2016 (6) TMI 212 - AT - Income Tax

Penalty u/s 271(1) (c ) - G.P. estimation - Held that - The assessment was completed by applying 5% as net profit of gross receipts which was estimation basis thus in the case of estimation of profit penalty u/s 271(1) (c ) was not imposable. - Decided in favour of assessee.

Summary

Issues:
- Whether the CIT(A) was right in deleting the penalty without considering the original penalty order u/s 271(1)(c) of the I.T. Act, 1961.
- Whether the CIT(A) was right in deleting the penalty when the ITAT allowed the miscellaneous application filed by the assessee for recalling the order.

Analysis:
1. The appeal involved a dispute regarding the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961 for the assessment year 2004-05.

2. The Revenue contended that the penalty was justified based on the addition made by the Assessing Officer through estimation. The Appellant argued that penalties under section 271(1)(c) were not applicable when income was assessed based on estimation, citing relevant case laws to support their claim.

3. The CIT(A) deleted the penalty, citing that the penalty order had already been deleted by the ITAT in a previous year for the same assessed income. The CIT(A) also found the re-imposition of the penalty to be time-barred under section 275(1)(a) of the Act.

4. The CIT(A) highlighted that the penalty was imposed based on an estimated income of the appellant at a net profit rate of 5%. The CIT(A) referred to the relevant provisions of the Act and previous case laws to support the deletion of the penalty.

5. The ITAT upheld the decision of the CIT(A) by dismissing the Revenue's appeal. The ITAT emphasized that penalties for concealment or inaccurate particulars of income were not applicable in cases of income estimation, as in this instance.

6. The ITAT clarified that the quantum decision against the assessee by the Tribunal and the subsequent dismissal of the Miscellaneous Application did not justify the imposition of the penalty, as assessment and penalty proceedings are independent.

7. Ultimately, the ITAT dismissed the Revenue's appeal, upholding the deletion of the penalty by the CIT(A) based on the grounds of the penalty being time-barred and the nature of the income estimation involved.

In conclusion, the ITAT ruled in favor of the assessee, emphasizing that penalties under section 271(1)(c) were not applicable in cases of income estimation, and the re-imposition of the penalty was time-barred, leading to the dismissal of the Revenue's appeal.