2021 (6) TMI 657 - AT - Income Tax

Penalty u/s 271(1)(c) - proof of concealment of income - HELD THAT - Penalty under section 271(1)(c) of the Act is liable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income. We find support from the series of decisions by different High Courts as well the decision of the Co ordinate Benches of the Tribunal, wherein it was held that when addition is made on estimate basis, penalty is not sustainable in the eyes of law. Even the learned Departmental Authorities has not brought any cogent material to prove otherwise warranting interference at the instance of the Revenue. In this view of the matter, we are of the considered view that the Commissioner (Appeals) was indeed justified in directing the Assessing Officer to delete the penalty, as there was no concealment of income on the part of the assessee have been proved by the Revenue and additions made on estimation by the Assessing Officer do not call for initiation of penalty. Consequently, we uphold the order passed by Commissioner (Appeals) by dismissing the grounds of appeal raised by the Revenue.

Summary

Issues:
- Challenge to deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Appellate Tribunal ITAT Mumbai for the assessment year 2010-11.

Analysis:
1. Background and Assessment: The appeal was filed by the Revenue against the order deleting the penalty imposed under section 271(1)(c) of the Income Tax Act, 1961. The case involved the assessee, a Private Limited company engaged in manufacturing metals and chemicals. The Assessing Officer re-opened the assessment based on information regarding the company's involvement in evading taxes through bogus purchases. The AO added an amount based on hawala transactions, and penalty proceedings were initiated subsequently.

2. Commissioner's Decision: The learned Commissioner (Appeals) directed the Assessing Officer to delete the penalty after considering the submissions. The Commissioner noted that the addition was made on an estimation basis and cited various judgments supporting the position that penalty cannot be imposed solely on estimated income. The Commissioner emphasized that when income is estimated, imposing a penalty under section 271(1)(c) is not justified.

3. Tribunal's Analysis: The Appellate Tribunal upheld the Commissioner's decision, stating that penalty under section 271(1)(c) can only be imposed for concealment or furnishing inaccurate particulars. The Tribunal highlighted that making additions on an ad-hoc basis does not warrant a penalty. Relying on decisions by different High Courts and Tribunal benches, the Tribunal concluded that when additions are based on estimates, penalties are not sustainable in law.

4. Judicial Precedents: The Tribunal referred to several case laws to support its decision, including judgments by the Allahabad High Court, Lucknow Tribunal, Chandigarh Tribunal, Delhi High Court, and the Supreme Court. These cases emphasized that penalties cannot be imposed solely on estimated income without evidence of concealment or inaccurate particulars.

5. Final Decision: The Tribunal dismissed the Revenue's appeal, affirming the Commissioner's order to delete the penalty. The Tribunal found that there was no proven concealment of income by the assessee, and the additions made on estimation did not justify the imposition of a penalty. The Tribunal upheld the principle that penalties under section 271(1)(c) require evidence of concealment or inaccurate particulars, which were lacking in this case.

In conclusion, the Appellate Tribunal ITAT Mumbai upheld the decision to delete the penalty imposed under section 271(1)(c) for the assessment year 2010-11, emphasizing that penalties cannot be imposed solely on estimated income without evidence of concealment or furnishing inaccurate particulars.