2021 (7) TMI 460 - AT - Income Tax

Tribunal quashes CIT(A)'s order, cites lack of legal basis

The Tribunal allowed the appeal filed by the assessee, quashing the entire order passed by the CIT(A) and directing the Assessing Officer not to give ... Penalty u/s 271(1)(c) - Power of CIT(A) to issue directions to the AO for levy of penalty on Estimation of income - Low GP - HELD THAT:- CIT(A) has proceeded as if he is setting in revision of the order u/s 263 and he has done enhancement. Enhancement is also on a very absurd reasoning that the GP is very low. Reasoning adduced by the assessee has totally been ignored. Just because the GP rate is low as compared to earlier years that is not conclusive proof that income is suppressed. Hon'ble Punjab & Haryana High Court in the case of Commissioner of Income Tax Vs. Ajay Kumar Singla [2014 (10) TMI 709 - PUNJAB & HARYANA HIGH COURT] has held that lower GP may be cause for investigation but that is not the cause for increase in the assessment. Hence, this limb of learned CIT(A)’s decision is totally devoid of cogency and the same is liable to be quashed An assessment based upon low GP without recording any reason of inaccurate particulars involved is not sustainable. Thereafter learned CIT(A) has given direction to the Assessing Officer to levy penalty equivalent to 100% tax under section 271(1)(c) of the Act. Mere estimate of income cannot fasten liability upon the assessee u/s.271(1)(c) of the Act. In Reliance petro products, it was held that mere disallowance cannot ipso facto fasten liability u/s.271(1)(c) of the Act. Further, it is settled law that learned CIT(A) has no power whatsoever to remit the matter to the Assessing Officer to pass a penalty order as per his direction. In this view of the matter order of learned CIT(A) is perverse and is liable to be quashed. - Decided in favour of assessee. Issues:1. Appeal against order under section 271(1)(c) of the Income Tax Act, 1961.2. Condonation of delay in filing appeal.3. Direction to levy penalty under section 271(1)(c) by the CIT(A).4. Enhancement of income by CIT(A) and subsequent penalty imposition.Issue 1: Appeal against order under section 271(1)(c) of the Income Tax Act, 1961:The case involved an appeal by the assessee against the order of the Commissioner of Income Tax (Appeals) under section 271(1)(c) of the Income Tax Act, 1961. The Assessing Officer had made an addition to the income of the assessee, alleging that income was wrongly deferred in a previous assessment year. The CIT(A) upheld the addition and further enhanced the income, leading to the imposition of a penalty under section 271(1)(c) for furnishing inaccurate particulars of income.Issue 2: Condonation of delay in filing appeal:The assessee requested the condonation of delay in filing the appeal, which was considered by the Tribunal. The delay was sought to be condoned, and the appeal was decided accordingly.Issue 3: Direction to levy penalty under section 271(1)(c) by the CIT(A):The CIT(A) directed the Assessing Officer to levy a penalty under section 271(1)(c) of the Income Tax Act, 1961, based on the enhancement of income made by the CIT(A). The CIT(A) concluded that the appellant had evaded tax by furnishing inaccurate particulars of income, leading to the imposition of the penalty.Issue 4: Enhancement of income by CIT(A) and subsequent penalty imposition:The CIT(A) enhanced the income by estimating the net profit for certain wings of a project, disregarding the reasons provided by the assessee for the lower profit. The CIT(A) issued a notice for penalty under section 271(1)(c) without finding any inaccurate particulars of income in the assessment order. The Tribunal found the CIT(A)'s decision to be devoid of cogency and quashed the order, stating that the mere estimate of income cannot warrant a penalty under section 271(1)(c) of the Act. The Tribunal also highlighted that the CIT(A) had no power to remit the penalty matter to the Assessing Officer, ultimately allowing the appeal filed by the assessee.In conclusion, the Tribunal quashed the entire order passed by the CIT(A) and directed the Assessing Officer not to give effect to any part of the CIT(A)'s decision. The appeal filed by the assessee was allowed, emphasizing the lack of legal basis and perversity in the CIT(A)'s order.