2019 (6) TMI 1114 - AT - Income Tax

Levy of penalty u/s 271 (1)(c) - addition in respect of peak cash credit - HELD THAT - Assessee has explained that the assessee was engaged in the activity of sale and purchase of old vehicles and that the customers used to deposit certain amounts with the assessee so that the assessee may immediately book / purchase vehicles of their choice as and when the same are found available for purchase. The above contention of the assessee has not been totally rejected by the Revenue that is why the AO apart from making the addition s on peak cash credit also estimated the unaccounted profits on the deposits found in the bank account of the assessee If the AO was of the view that such deposits were out of unaccounted income of the assessee there was no reason with the AO to estimate profits on such deposits on the basis of the turnover. CIT(A) has also given relief to the assessee observing that the assessee himself has also declared certain profits in respect of its activities of sale / purchase of vehicles. It is apparent that the impugned additions have been made by the lower authorities on estimation basis. However there was no reliable or un-rebutted evidences on the file to prove that the assessee had actually furnished inaccurate particulars of income or concealed particulars of his income. Though the additions have been made by the AO and further confirmed by the CIT(A) on the basis of estimation / preponderance of possibilities of introducing some unaccounted income into the bank account of the assessee - Appeal of the assessee treated as allowed.

Summary

Issues:
Levy of penalty u/s 271(1)(c) of the Act in relation to quantum additions sustained by the Ld. CIT(A).

Analysis:
The appeal was filed against the order of the Commissioner of Income Tax (Appeals)-3, Ludhiana regarding the penalty under section 271(1)(c) of the Act. The appeal was initially time-barred by 39 days, but the delay was condoned considering the reasons provided by the assessee, who is an NRI. The core issue raised in the appeal pertained to the penalty imposed on the quantum additions sustained by the Ld. CIT(A).

The assessee, engaged in the sale and purchase of old vehicles, had certain amounts deposited in their account. The Assessing Officer made additions based on peak cash credit and estimated profits on the total amount deposited. In the appeal, the Ld. CIT(A) reduced the peak cash credit addition and restricted the estimated profits addition. Penalty proceedings under section 271(1)(c) were initiated and the penalty was levied by the Assessing Officer based on the additions confirmed by the Ld. CIT(A). Although the assessee did not appeal against the quantum additions, they contested the penalty imposition in the present appeal.

The Tribunal analyzed the contentions presented by the assessee and observed that the additions were made on an estimation basis without concrete evidence of inaccurate particulars of income or concealed income. The Revenue did not entirely reject the assessee's explanation regarding the deposits, leading to the conclusion that the additions were based on estimations. The Tribunal noted that there was no reliable evidence to prove that the assessee furnished inaccurate particulars of income. Consequently, the Tribunal held that it was not a suitable case for the imposition of a penalty under section 271(1)(c) of the Act and ordered the deletion of the penalty.

In conclusion, the Tribunal allowed the appeal of the assessee, emphasizing that the penalty under section 271(1)(c) was not justified based on the circumstances and evidence presented during the proceedings.