2016 (10) TMI 596 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - assessment based on estimated income - professional entry operator - as per assessee he has accepted the estimated income to buy peace and avoid protracted litigation - Held that - The addition on which penalty has been imposed is not based on estimate but the same was offered by the assessee itself based on another case of Nexus Software Ltd. There being no element of estimate, this contention of the assessee carries no merit. Nothing emerges from record that the assessee agreed to the addition to buy peace of mind and to avoid litigation. The record is full of facts that nature of material was available. Plethora of evidence was available to hold that assessee was a professional entry operator, the fact which is accepted by the assessee. Ld. AO and CIT(A) have been reasonable in imposing penalty to the tune of 100%, whereas they could have imposed at the rate of 300% of the tax sought to be evaded by such deplorable accommodation entry racket. Thus no infirmity in the orders of the authorities below confirming the penalty which are upheld - Decided against assessee.

Issues Involved:
1. Legitimacy of the penalty imposed under Section 271(1)(c) for furnishing inaccurate particulars of income.
2. Whether the income addition was based on an estimate or on definitive findings.
3. Applicability of the ITAT Nagpur Bench judgment in the case of Malu Electrodes (P) Ltd.

Detailed Analysis:

Issue 1: Legitimacy of the penalty imposed under Section 271(1)(c) for furnishing inaccurate particulars of income.

The primary contention by the assessee was that the penalty of ?7,15,485/- levied under Section 271(1)(c) for allegedly furnishing inaccurate particulars of income was unjustified. The assessee argued that accepting the estimated income to avoid litigation does not amount to furnishing inaccurate particulars. The Assessing Officer (AO) and the Commissioner of Income-Tax (Appeals) [CIT(A)] held that the assessee was involved in providing accommodation entries and admitted to earning a commission of 0.5% on such entries. The AO and CIT(A) found that the assessee's admission of income was not voluntary but was a result of the evidence against it. The Tribunal upheld the penalty, noting that the assessee had indeed furnished inaccurate particulars by not reflecting the commission income in its books.

Issue 2: Whether the income addition was based on an estimate or on definitive findings.

The assessee contended that the income addition was based on an estimate, and therefore, penalty under Section 271(1)(c) should not be imposed on estimated income. However, the AO and CIT(A) found that the income addition was not based on an estimate but on the assessee's own admission of being an entry operator and the commission earned thereon. The Tribunal agreed with the lower authorities, stating that the addition was based on clear-cut findings and the assessee's voluntary admission during the assessment proceedings. The Tribunal emphasized that there was no element of estimate in the income addition, as it was based on the assessee's own admission.

Issue 3: Applicability of the ITAT Nagpur Bench judgment in the case of Malu Electrodes (P) Ltd.

The assessee relied on the ITAT Nagpur Bench judgment in the case of Malu Electrodes (P) Ltd., arguing that mere acceptance of an addition does not imply concealed income. The Tribunal distinguished the facts of the present case from the Malu Electrodes case, noting that the assessee was a professional entry operator and had admitted to providing accommodation entries. The Tribunal found that the judgment in Malu Electrodes was not applicable, as the facts of the two cases were different. The Tribunal upheld the penalty, noting that the assessee's case involved clear evidence of furnishing inaccurate particulars of income.

Conclusion:

The Tribunal concluded that the penalty under Section 271(1)(c) was justified, as the assessee had furnished inaccurate particulars of income by not disclosing the commission earned from accommodation entries. The Tribunal upheld the orders of the lower authorities, noting that the income addition was based on definitive findings and the assessee's own admission, not on an estimate. The appeal by the assessee was dismissed.

← Previous Next →