, but no one appeared on behalf of the assessee during multiple listings. The tribunal rejected an adjournment request due to the smallness of the dispute and proceeded to decide based on available material.

The tribunal noted that the Assessing Officer had partly accepted the assessee's request to reject the books of account without initiating penalty proceedings. It emphasized that penalty and assessment are separate proceedings, with the burden on the Revenue to prove inaccurate particulars or concealment of income for penalty imposition. The tribunal found that the reasons for additions in the assessment were insufficient for levying a penalty under section 271(1)(c). It concluded that the assessee had not furnished inaccurate particulars or concealed income, as the income was determined on an estimate basis. Therefore, it held that no penalty was justifiable in this case and allowed the appeal of the assessee.

In summary, the tribunal's decision revolved around the justification of the penalty imposed under section 271(1)(c) of the Income-tax Act, 1961. It highlighted the distinction between penalty and assessment proceedings, emphasizing the need for the Revenue to prove inaccurate particulars or concealment of income for penalty imposition. The tribunal concluded that in this case, where the income was estimated and no inaccurate particulars were furnished, the penalty was not warranted.