2013 (11) TMI 569 - AT - Income Tax

Penalty u/s 271(1)(c) of the Income tax act Held that - When the Assessing Officer decided to initiate penalty proceedings, he had no material to conclude that the assessee had concealed income or provided inaccurate particulars. The assessee did provide particulars, but could not back up its claim with confirmation - Only on the basis of the assessee s offer to be taxed at 8% on gross receipts, have concluded that it had provided inaccurate particulars in its returns - The imposition of penalty was not justified Decided in favor of Assessee.

Summary

Issues:
Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2006-07.

Analysis:
1. The assessee, engaged in construction work, filed a return of income showing total income at Rs.10,18,101. The Assessing Officer rejected the books of accounts and computed total income at 5% of turnover due to insufficient details provided by the assessee regarding site wise material consumed and labour expenses. Penalty under section 271(1)(c) was imposed, which was confirmed by the Ld. Commissioner of Income Tax (Appeals).

2. The grounds of appeal raised by the assessee included the rejection of books of accounts without recording any defect, levying of penalty on estimation basis without establishing concealed particulars, and the request for deletion of the penalty. The arguments presented by both the Ld. Counsel for the assessee and the Ld. Sr. D.R. were considered by the tribunal.

3. The tribunal noted that the assessee agreed to a net profit determination of 5% of total turnover due to the inability to provide satisfactory details of expenses. Citing relevant case laws, the tribunal upheld the penalty based on the decision of the Hon'ble Supreme Court and the Hon'ble Delhi High Court. The Ld. Counsel for the assessee relied on specific cases to support their arguments.

4. Referring to the case of Vatika Constructions P.Ltd., the tribunal emphasized the importance of the Assessing Officer basing penalty proceedings on available materials and highlighted discrepancies in the assessment leading to the penalty imposition. The tribunal concluded that the penalty was not justified based on the circumstances of the case and decided to delete the penalty.

5. The tribunal found that the principles established in the Vatika Constructions case were directly applicable to the present case, leading to the deletion of the penalty. Other case laws cited by the parties were deemed irrelevant to the current matter.

6. Ultimately, the tribunal allowed the appeal of the assessee, pronouncing the order in the Open Court on 26th July 2013.