2021 (9) TMI 677 - AT - Income Tax

Tax Penalty Deleted: Lack of Evidence, Circular Applies, No Bonafide Explanation

The Tribunal upheld the deletion of penalty under section 271(1)(c) of the Income Tax Act, 1961. The revenue's appeal against the Ld. CIT(A)'s decision to ... Penalty levied u/s 271(1) (c) - Bogus purchases - CIT(A) has restricted the addition @ 25% of Bogus Purchases - Whether for the year under consideration the income tax payable on total income was computed under normal provisions of the Act and not on Book profit u/s 115 JB? - HELD THAT:- As decided by CIT-A the Board itself vide circular F No279/Misc/140/2015/ITJ dated 31/12/2015 has directed that for a period prior to 01/04/16, no penalty is leviable with reference to the additions and disallowances made under normal provisions, where the Income Tax payable on the normal income is less than the book profits u/s 115JB. The same has been upheld as such by the Hon'ble Delhi High Court as well in the case of Nalwa Sons Investment Ltd. [2010 (8) TMI 40 - DELHI HIGH COURT] Thus , on these premises also, the penalty is not maintainable. DR could not controvert the observations of the Ld. CIT (A) with any cogent evidence or information. Accordingly, we find that the Ld. CIT (A) has passed a reasoned order and relied on the judicial decision. Accordingly, we do not find any infirmity in the order of the Ld.CIT(A) and uphold the same and dismiss the grounds of appeal of the revenue. Issues:- Justification for deleting penalty under section 271(1)(c) without establishing genuineness of transaction.- Maintainability of penalty under section 271(1)(c) based on CBDT Circular No 25/2015.- Application of penalty under section 271(1)(c) in case of concealment of income.- Deletion of penalty under section 271(1)(c) based on lack of bonafide explanation.- Judicial decisions and principles considered in deleting the penalty.Issue 1: Justification for deleting penalty under section 271(1)(c) without establishing genuineness of transaction:The revenue appealed against the deletion of penalty of Rs. 80,555 under section 271(1)(c) by the Ld. CIT(A) without appreciating the failure of the assessee to establish the genuineness of the transaction with M/s Dev Enterprises. The AO considered the transaction as a bogus one due to lack of proof regarding nature and source of investment.Issue 2: Maintainability of penalty under section 271(1)(c) based on CBDT Circular No 25/2015:The revenue questioned the Ld. CIT(A)'s decision, arguing that the penalty under section 271(1)(c) was maintainable despite the CBDT Circular No 25/2015. The circular exempted penalties in cases where the income tax payable on normal income was less than the book profits under section 115JB, a point upheld by the Hon'ble Delhi High Court in Nalwa Sons Investment Ltd.Issue 3: Application of penalty under section 271(1)(c) in case of concealment of income:The Ld. CIT(A) cited judicial precedents, including the case of Steel Infots Ltd vs. CIT and CIT vs Escorts Finance Ltd, to support the deletion of penalty under section 271(1)(c) based on concealment of income through bogus claims. The decisions highlighted that penalties were justified in cases of concealment or furnishing of inaccurate particulars of income.Issue 4: Deletion of penalty under section 271(1)(c) based on lack of bonafide explanation:The Ld. CIT(A) deleted the penalty of Rs. 80,555 levied under section 271(1)(c) by considering the explanation provided by the assessee as not bonafide. This decision was supported by the Hon'ble Delhi High Court's ruling in the case of Zoom Communications Pvt. Ltd., emphasizing that incorrect claims without basis triggered Explanation I to section 271(1)(c).Issue 5: Judicial decisions and principles considered in deleting the penalty:The Hon'ble Tribunal upheld the Ld. CIT(A)'s decision to delete the penalty under section 271(1)(c) by relying on judicial decisions and principles. The tribunal found no infirmity in the Ld. CIT(A)'s reasoned order, which considered the CBDT Circular, precedents, and lack of evidence from the revenue's side to support the penalty imposition.This detailed analysis covers the various issues raised in the appellate tribunal's judgment regarding the penalty under section 271(1)(c) of the Income Tax Act, 1961.