2014 (3) TMI 573 - AT - Income Tax

Penalty u/s 271(1)(c) of the Act Held that - The CIT(A) has deleted the penalty on a different ground on merits - The date of receipt of the order by the CCIT or CIT is not on record - the order of the CIT(A) is dated 13/03/2008 and subsequent thereto, the show cause notice was issued in February, 2009 - Six months from February, 2009 would expire in Aug., 2009 but no penalty order has been passed pursuant to the show cause notice dated February, 2009 - It is a clear case of estimation of cost of construction and as rightly pointed by the CIT(A) there was no material found during the course of search on the basis of which such addition has been made there is no reason to interfere with the order of the CIT(A) deleting penalty Relying upon COMMISSIONER OF INCOME TAX Versus AERO TRADERS (P) LTD. 2010 (1) TMI 32 - DELHI HIGH COURT - every addition will not automatically attract penalty thus, penalty is not leviable on estimated income. - Decided against the revenue. Bar of limitation of time u/s 275 of the Act Time-barred penalty orders Held that - The ITAT had passed the order on 26/03/2009 while the AO has given effect to the ITAT s order on 31/12/2010 and the penalty order is passed on 29/06/2011 i.e. within six months from the date of the order giving effect to the ITAT s order - the date of receipt of ITAT s order by CCIT or CIT is not on record thus, no adjudication is required as the relief is already granted to the assessee Decided against Assessee.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) for assessment years 1999-00 to 2003-04.
- Whether penalty orders are barred by limitation under section 275 of the IT Act.
- Validity of penalty on confirmed addition of difference in cost of construction.
- Consideration of limitation period in passing penalty orders.

Analysis:
1. The appeals were filed by the Revenue against the CIT(A)'s order deleting the penalty under section 271(1)(c) for the assessment years 1999-00 to 2003-04. The Assessee raised cross objections stating that the penalty orders were time-barred under section 275 of the IT Act.

2. The case involved an individual Assessee who filed returns of income for the relevant years. Following a search and seizure operation, the Assessee admitted additional income not offered initially. Block assessments were completed, and additions were made, some of which were later deleted on appeal.

3. The AO initiated penalty proceedings under section 271(1)(c) based on the Assessee's additional income disclosure. The AO held that the Assessee concealed income and furnished inaccurate particulars, justifying the penalty. The penalty was levied for all years under consideration.

4. The CIT(A) deleted the penalty on the confirmed addition of difference in cost of construction, citing that it was based on estimates and not justified. The penalty was also not linked to any material found during the search operation, leading to the deletion of penalties for all years.

5. The issue of limitation under section 275 was crucial. The Assessee argued that penalty proceedings should have been concluded within the specified time frame. The CIT(A) did not address this ground but deleted the penalty on other merits. The timeline of events post-search was presented to support the limitation argument.

6. The ITAT dismissed the Revenue's appeals and the Assessee's cross objections for all the years under consideration. The judgment highlighted the importance of considering the period of limitation for passing penalty orders and upheld the deletion of penalties based on merit and lack of material evidence supporting the additions made.

7. The judgment emphasized that penalties should not be automatically imposed on estimated income and that the limitation period prescribed by law must be adhered to. The decision was made based on a thorough analysis of the facts, legal provisions, and precedents.