2012 (7) TMI 1181 - AT - Income Tax

Penalty under Section 271(1)(c) challenged after income determined under Section 44AE - penalty set aside as unsustainable

A concealment penalty under Section 271(1)(c) cannot be sustained where the appellate authority directs income to be determined by applying the Section ... - Issues: Whether the penalty under Section 271(1)(c) of the Income-tax Act, 1961 can be sustained where the appellate Tribunal altered the basis of assessment by directing determination of income under Section 44AE of the Income-tax Act, 1961.Analysis: The penalty was levied on the premise that the assessing officer disallowed certain expenses and enhanced receipts, leading to alleged concealment. The appellate Tribunal directed that the income be determined by applying the formula in Section 44AE of the Income-tax Act, 1961, thereby changing the basis on which the additions and the consequent penalty were originally made. Where an appellate determination alters the foundational basis of the assessment such that the original findings of concealment are no longer operative, the continuation of a concealment penalty based on the prior basis is inconsistent with the revised assessment framework.Conclusion: The penalty under Section 271(1)(c) of the Income-tax Act, 1961 is not sustainable in view of the Tribunal's direction to determine income under Section 44AE; decision is in favour of the assessee.Ratio Decidendi: A concealment penalty under Section 271(1)(c) cannot be sustained when the appellate authority has altered the basis of assessment by directing estimation of income under Section 44AE of the Income-tax Act, 1961, thereby removing the factual and legal foundation for the penalty.