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2021 (7) TMI 1193 - AT - Income TaxPenalty u/s 271(1)(c) - addition made on account of bogus purchases - 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. DR 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 learned CIT(A) was indeed justified in deleting 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 the learned CIT(A) by dismissing the grounds of appeal raised by the Revenue.
Issues Involved:
1. Legitimacy of penalty imposed under section 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2009-10 and 2011-12. Issue-wise Detailed Analysis: 1. Legitimacy of Penalty Imposed under Section 271(1)(c): The Revenue challenged the order passed by the learned CIT(A) which deleted the penalties of ? 55,000 for A.Y. 2009-10 and ? 1,56,000 for A.Y. 2011-12 imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act, 1961. The appeals were consolidated since they involved the same assessee and common issues, differing only in figures. The facts of the appeal for A.Y. 2009-10 were primarily considered for analysis. Facts in Brief: The assessee, a Public Limited Company engaged in manufacturing gold-studded jewelry, filed its return for A.Y. 2009-10 declaring total income of ? 2,58,62,409. The case was reopened under section 147 based on information from Sales Tax Authorities. The assessee failed to provide evidence for purchases amounting to ? 4,82,762 from M/s. Pooja Trading Company. Consequently, the Assessing Officer added this amount as bogus purchases and imposed a penalty under section 271(1)(c). CIT(A) Decision: The CIT(A) deleted the penalty, stating that the assessee had neither concealed income nor furnished inaccurate particulars. The assessee had provided all necessary documents to substantiate the genuineness of transactions. The CIT(A) relied on various judicial precedents, including the Hon’ble Supreme Court’s decision in CIT vs. Reliance Petro Products Pvt. Ltd. (322 ITR 158), which held that making an incorrect claim does not amount to furnishing inaccurate particulars. Tribunal’s Analysis: The Tribunal considered the rival submissions and perused the material on record. It noted that the Assessing Officer imposed the penalty on an ad-hoc basis without evidence of concealment of income. The Tribunal emphasized that penalties under section 271(1)(c) are applicable only when there is concealment of income or furnishing of inaccurate particulars. Ad-hoc additions do not justify penalties. The Tribunal cited multiple case laws supporting this view, including: - CIT v/s Norton Electronics Systems (P) Ltd. [2014] 41 taxmann.com 280 (Allahabad HC) - ACIT v/s Vision Research Management (P) Ltd., [2015] 63 taxmann.com 8 (Lucknow) (Trib.) - Prem Chand v/s ACIT, [2014] 52 taxmann.com 95 (Chandigarh) (Trib.) - CIT v/s PHI Seeds India Ltd., [2008] 301 ITR 0013 (Del) - Dilip N. Shroff v/s JCIT [2007] 291 ITR 519 (SC) The Tribunal found no evidence from the Department to prove concealment of income by the assessee. It upheld the CIT(A)’s order deleting the penalty, stating that additions made on estimation do not warrant penalties under section 271(1)(c). Conclusion: For both A.Y. 2009-10 and A.Y. 2011-12, the Tribunal upheld the CIT(A)’s decision to delete the penalties imposed under section 271(1)(c). The appeals filed by the Revenue were dismissed, reaffirming that penalties cannot be imposed based on ad-hoc additions and without substantial evidence of concealment or inaccurate particulars. The order was pronounced in the open court on 27.07.2021.
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