2020 (10) TMI 1146 - AT - Income Tax

Tribunal upholds deletion of penalty under Sec. 271(1)(c) for unproved claims

Income Tax Officer, Ward 1 (4), Thane Versus M/s Lotus Dyes and Chemicals

Income Tax Officer, Ward 1 (4), Thane Versus M/s Lotus Dyes and Chemicals - TMI Issues:- Appeal against orders passed by CIT(A) under Sec. 271(1)(c) for A.Ys. 2009-10 & 2010-11.- Justification for deleting penalty u/s 271(1)(c) by CIT(A).- Compliance with CBDT's Instruction No. 3/2018.- Validity of penalty imposition by A.O under Sec. 271(1)(c).Analysis:1. The appeals were filed against orders passed by CIT(A) under Sec. 271(1)(c) for A.Ys. 2009-10 & 2010-11. The A.O disallowed purchases claimed by the assessee based on information received from the Sales Tax Department. The CIT(A) reduced the disallowance, leading to a penalty imposition by the A.O under Sec. 271(1)(c). The CIT(A) later vacated the penalty, leading to the current appeal by the revenue.2. The main issue was the justification for deleting the penalty u/s 271(1)(c) by the CIT(A). The A.O imposed the penalty due to unproved purchases, but the CIT(A) found that disallowance of purchases did not automatically warrant a penalty. The Tribunal upheld the CIT(A)'s decision based on the principle that no penalty can be imposed if the facts are consistent with the possibility that the amount does not represent concealed income.3. The appellant raised the issue of compliance with CBDT's Instruction No. 3/2018. However, the Tribunal did not find this argument sufficient to uphold the penalty imposition under Sec. 271(1)(c). The Tribunal focused on the lack of concrete evidence disproving the authenticity of the purchases claimed by the assessee, leading to the deletion of the penalty.4. The Tribunal analyzed the validity of penalty imposition by the A.O under Sec. 271(1)(c). It was observed that the disallowance was based on estimation rather than concrete evidence. As the revenue failed to disprove the authenticity of the purchases, the Tribunal upheld the deletion of the penalty. The decision was supported by legal precedents emphasizing the need for concrete evidence to justify penalty imposition.In conclusion, the Tribunal dismissed the appeals filed by the revenue, upholding the deletion of the penalty u/s 271(1)(c) by the CIT(A) for both A.Ys. 2009-10 and 2010-11. The decision was based on the lack of concrete evidence disproving the authenticity of the purchases claimed by the assessee, emphasizing the principle that unproved claims do not automatically warrant a penalty under Sec. 271(1)(c).