2017 (4) TMI 822 - AT - Income Tax

Penalty u/s 271(1)(c) - addition on remission/cessation of liability as per the provisions of section 41(1)(a) - Held that - In case of Asstt. IT., Cirle-2, Gurgaon Versus Shri Shailesh Mital 2014 (1) TMI 1303 - ITAT DELHI on similar and identical issue wherein the addition was made by the AO on account of unconfirmed trade creditors agreed upon by the assessee. In this case penalty proceedings were initiated for furnishing inaccurate particulars of income. The assessee did not prefer appeal against the assessment order. In this case the assessee submitted that in respect of sundry creditors, the liability did not cease to exist but the outstanding amount was surrendered to avoid litigation and no penalty was leviable. We further note that the Ld. CIT(A) in this case concluded that the penalty could not be levied on the amount surrendered by the assessee, unless there was material on the record to show that the surrendered item was his income. There was no case of furnishing of inaccurate particulars of income so as to make the assessee liable for penal consequences which was later been confirmed by the ITAT, Delhi, as aforesaid. Keeping in view of the facts of the case, we are of the considered opinion that it become evident that the income assessed by the AO was agreed upon by the assessee as a measure of cooperation and with a view to escape penal consequences. However, we further note that assessment order also do not indicate any concealment of income at all. In our view, the income was merely estimated without finding any concealment as such, hence the penalty is not attracted. We also find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee s conduct cannot be said to be contumacious so as to warrant levy of penalty. - Decided in favour of assessee

Summary

Issues:
1. Confirmation of penalty by Ld. CIT(A) under section 271(1)(c) of the IT Act.
2. Application of provisions of Section 41(1)(a) of the IT Act.
3. Validity of penalty based on additions made in assessment order.
4. Application of decision of Hon’ble Supreme Court in a specific case.
5. Consideration of submissions and responses by the Assessing Officer.
6. Justification of penalty imposition under section 271(1)(c).

Analysis:

Issue 1:
The appeal by the Assessee contested the penalty levied by the Assessing Officer and confirmed by the Ld. CIT(A) under section 271(1)(c) of the IT Act. The Assessee argued that the penalty should be quashed, highlighting the grounds of contestation.

Issue 2:
The Assessing Officer invoked the provisions of Section 41(1)(a) of the IT Act due to the Assessee's failure to provide confirmations for liabilities, leading to the conclusion that the liabilities had ceased to exist. This action was a significant factor in the penalty imposition.

Issue 3:
The Assessee challenged the penalty imposed based on the additions made in the assessment order under section 143(3) of the IT Act. The Assessing Officer considered the claim of liabilities as bogus, resulting in the penalty calculation.

Issue 4:
The Assessee disputed the application of a decision of the Hon’ble Supreme Court in a specific case, arguing that it was wrongly applied by the Ld. CIT(A) in the penalty imposition.

Issue 5:
The Assessing Officer examined the submissions and responses provided by the Assessee during the assessment and penalty proceedings. The responses regarding liabilities and confirmations were considered in the penalty order.

Issue 6:
The Tribunal analyzed the previous decision of ITAT, Delhi Bench in a similar case to determine the justification for the penalty imposition. It was concluded that the penalty under section 271(1)(c) was not justified in the present case, as there was no concealment of income or furnishing of inaccurate particulars.

In conclusion, the Tribunal allowed the appeal by the Assessee, setting aside the penalty imposition after considering the facts, legal provisions, and precedents. The decision emphasized the importance of accurate assessment and the lack of justification for penal consequences in the absence of deliberate misconduct.