2018 (5) TMI 1373 - AT - Income Tax

Levy of penalty U/s 271(1)(c) - NP rate estimation initited by AO - Reduction of rate % - Held that - Undisputedly, the turnover declared by the assessee in his return of income filed much prior to survey has been accepted by the Assessing Officer and thereafter the Assessing Officer has estimated the NP rate @ 20%. Subsequently, during the appellate proceedings, the NP rate has been reduced by the ld. CIT(A) to 12%. There is no finding recorded by either of the authorities regarding linkage and estimation of net profit rate with findings, if any during the course of survey proceedings. It is, therefore, a case where the NP rate has been estimated by both the authorities and the additions have been made in the hands of the assessee. Referring to case of COMMISSIONER OF INCOME-TAX VERSUS KRISHI TYRE RETREADING AND RUBBER INDUSTRIES 2014 (2) TMI 21 - RAJASTHAN HIGH COURT as held that on such guess work or estimation, no penalty under section 271(1)(c) of the Act is leviable - For imposing penalty under section 271(1)(c) of the Act, the Assessing Officer has to clearly prove the conduct of the assessee - The assessee offered an explanation, which could not be termed as not bona fide - In the absence of any corroborative evidence, it cannot be said that there was concealment of income - Thus the levy of penalty u/s 271(1)(c) is hereby deleted - Decided in favour of assessee.

Summary

Issues:
Levy of penalty under section 271(1)(c) of the Income Tax Act, 1961 based on estimated additions.

Analysis:
The appellant contested the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961, challenging the levy despite the additions being made on an estimated basis. The appellant's income was derived from contract and job work of iron fabrication, with the Assessing Officer estimating the NP rate at 20% and additional income from job work. The ld. CIT(A) reduced the NP rate to 12% during the quantum proceedings. The penalty was imposed based on inaccurate particulars of income, leading to a penalty amount of ?2,79,731 @ 100% of tax sought to be evaded. The appellant argued that the substantial reduction of additions in appellate proceedings invalidated the basis for penalty imposition. The appellant highlighted the lack of positive evidence supporting the additional income, emphasizing the estimation basis without concrete material against the appellant.

During the appeal, the appellant's representative argued that the penalty should not stand as the additions were primarily estimation-based and substantially reduced in appellate proceedings. The appellant's representative cited various court decisions to support the argument that penalties should not be imposed solely on estimated additions. The Senior DR supported the lower authorities' findings, advocating for upholding the penalty.

The Tribunal analyzed the facts and legal precedents, emphasizing the need for clear proof of misconduct by the assessee for penalty imposition. Referring to relevant court decisions, the Tribunal concluded that penalties cannot be levied solely on estimation without concrete evidence of concealment or misconduct. Citing the decisions of the Hon'ble Rajasthan High Court, the Tribunal held that in the absence of definitive proof, penalties under section 271(1)(c) could not be justified. Consequently, the Tribunal ruled in favor of the appellant, deleting the penalty imposed under section 271(1)(c) based on estimated additions.

In conclusion, the Tribunal allowed the appeal, emphasizing the necessity of concrete evidence to support penalty imposition under section 271(1)(c) of the Income Tax Act, 1961. The decision highlighted the importance of clear proof of misconduct and the inadequacy of penalties solely based on estimations without substantial evidence.