2018 (11) TMI 1889 - AT - Income Tax

Tribunal overturns penalty under section 271(1)(c) stressing importance of evidence

Shri Anita L. Ghadge Versus D.C.I.T. Circle – 21 (3) Mumbai

The Tribunal ruled in favor of the appellant, directing the deletion of the penalty imposed under section 271(1)(c) of the Act. The decision emphasized ... Penalty u/s. 271(1)(c) - Addition of commission as well as the expenses on an estimate basis which was further reduced by the Ld.CIT(A) - HELD THAT:- None of the authorities below have conclusively proved that there is neither concealment of income nor furnishing of inaccurate particulars by the assessee. It is only a mere disallowance of expenses on estimates on an adhoc basis. Penalty u/s.271(1)(c) of the Act is not attracted when there is an adhoc estimation of disallowance of expenses. Hence, we direct the Assessing Officer to delete the penalty levied U/s. 271(1)(c) of the Act. This ground is allowed. Issues Involved:Appeals against orders of the Learned Commissioner of Income-tax(Appeals) for Assessment years 2007-08 & 2008-09 - Disallowance of commission and expenses - Penalty under section 271(1)(c) of the Act - Additional grounds raised by the assessee.Analysis:Issue 1: Disallowance of Commission and ExpensesThe appellant, engaged in earning commission income by providing services to a company, incurred expenses in the process. The Assessing Officer disallowed a portion of the commission and other expenses due to inadequate accounts. The Ld. CIT(A) reduced the adhoc disallowance but upheld the penalty under section 271(1)(c) of the Act. The appellant argued that expenses were necessary for business promotion and commission earning, and the adhoc disallowance did not warrant a penalty. The Tribunal observed that no conclusive evidence of income concealment existed, and the disallowance was based on estimates. Consequently, the penalty was deemed unwarranted, and the Assessing Officer was directed to delete it.Issue 2: Additional Grounds Raised by the AssesseeThe appellant raised additional grounds challenging the notice under section 274 read with section 271(1)(c) as mechanically issued without proper satisfaction. Despite not delving into these additional grounds due to the penalty deletion on merit, the Tribunal noted the issue for reference. Ultimately, the appeals by the assessee were allowed, and the penalty was set aside.In conclusion, the Tribunal ruled in favor of the appellant, directing the deletion of the penalty imposed under section 271(1)(c) of the Act. The decision highlighted the importance of proper assessment and evidence in disallowance cases to avoid unwarranted penalties.