2018 (6) TMI 69 - AT - Income Tax

Penalty u/s 271(1)(c) - rejection of books of accounts - addition of 25% on unverifiable/bogus purchases - Held that - As decided in DEEPAK DALELA, VERSUS I.T.O., WARD-6 (3) , JAIPUR. 2017 (2) TMI 412 - ITAT JAIPUR in making computation of total income where the income returned has been rejected by rejecting the trading results, finding some discrepancy in the books of account and substituting the same by an estimated figure, in the strict sense, can neither be said to be addition of any amount in the returned income nor disallowance of any amount as deductions claimed. The word amount of which additions made or deductions disallowed also denotes reference to specific item of amount added or disallowed as deduction in contrast to substitution of altogether a new estimated sum in place of the income returned. It is a case neither of addition or disallowance but a case of substitution - Accordingly, we delete the penalty levied - Decided in favour of assessee

Summary

Issues:
Penalty under section 271(1)(c) of the Income Tax Act, 1961 for filing inaccurate particulars of income and concealment of income.

Detailed Analysis:
The appeal pertained to the imposition of a penalty under section 271(1)(c) of the Income Tax Act, 1961, based on the addition made for bogus purchases during the Assessment Year 2007-08. The Assessing Officer rejected the books of accounts and applied a 25% income on unverifiable purchases, resulting in an addition of ?5,65,304. The CIT (A) confirmed this addition, emphasizing that the parties involved were providing accommodation entries without actual delivery of goods. Consequently, a penalty of ?1,72,981 was levied on the addition made. The appellant failed to provide written submissions or appear during the proceedings. The Hon'ble ITAT observed a prevalent practice of parties providing accommodation bills to reduce profitability and upheld the penalty imposed by the Assessing Officer.

During the hearing, the appellant sought the deletion of the penalty, citing precedents from the ITAT Jaipur bench. The appellant argued that the issue was covered by previous decisions and requested the penalty to be revoked. The Department, however, supported the decisions of the lower authorities. The ITAT, after considering the arguments and case details, noted that similar penalties had been deleted in past cases by the Jaipur bench. Citing specific cases and legal principles, the ITAT concluded that the penalty imposed by the Assessing Officer was not justified. Drawing on relevant jurisprudence, the ITAT directed the deletion of the penalty, thereby allowing the appeal of the assessee.

In conclusion, the ITAT allowed the appeal of the assessee, directing the deletion of the penalty under section 271(1)(c) of the Income Tax Act, 1961, as confirmed by the CIT (A). The decision was made based on the application of legal principles and precedents established in similar cases, leading to the reversal of the penalty imposed by the Assessing Officer.