Tribunal cancels penalty under Income Tax Act 271(1)(c) due to income estimation, no concealment found

The Tribunal allowed the appeal of the assessee, directing the Assessing Officer to delete the penalty imposed under section 271(1)(c) of the Income Tax Act. This decision was based on the Tribunal's finding that since the income had been estimated at 12.5% in the quantum proceedings, the penalty could not be justified. The Tribunal emphasized that in cases involving income estimation, the penalty for inaccurate particulars of income or concealment could not be imposed. Consequently, the Commissioner of Income Tax (Appeals)'s decision affirming the penalty imposition was set aside, and the penalty was deleted.

---

---

Issues:
Confirmation of penalty under section 271(1)(c) of the Act.

Analysis:
The appeal was filed by the assessee against the Commissioner of Income Tax (Appeals) order confirming a penalty of &8377; 5,53,318 imposed by the Assessing Officer under section 271(1)(c) of the Income Tax Act for the assessment year 2009-10. The assessment was done under section 143(3) read with section 147, where income was assessed at &8377; 20,45,180 by adding &8377; 16,54,146 on account of bogus purchases. Penalty proceedings were initiated for furnishing inaccurate particulars of income and concealment of income particulars. The AO levied a penalty equal to 100% of the tax sought to be evaded. The Commissioner of Income Tax (Appeals) affirmed the AO's decision, justifying the penalty imposition.

In the appellate proceedings, the assessee argued that a co-ordinate bench of the Tribunal had allowed a partial appeal in quantum by directing the AO to apply a profit rate of 12.5% on the bogus purchases. The assessee contended that since the income was estimated at 12.5%, the penalty should not be imposed. The argument was based on the disparity between the AO's addition of 100% and the Tribunal's decision on 12.5% estimation. The assessee requested the bench to set aside the CIT(A)'s order and direct the AO to delete the penalty. On the contrary, the Revenue strongly supported the lower authorities' orders.

After considering the arguments and reviewing the case, the Tribunal found that the income had been estimated at 12.5% by the co-ordinate bench in the quantum proceedings, reducing the initial addition made by the AO. The Tribunal concluded that in such a scenario where income estimation was involved, the penalty under section 271(1)(c) could not be imposed. Therefore, the Tribunal set aside the CIT(A)'s order and directed the AO to delete the penalty. As a result, the appeal of the assessee was allowed, and the order was pronounced in the open court on 20.05.2019.

---