2023 (9) TMI 594 - AT - Income Tax

Penalty u/s. 271(1)(c) - assessee could not explain the investment to the satisfaction of the CIT(A) - CIT(A) concluded that the assessee has sufficient sources of income for the purpose of investment in the properties as undisclosed - as explained by the assessee did not maintain any books of account during the impugned assessment year as there was no business carried on by the assessee. HELD THAT - Since the addition is made on estimate basis, various judicial pronouncements have held that penalty cannot be levied when the addition is estimated. We therefore find that the levy of penalty based on the addition made by an estimate cannot be a valid ground and hence it should be deleted. Appeal filed by the assessee is allowed.

Summary

Issues involved:
The judgment involves the appeal against the orders of the Ld. Commissioner of Income Tax (Appeals)- National Faceless Appeal Centre regarding penalty proceedings u/s 271(1)(c) of the Income Tax Act, 1961 for the assessment years 2007-08 and 2012-13.

Issue 1: Penalty U/s. 271(1)(c) of the Act - AY 2007-08:
The assessee did not disclose a significant investment during the income tax return filing, leading to penalty proceedings u/s 271(1)(c) of the Act. The Ld. CIT(A) confirmed the penalty citing undisclosed investment in property. The main argument was whether the penalty was justified due to alleged concealment of income.

Details for Issue 1:
The assessee argued that no income particulars were concealed, and the Ld. CIT(A) had estimated sources of funds, which should not warrant penalty. Conversely, the Ld. DR contended that non-disclosure of investment amounts to concealment. The Tribunal noted the assessee's admission post-survey and the Ld. CIT(A)'s acceptance of reasonable sources of income. As the addition was based on estimates, the Tribunal held that penalty on estimated additions is not valid and thus deleted the penalty.

Issue 2: Similar Grounds for AY 2012-13:
The appeal for AY 2012-13 raised similar grounds as AY 2007-08, with the only difference being in figures. The Tribunal applied its decision on the AY 2007-08 appeal to the AY 2012-13 appeal, allowing the grounds raised by the assessee for the latter year as well.

Conclusion:
Both appeals of the assessee against the penalty proceedings u/s 271(1)(c) for AY 2007-08 and AY 2012-13 were allowed by the Tribunal, holding that the penalty based on estimated additions was not justified. The decision was pronounced on 10th August 2023.