2021 (6) TMI 970 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus purchases - addition on account of hawala purchases - HELD THAT - AO imposed penalty under section 271(1)(c) on estimation basis without adducing any evidence on record for concealment of income. Penalty under section 271(1)(c) 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. Thus 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 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. - Decided against revenue.

Summary

Issues:
- Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner (Appeals).
- Imposition of penalty for furnishing inaccurate particulars of income.
- Justification of penalty based on assessment proceedings.
- Legal principles governing imposition of penalty under section 271(1)(c).

Issue 1: Appeal against deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner (Appeals)

The Revenue appealed against the deletion of a penalty of ?2,19,719 imposed under section 271(1)(c) by the Assessing Officer for the assessment year 2009-10. The Commissioner (Appeals) had deleted the penalty, leading to the Revenue's appeal before the Tribunal. The Tribunal upheld the Commissioner's decision, emphasizing that the Assessing Officer had imposed the penalty on an estimation basis without concrete evidence of concealment of income. The Tribunal cited various legal precedents to support its conclusion that when additions are made on an estimated basis, the penalty under section 271(1)(c) is not sustainable.

Issue 2: Imposition of penalty for furnishing inaccurate particulars of income

During the penalty proceedings, the Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act based on the belief that the assessee had filed inaccurate particulars of income by making a wrong claim. The Assessing Officer referred to a decision of the Orissa High Court and imposed a penalty of ?6,19,007. However, the Commissioner (Appeals) deleted this penalty, highlighting that the Assessing Officer had not provided substantial evidence to prove concealment of income. The Commissioner's decision was upheld by the Tribunal, emphasizing that penalty under section 271(1)(c) can only be imposed if there is a clear case of concealment or furnishing of inaccurate particulars of income.

Issue 3: Justification of penalty based on assessment proceedings

The Assessing Officer had initiated penalty proceedings under section 271(1)(c) based on the quantum assessment order, which involved an ad-hoc addition of ?63,53,010 on account of bogus purchases. The Commissioner (Appeals) restricted the addition to ?6,19,007, leading to a revised income for the assessee. The Tribunal noted that the quantum assessment findings cannot automatically be applied to penalty proceedings, and each case must be considered separately. The Tribunal emphasized that the penalty cannot be justified solely based on additions made on an estimation basis without concrete evidence of concealment of income.

Issue 4: Legal principles governing imposition of penalty under section 271(1)(c)

The Tribunal's decision was guided by legal principles established in various cases, including the Supreme Court's ruling in Dilip N. Shroff v. Jt. CIT, emphasizing that findings in assessment proceedings cannot automatically lead to penalty imposition. Additionally, the Tribunal cited precedents such as CIT v. Reliance Petro Products (P) Ltd. to highlight that the mere disallowance of a percentage of purchases does not justify the imposition of a penalty under section 271(1)(c). The Tribunal concluded that the Assessing Officer's actions lacked evidence of concealment of income, and therefore, the penalty was not sustainable.

In conclusion, the Tribunal dismissed the Revenue's appeal, upholding the deletion of the penalty under section 271(1)(c) by the Commissioner (Appeals). The decision was based on the lack of concrete evidence of concealment of income and the application of legal principles governing the imposition of penalties under the Income Tax Act.