2020 (9) TMI 26 - AT - Income Tax

Levy of penalty u/s 271(1)(c) - investment in unaccounted purchases made by the AO pursuant to survey conducted at the premises of the assessee - HELD THAT - On perusal of the order passed by the Tribunal, we find that there is a clear finding recorded that it is a case of unrecorded sales which has not been disclosed by the assessee at the time of filing of return of income and we therefore agree with the contention of the ld DR that the penalty has been rightly levied in this case invoking provisions of section 271(1)(c). Not agree with the contention AR that the Tribunal has restored the income as declared in the return of income in view of the clear finding of the Tribunal where the AO is directed to restrict the addition to the extent of profit on undisclosed sales. At the same time, where the very basis of levy of penalty, being the quantum addition, has been restricted by the Tribunal to ₹ 18,566/- in the quantum proceedings, the consequent levy of penalty u/s 271(1)(c) shall also be required to be computed on the said amount of ₹ 18,566/- as against the addition made by the AO. AO is directed to recompute the penalty u/s 271(1)(c) by taking the quantum addition of ₹ 18,566/- as the basis for such levy as confirmed by the Tribunal in the quantum proceedings and the remaining penalty is hereby directed to be deleted. - Decided partly in favour of assessee.

Summary

Issues Involved:
Delay in filing the appeal - condonation of delay, Merits of the case - imposition of penalty u/s 271(1)(c) of the Act based on unaccounted purchases.

Analysis:

Delay in filing the appeal - Condonation of Delay:
The appeal was filed with a delay of 56 days. The assessee explained that the delay occurred due to the Counsel's oversight in misplacing the order and subsequently forgetting about it. The Counsel later found the papers and the appeal was filed. The assessee argued that there was no willful attempt to cause delay and cited judicial pronouncements supporting the condonation of delay for sufficient cause. The Tribunal, after hearing both parties, condoned the delay, admitting the appeal for adjudication.

Merits of the Case - Imposition of Penalty u/s 271(1)(c) of the Act:
The assessee, engaged in wholesale trading, declared income but did not include undisclosed amounts in the return despite a survey. The AO made additions to the total income, which were confirmed by the CIT(A) but later partially deleted by the Tribunal. The Tribunal held that the case involved suppressed sales rather than unaccounted purchases, directing the AO to restrict the addition to the profit on undisclosed sales. The penalty was based on the alleged unexplained investment in purchases, which the Tribunal reduced to the profit element. The Tribunal found that the penalty was rightly levied under section 271(1)(c) due to undisclosed sales. The Tribunal directed the AO to recompute the penalty based on the reduced addition, deleting the remaining penalty amount.

In conclusion, the Tribunal upheld the penalty under section 271(1)(c) based on undisclosed sales, reiterating the importance of accurately reporting income. The appeal was disposed of with directions to recompute the penalty based on the reduced addition amount.