2020 (10) TMI 1080 - AT - Income Tax

Penalty u/s 271(1)(c) - information from the Sales Tax Department, Government of Maharashtra about bogus purchases made by the assessee - HELD THAT - Instead of disallowing the entire purchases AO had only added the profit element embedded in such purchases which clearly suggests that the assessee, in fact, had made purchases, though, the source of such purchases may not have been established for whatever may be the reason. Even assuming that the assessee was unable to prove the source of such purchases, what might have escaped assessment is only the profit element embedded in such purchases. For that reason only, the Assessing Officer has estimated the profit element embedded in such purchases @ 12.5% and added back to the income of the assessee. Additions of such estimated profit by no means would lead to an inference that the assessee has either furnished inaccurate particulars of income or concealed its income. That being the case, the provisions of section 271(1)(c) cannot be pressed into action - Decided in favour of assessee.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Years 2010-11 and 2009-10.

Analysis:
1. Background and Appeal: The appeals filed by the Revenue challenge the decision of the Commissioner of Income Tax (Appeals) in deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the Assessment Years 2010-11 and 2009-10.

2. Ex-Parte Hearing: During the hearing, no representative appeared for the assessee, and no adjournment request was made. The Tribunal proceeded ex-parte and considered the Departmental Representative's arguments and the available records to dispose of the appeals.

3. Assessment and Penalty Imposition: The Assessing Officer reopened the assessment for the relevant years based on information from the Sales Tax Department indicating non-genuine purchases by the assessee. The Officer, unsatisfied with the evidence provided, estimated the profit element in the disputed purchases and imposed penalties under section 271(1)(c) of the Act.

4. Commissioner's Decision: The Commissioner (Appeals), after reviewing the facts and submissions, referred to a High Court decision and deleted the penalties imposed for both assessment years, emphasizing that the additions made by the Assessing Officer did not imply inaccurate income particulars or income concealment.

5. Tribunal's Analysis: The Tribunal observed that the Assessing Officer's actions indicated that the assessee had indeed made purchases, albeit with unestablished sources. The additions were based on estimated profit elements, not on inaccurate income particulars or income concealment. Therefore, the Tribunal upheld the Commissioner's decision to delete the penalties under section 271(1)(c) for both assessment years.

6. Conclusion: The Tribunal dismissed the Revenue's appeals, affirming the deletion of penalties under section 271(1)(c) for the Assessment Years 2010-11 and 2009-10. The decision was communicated on 07.10.2020 as per the Income Tax (Appellate Tribunal) Rules, 1963.