2021 (3) TMI 477 - AT - Income Tax

Penalty u/s 271(1)(c) - Inaccurate particulars of income on account of treating the purchases as non genuine - HELD THAT - Because the assessee has accepted the assessment order and for buying peace if the assessee agrees to face the disallowance so made by the Assessing Officer, it does not mean the assessee has concealed inaccurate particulars of income which is resulted in imposition of levying penalty under section 271(1)(c). AO has failed to meet the conditions of imposing penalty under section 271(1)(c) of the Act and hence, the penalty levied, in our opinion, is not sustainable in the case when the income enhanced based on estimation. We find that the assessee had furnished all the details of purchases as well as the income accrued was shown in the return of income. Even the payments made were by way of issuing cheques which were not considered by the Assessing Officer. Merely because the assessee has claimed the expenditure which was not acceptable to the Revenue that by itself does not mean that the assessee has concealed its particulars of income. With these observations, we hold that the learned Commissioner (Appeals) has properly held that the addition made on account of disallowance of a percentage of expenditure as bogus automatically cannot justify the penalty levied under section 271(1)(c) - Decided against revenue.

Summary

Issues involved:
- Dispute regarding deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner (Appeals) for the assessment year 2009-10.

Detailed Analysis:
1. The appeal was filed by the Revenue challenging the order of the Commissioner (Appeals) regarding the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The assessee did not appear for the hearing, and the appeal was disposed of ex-parte. The main issue was whether the penalty of ?63,920 imposed by the Assessing Officer was justified.

2. The Assessing Officer re-opened the assessment under section 147 of the Act based on suspicious purchases made by the assessee. The purchases were found to be non-genuine, and a penalty was imposed for filing inaccurate particulars of income. The assessee accepted the addition made by the Assessing Officer but appealed against the penalty.

3. The Commissioner (Appeals) observed that the penalty was levied merely on the disallowance of a percentage of expenditure and not on concealment to reduce taxable income. The assessee argued that the penalty cannot be imposed on an ad-hoc basis for suspicious purchases. The Commissioner relied on various judicial decisions to support the conclusion that the penalty was not justified.

4. The Tribunal considered the submissions and upheld the Commissioner's order. It noted that the assessee had accepted the assessment order and refrained from filing an appeal against the disallowance. The Tribunal held that accepting the disallowance did not amount to concealing inaccurate particulars of income. The Tribunal found that the penalty was not sustainable as the conditions for imposing it were not met.

5. The Tribunal further stated that the assessee had provided details of purchases and income in the return, and the payments were made via cheques. Merely claiming expenditures that were not acceptable to the Revenue did not imply concealment of income. Therefore, the Tribunal upheld the Commissioner's decision to delete the penalty under section 271(1)(c) of the Act.

6. In conclusion, the Tribunal dismissed the Revenue's appeal and upheld the order of the Commissioner (Appeals) regarding the deletion of the penalty. The Tribunal found no grounds for interference and upheld the decision based on the facts and legal principles presented in the case.