2015 (1) TMI 662 - HC - Income Tax

Court upholds decision to delete penalties under Income Tax Act Section 271(1)(c)

The High Court upheld the Income Tax Appellate Tribunal's decision to delete penalties under Section 271(1)(c) of the Income Tax Act. The Court found that ... Penalty under Section 271(1)(c) - ITAT deleted penalty on the ground that income is determined on estimate basis - assessment challenged - Held that:- Assessment made is just and proper. The statements made in the affidavits are not based on any record or corroborated with cogent evidence. The presumption raised by the papers which were seized from the custody of the appellant had not been rebutted. - Decided against assessee. Addition had been sustained purely on estimate basis and no positive fact or finding had been had been found so as to even make the addition which was a pure guess work, no penalty under section 271(1)(c) of the Act could be said to be leviable on such guess work or estimation. Thus penalty has been wrongly imposed under Section 271(1) (c). - Decided in favour of assessee. Issues:Challenge to judgment and order dated 28.2.2007 passed by the Income Tax Appellate Tribunal, Ahmedabad Bench in ITA No. 425/Ahd/2001, ITA No. 429/Ahd/2001, and ITA No. 427/Ahd/2001. Substantial question of law framed: Whether ITAT was right in deleting penalty under Section 271(1)(c) of the Income Tax Act due to income determination on an estimate basis.Analysis:The appellant challenged the judgment and order passed by the Income Tax Appellate Tribunal, Ahmedabad Bench, regarding the deletion of penalties under Section 271(1)(c) of the Income Tax Act. The returns of income for various assessment years were filed, and assessment orders were passed subsequently. The CIT(A) dismissed the appeals filed by the assessee, leading to appeals before the ITAT, which ruled in favor of the assessee, prompting the Revenue to file the present Tax Appeals before the High Court.The High Court considered submissions from both parties and noted a similar issue addressed in a previous case. The Court observed that the assessment made was just and proper, emphasizing the lack of corroborated evidence in the affidavits provided by the appellant. The Court held that the penalties imposed in certain appeals were justified, while in other appeals, penalties under Section 271(1)(c) were deemed wrongly imposed due to additions being sustained purely on an estimate basis without concrete findings.The Tribunal's observation highlighted that the income was estimated at 30% without delving into individual expenditure claims, leading to the conclusion that the penalty imposition was unwarranted. Consequently, the High Court ruled in favor of the Revenue, upholding the ITAT's decision to delete penalties under Section 271(1)(c) based on income estimation. The Court dismissed all Tax Appeals in light of these findings.