2021 (8) TMI 1039 - AT - Income Tax

ITA overturns penalty under section 271(1)(c) for inaccurate income particulars

The ITAT allowed the Assessee's appeal against a penalty order under section 271(1)(c) of the Income Tax Act for AY 2013-2014. The Assessee's penalty for ... Levy penalty u/s. 271(1)(c) - furnishing of inaccurate particulars of income - disallowance was made on ad hoc and estimated basis being 15% - HELD THAT:- Admittedly, there was no addition made by the authorities below on estimated basis. In fact all the expenses claimed by the assessee against impugned short term capital gain were treated as bogus and therefore 100% expenses were disallowed. However, the ITAT in the own case of the assessee in quantum proceedings [2019 (9) TMI 948 - ITAT AHMEDABAD] has restricted the disallowance to the tune of 15%. As per the earlier decision, there remains no ambiguity that addition were reduced by the ITAT to extent of 15% which is purely on estimated basis and balance amount to the tune of 85% has been treated as genuine. Thus it can be inferred that there was no deliberate act on the part of the assessee to furnish inaccurate particulars of income. In our considered view there cannot be any penalty in the hands of the assessee. For this preposition we draw strength from the judgment of Hon'ble Gujarat High Court in the case of Ramesh Chandra A Shah [2016 (8) TMI 1389 - GUJARAT HIGH COURT] We also draw support and guidance from the order of this Tribunal in the case of Maradia Copper Extrusion(P) Ltd [2017 (4) TMI 249 - ITAT AHMEDABAD] - We are of the view that the assessee cannot be visited with the penalty u/s. 271(1)(c) of the Act as the penalty was levied on the income determined on estimated basis. Hence the ground of appeal of the assessee is allowed. Issues:- Appeal against penalty order under section 271(1)(c) of the Income Tax Act, 1961 for Assessment Year 2013-2014.Analysis:1. The appeal was filed by the Assessee against the order of the Commissioner of Income Tax (Appeals) confirming the penalty under section 271(1)(c) of the Act. The Assessee contended that the penalty was wrongly imposed for furnishing inaccurate particulars of income.2. The facts revealed that the Assessee declared income under various heads, including short term capital gain. The Assessee claimed expenses on sand, bricks, and matipuran, which the Assessing Officer (AO) found to be bogus during assessment proceedings. Consequently, the AO disallowed these expenses and added them to the Assessee's total income. The penalty proceedings under section 271(1)(c) were initiated and a penalty of Rs. 15,79,620 was levied.3. The Assessee appealed to the Commissioner of Income Tax (Appeals), who upheld the AO's order, leading to the current appeal before the ITAT.4. The Assessee argued that the disallowance made by the ITAT in the quantum proceedings was only 15% of the claimed expenses, indicating an estimated basis for the disallowance. Citing relevant case law, the Assessee contended that penalties cannot be imposed based on estimated additions.5. The ITAT considered the contentions of both parties and noted that the disallowance by the ITAT was indeed on an estimated basis of 15%, with the remaining 85% treated as genuine. Therefore, it was inferred that there was no deliberate attempt by the Assessee to furnish inaccurate particulars of income.6. Relying on the judgments of the Gujarat High Court and a previous Tribunal order, the ITAT concluded that no penalty should be imposed on the Assessee as the income was determined on an estimated basis. The appeal of the Assessee was allowed, overturning the penalty under section 271(1)(c) of the Act.7. In the final order, the ITAT allowed the appeal of the Assessee, emphasizing that the penalty could not be upheld as it was based on estimated additions. The judgment was pronounced on 17/08/2021 at Ahmedabad.