ITA Tribunal: Penalties Set Aside for Assessment Years 2004-05 & 2008-09

The I.T.A.T. allowed both appeals, setting aside the penalty imposed under section 271(1)(c) for Assessment Years 2004-05 & 2008-09. The decision was based on the similarity to previous cases where penalties were deleted, emphasizing the distinction between quantum proceedings and penalty imposition. The commission income assessment on an estimate basis did not warrant penalty, following precedents.

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Issues:
Appeal against penalty levied under section 271(1)(c) of the Act for Assessment Years 2004-05 & 2008-09.

Analysis:
The appeals were filed against the penalty upheld by the ld. CIT(A)-38, Mumbai for providing accommodation entries. The assessee argued for deletion of penalty based on similar cases where penalties were deleted by the I.T.A.T., Mumbai Bench. The Revenue estimated commission income at 2% for providing accommodation entries, which was upheld by the ld. CIT(A). However, the I.T.A.T. directed the Assessing Officer to re-compute the commission income at 0.15% instead of 2%. The penalty was sustained by the ld. CIT(A) based on similar cases. The I.T.A.T. noted that the difference in income estimation between the assessee and Revenue did not warrant penalty under section 271(1)(c) of the Act. Citing previous cases, the I.T.A.T. held that penalty and assessment proceedings are distinct, and levying penalty based on estimated additions is not justified.

The I.T.A.T. referenced the case of Aero Traders P. LTD. where penalty for estimated profit was deleted, emphasizing the distinction between quantum proceedings and penalty imposition. Additionally, the case of Durga Kamal Rice Mills highlighted the requirement for conclusive evidence of concealed income for penalty imposition. The I.T.A.T. found the circumstances and modus operandi in the present case similar to previous cases where penalties were deleted. Consequently, the penalty under section 271(1)(c) was set aside, following precedents and the principle that no penalty is attracted for additions/disallowances made on an estimate basis.

In conclusion, the I.T.A.T. allowed both appeals, deleting the penalty imposed under section 271(1)(c) as the commission income was assessed on an estimate basis. The decision was based on the similarity of facts and circumstances to previous cases where penalties were deleted. The order was pronounced on 21st October 2016.

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