2013 (8) TMI 758 - AT - Income Tax

Penalty overturned by ITAT due to lack of concrete evidence

Super Casseettes Industries Ltd. Versus Joint Commissioner of Income Tax

Super Casseettes Industries Ltd. Versus Joint Commissioner of Income Tax - TMI Issues Involved:1. Legality of the penalty order passed by the Commissioner of Income Tax (Appeals).2. Confirmation of penalty levied under section 158BFA(2) of the Income Tax Act, 1961.3. Determination of undisclosed income and its implications on penalty.4. Judicial discretion in imposing penalty under section 158BFA(2).5. Relevance of precedents and judicial interpretations in penalty imposition cases.Issue-wise Detailed Analysis:1. Legality of the Penalty Order Passed by the Commissioner of Income Tax (Appeals):The appeal was preferred by the assessee against the order of the Commissioner of Income Tax (Appeals)-XII, New Delhi, dated 31.12.2011, which confirmed the penalty levied by the Assessing Officer under section 158BFA(2) of the Income Tax Act, 1961. The assessee contended that the order passed by the Commissioner of Income Tax (Appeals) was bad in law and contrary to the facts of the case.2. Confirmation of Penalty Levied Under Section 158BFA(2) of the Income Tax Act, 1961:The penalty of Rs. 5,26,070/- was levied by the Assistant Commissioner of Income Tax, Circle - 9(1), New Delhi, on account of alleged furnishing of inaccurate particulars of income amounting to Rs. 8,76,784/-. This included differences in stock in various units and undisclosed expenditure. The penalty was confirmed by the Commissioner of Income Tax (Appeals) despite the assessee's arguments that the discrepancies were based on estimations and not on actual inaccuracies.3. Determination of Undisclosed Income and Its Implications on Penalty:A search operation led to the determination of total undisclosed income at Rs. 35,38,74,600, which was later reduced to Rs. 8,76,784 after appeals. The Assessing Officer initiated penalty proceedings under section 158BFA(2) due to the excess of undisclosed income determined over the income shown in the return. The ITAT noted that the penalty was imposed on the portion of undisclosed income determined in excess of the amount shown in the return.4. Judicial Discretion in Imposing Penalty Under Section 158BFA(2):The assessee argued that the penalty under section 158BFA(2) is not mandatory and requires judicial discretion. They cited the judgment of the Hon'ble Jurisdictional High Court in the case of C.I.T. Delhi-IX vs Harkaran Das Ved Pal, which emphasized that the imposition of penalty should be based on judicial consideration and not be automatic. The court highlighted that the Assessing Officer has discretion in imposing the penalty, and it should be determined based on the specific facts and circumstances of each case.5. Relevance of Precedents and Judicial Interpretations in Penalty Imposition Cases:The assessee relied on various judgments, including ITAT Delhi 'H' Bench in ITA No. 12/Del/2012 in the case of M/s Tony Electronics Ltd., where the penalty imposed under section 158BFA(2) was deleted. The ITAT noted that the income for the block period must be determined based on seized material, and discrepancies based on estimations should not automatically lead to penalties. The ITAT also referred to judgments from other benches, such as ITAT Jaipur Bench 'A' and ITAT Chennai Bench 'A', which held that penalties should not be imposed on estimated additions without clear evidence of concealment or suppression of income.Conclusion:The ITAT concluded that the penalty imposed in the present case was not sustainable because the enhancement of undisclosed income by the Assessing Officer was based on estimations. There was no material evidence proving beyond doubt that there was actual undisclosed income. The ITAT, following the judgment in the case of M/s Tony Electronics Ltd., allowed the appeal of the assessee and deleted the penalty. The appeal was allowed, and the order was pronounced in the open court on 11.7.2013.