2021 (1) TMI 198 - AT - Income Tax

Tribunal quashes penalties for estimated income assessment, citing High Court decisions.

The Tribunal allowed the appeal filed by the assessee for Assessment Years 2007-08 and 2008-09, quashing the penalty under section 271(1)(c). It held that ... Levy of penalty u/s 271(1)(c) - gross receipts should not be assessed to tax but only 60% of the gross receipts, which suggests that the income is finally assessed on estimated basis - HELD THAT:- \From the evidence on record, it is clear that the income was assessed on estimated basis i.e. the rate of 60% of the gross receipts, therefore, the income assessed originally by the Assessing Officer had come down whereas the penalty was levied with respect to the original assessed income by the Assessing Officer. The ld. CIT(A) obviously lost sight of the Tribunal’s order passed in the quantum appeal, however, without dwelling further on this aspect. It is settled position of law that in case where the income is assessed on estimated basis levy of penalty u/s 271(1)(c) of the Act cannot be upheld. - Decided in favour of assessee. Issues Involved:- Appeal against orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2007-08 and 2008-09.- Validity of penalty levied under section 271(1)(c) of the Income Tax Act, 1961.- Whether penalty can be levied when income is assessed on an estimated basis.- Failure to specify the limb of charge for penalty under section 271(1)(c).Analysis:Issue 1: Appeal Against Orders of CIT(A)The appeals were filed by the assessee against orders of the Commissioner of Income Tax (Appeals) for Assessment Years 2007-08 and 2008-09. The Tribunal decided to dispose of the appeals through a common order due to the involvement of identical facts and issues in both cases.Issue 2: Validity of Penalty under Section 271(1)(c)The primary issue in the present appeal was the validity of the penalty levied under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer had imposed a penalty for concealment of income, which was challenged by the appellant. The appellant argued that since the income was assessed on an estimated basis, the penalty could not be upheld. The Tribunal referred to various High Court decisions supporting the position that in cases where income is assessed on an estimated basis, the levy of penalty under section 271(1)(c) cannot be sustained.Issue 3: Penalty on Estimated BasisThe Tribunal observed that the income in question was assessed on an estimated basis at 60% of the gross receipts, resulting in a reduction from the original assessment. Given this, the Tribunal held that the penalty levied with respect to the original assessed income could not be upheld. The Tribunal cited several High Court decisions to support its conclusion that in such cases, the penalty under section 271(1)(c) cannot be sustained.Issue 4: Failure to Specify Limb of Charge for PenaltyThe appellant raised an additional ground questioning the validity of the penalty order, stating that the Assessing Officer had failed to specify the relevant limb of charge for the penalty under section 271(1)(c). The appellant argued that this failure rendered the penalty order bad in law. The Tribunal, however, did not delve into this aspect as it found the penalty could not be sustained due to the estimated basis of income assessment.ConclusionThe Tribunal allowed the appeal filed by the assessee for both Assessment Years 2007-08 and 2008-09, as it quashed the levy of penalty under section 271(1)(c) based on the settled legal position that penalties cannot be imposed when income is assessed on an estimated basis. The Tribunal emphasized that in such cases, the penalty cannot be upheld, citing various High Court decisions in support of its decision.