2014 (1) TMI 1138 - AT - Income Tax

Penalty u/s 271(1)(c) for not disclosing sales - Held that - The Tribunal held that the sales have been considered by the assessee in working out the income, there can be no separate additions of any separate sales, particular when the purchases are also stand admitted - There is no justification in making any addition on account of estimated profit on the sales, unexplained investment and unexplained debtors in the years under appeal - Following K.C. Builders and another Vs. ACIT 2004 (1) TMI 7 - SUPREME Court - Where the additions made in the assessment order on the basis of which penalty for concealment is levied, are deleted, there remains no basis at all for levying penalty for concealment - In such a case no penalty can survive and the penalty is liable to be cancelled - Decided against Revenue.

Summary

Issues:
Deletion of penalty u/s 271(1)(c) of the I.T. Act based on quantum additions and undisclosed income.

Analysis:
The appeals by the department were against the orders of the Ld. CIT(A) for the assessment years 2002-03 to 2006-07, all involving a common issue of penalty deletion under section 271(1)(c) of the Act. The facts were identical across appeals, with the only difference being the penalty amounts. The Assessing Officer had levied penalties before the outcome of appeals to the ITAT Jodhpur Bench. The Ld. CIT(A) deleted the penalties citing the ITAT's deletion of quantum additions as the basis for penalty removal. The department, in its appeal, supported the Assessing Officer's order, but failed to counter the Ld. CIT(A)'s findings.

The source of income for the assessee was marble business, and a search operation took place, leading to discrepancies in income declarations. The Ld. CIT(A) had granted some relief while confirming certain additions. Both parties appealed to the ITAT Jodhpur Bench, where all additions were eventually deleted. The ITAT's order highlighted that no justification existed for additional penalties once the Assessing Officer's additions were deleted. The Supreme Court precedent in K.C. Builders was cited to emphasize that if additions forming the basis for penalties are deleted, the penalties themselves cannot stand.

The ITAT, following the Supreme Court's guidance, dismissed the department's appeals, stating that with the deletion of additions, the penalties were not sustainable under section 271(1)(c) of the Act. The judgment was pronounced on 10/12/2013, upholding the Ld. CIT(A)'s decision to delete the penalties based on the absence of valid grounds post-deletion of additions.