Appeal Successful: Tribunal Deletes Penalty Under Section 271(1)(c), Citing No Concealment of Income by Assessee

The Tribunal allowed the appeal, directing the deletion of the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. It found no concealment of income by the assessee, as the addition was based on deeming provisions rather than inaccurate particulars. The Tribunal referenced the SC decision in CIT vs. Reliance Petro Products Pvt. Ltd., emphasizing that an unsustainable claim does not warrant a penalty. Thus, the penalty imposed by the AO was not justified, and the Tribunal ordered its removal.

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Issues Involved:
1. Sustaining the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961.
2. Interpretation and application of Explanation 1 to Section 271(1)(c) of the Act.
3. Whether the assessee furnished inaccurate particulars of income.

Summary:

1. Sustaining the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961:
The appeal was filed by the assessee against the order of the Commissioner of Income Tax (Appeals)-24, New Delhi, which sustained the penalty levied under Section 271(1)(c) of the Income Tax Act, 1961. The penalty was originally imposed by the Assessing Officer (AO) following an addition of Rs. 4,73,526/- as deemed dividend under Section 2(22)(e) of the Act.

2. Interpretation and application of Explanation 1 to Section 271(1)(c) of the Act:
The AO imposed the penalty by invoking Explanation 1 to Section 271(1)(c), alleging that the explanation offered by the appellant was not acceptable. However, the Tribunal found that Explanation 1 could only be invoked in cases of concealment of income, not for furnishing inaccurate particulars of income. The Tribunal cited the case of Tristar Intech Pvt. Ltd. vs. ACIT, which held that Explanation 1 is a deeming provision applicable when an amount is added or disallowed in the computation of total income, representing income in respect of which particulars have been concealed.

3. Whether the assessee furnished inaccurate particulars of income:
The Tribunal observed that the assessee had disclosed all relevant details, including the shareholding pattern and the accumulated profits of the lender company. The addition of Rs. 4,73,526/- was made based on deeming provisions and not due to any inaccurate particulars furnished by the assessee. The Tribunal referred to the Supreme Court's decision in CIT vs. Reliance Petro Products Pvt. Ltd., which held that merely making an unsustainable claim does not lead to the levy of penalty under Section 271(1)(c).

Conclusion:
The Tribunal concluded that there was no concealment of particulars of income by the assessee to attract penalty under Section 271(1)(c) of the Act. Consequently, the AO was directed to delete the penalty levied. The appeal of the assessee was allowed, and the order was pronounced in the open court on 16/10/2023.

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