2021 (9) TMI 631 - AT - Income Tax

Tax Penalty Deleted for Assessment Year 2011-12 | Estimation Basis | Commissioner Decision Upheld

The Tribunal upheld the deletion of the penalty under section 271(1)(c) of the Income Tax Act for the assessment year 2011-12. It emphasized that ... Penalty u/s 271(1)(c) - Estimation of income on bogus purchases - assessee has accepted the addition made by the Assessing Officer on account of ₹ 6,27,311 being 12.5% of bogus purchases - HELD THAT:- Since the assessee refrained to contest the addition/disallowance made by the Assessing Officer before the first appellate authority, the Assessing Officer cannot impose penalty under section 271(1)(c) of the Act alleging that the assessee has furnished inaccurate particulars of income thereby concealing particulars of income, particularly when income was estimated on percentage basis upon the alleged bogus purchase. Consequently, we find no cogent reason to disturb the order passed by the learned Commissioner (Appeals) as well warrants us to interfere in the order of the first appellate authority either. - Decided against revenue. Issues:Challenge to deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner (Appeals) for assessment year 2011-12.Analysis:The Revenue challenged the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961 by the Commissioner (Appeals) for the assessment year 2011-12. The case involved the assessee, a firm, filing its return of income declaring total income at Rs. 2,19,630, which was re-opened by the Assessing Officer under section 147 of the Act based on information received. The Assessing Officer made an addition on account of non-genuine purchases, initiating penalty proceedings under section 271(1)(c) of the Act. The penalty was imposed on the grounds of furnishing inaccurate particulars of income, concealing income prejudicial to the Revenue's interests. The assessee contested the penalty imposition before the Commissioner (Appeals).During the first appellate proceedings, the assessee argued that the ad-hoc addition by the Assessing Officer was based on suspicious purchases, which should not lead to penalty imposition under section 271(1)(c) of the Act. The Commissioner (Appeals) deleted the penalty, citing a Tribunal decision that similarly ruled in favor of the assessee in a comparable case involving alleged bogus purchases. The Commissioner (Appeals) emphasized that the penalty cannot be levied when additions are made on an estimation basis and supported by bonafide claims with documentary evidence, even if inconclusive due to lack of supplier confirmation.The Revenue, aggrieved by the Commissioner (Appeals) order, appealed before the Tribunal. Despite the absence of the respondent or authorized representatives during the hearing, the Tribunal considered the submissions of the Departmental Representative and the material on record. The Tribunal noted that the assessee had accepted the addition made by the Assessing Officer on bogus purchases, leading to the penalty imposition. However, since the assessee did not contest the addition/disallowance before the first appellate authority, the Tribunal held that penalty under section 271(1)(c) cannot be imposed based on estimated income from alleged bogus purchases. Consequently, the Tribunal upheld the Commissioner (Appeals) order, dismissing the Revenue's appeal.In conclusion, the Tribunal upheld the deletion of the penalty under section 271(1)(c) of the Act for the assessment year 2011-12, emphasizing that penalties cannot be imposed when additions are made on an estimation basis without contestation by the assessee.