2015 (10) TMI 579 - AT - Income Tax

Penalty under Income Tax Act not applicable for estimated additions, Tribunal directs AO to delete penalty

The Tribunal held that the penalty under section 271(1)(c) of the Income Tax Act was not applicable as the additions were based on estimates, not ... Penalty u/s 271(1)(c) - addition relating to gross profit and selling and administrative expenses - Held that:- The income of the assessee was determined by applying the gross profit rate and by making the disallowance out of the expenses on estimate basis. The learned CIT(A) also sustained the addition on estimate basis, so it cannot be said that the assessee concealed the income or furnished inaccurate particulars of income. Penalty u/s 271(1)(c) of the Act was not leviable to the facts of the present case. In that view of the matter, the penalty levied by the AO and sustained by the learned CIT(A) u/s 271(1)(c) of the Act is deleted. - Decided in favour of assessee. Issues:Penalty under section 271(1)(c) of the Income Tax Act, 1961 for concealment of income.Analysis:The appeal was against the penalty imposed by the Assessing Officer (AO) under section 271(1)(c) of the Income Tax Act, 1961, confirmed by the ld. CIT(A) for Assessment Year 2007-08. The penalty was levied due to unaccounted sales, rejection of books of account, and estimation of gross profit and expenses by the AO. The ld. CIT(A) reduced the additions made by the AO, but the penalty was still upheld. The Tribunal considered the case where the AO estimated income based on gross profit and expenses, similar to another case where the penalty was deleted by the Tribunal. The Tribunal referred to judgments by the Hon'ble Delhi High Court and Hon'ble Punjab & Haryana High Court where penalties were deleted in cases of estimated income. The Tribunal found that in the present case, the additions were made on an estimate basis, not due to concealment or furnishing inaccurate particulars of income. Therefore, the penalty under section 271(1)(c) was deemed not applicable.The Tribunal emphasized that the additions in the present case were made on an estimate basis, similar to the case where penalties were deleted by higher courts. The Tribunal held that since the income was determined based on estimates and not due to concealment or inaccurate particulars, the penalty was unjustified. Relying on the judgments of higher courts, the Tribunal concluded that the penalty under section 271(1)(c) should be deleted. Following the precedent set by a co-ordinate Bench, the Tribunal set aside the ld. CIT(A)'s order and directed the AO to delete the penalty. Consequently, the appeal by the assessee was allowed, and the penalty was revoked.In conclusion, the Tribunal found that the penalty under section 271(1)(c) was not applicable in this case as the additions were based on estimates and not due to concealment or furnishing inaccurate particulars of income. By referencing judgments from higher courts, the Tribunal determined that the penalty should be deleted. The Tribunal set aside the ld. CIT(A)'s order and directed the AO to remove the penalty, ultimately allowing the appeal filed by the assessee.