2024 (7) TMI 898 - AT - Income Tax

Penalty under section 271(1)(c) deleted where quantum additions made on estimated basis using net profit rate

ITAT Chennai held that penalty under section 271(1)(c) was not sustainable where quantum additions were made on estimated basis using 18.40% net profit ... Penalty u/s 271(1)(c) - quantum addition has been sustained on estimated basis by adopting net profit rate of 18.40% - HELD THAT:- The additions which have ultimately been sustained are purely estimated additions. It could also be seen that substantial quantum addition has already been deleted by Ld. CIT(A) considering the findings given by Ld. AO in the remand reports. Therefore, it could very well be said that the action of Ld. AO in making the quantum additions, at the first instance, was only on estimated basis. In such a scenario, the penalty is not sustainable in law considering the ratio of Hon’ble High Court of Madras in the cited case law of CIT vs. P Rojes [2013 (3) TMI 264 - MADRAS HIGH COURT] Mere making of an incorrect claim in law cannot tantamount to furnishing of inaccurate particulars. See Reliance Petroproducts (P) Ltd [2010 (3) TMI 80 - SUPREME COURT]. Thus, respectfully following the same, we delete the impugned penalty on merits, in all the three years. Legality of penalty notice in absence of specific charge in show-cause notice - As we are not impressed with all these grounds considering the facts that several notices were issued to the assessee after framing of assessment order as well as after first appellate orders in quantum appeals. However, the assessee failed to make any effective representation therein and failed to raise any such objections during those proceedings. Therefore, we are not inclined to concur with the legal grounds at this stage of proceedings. Appeals stands partly allowed. Issues:- Challenge to penalty levied under section 271(1)(c) for Assessment Years 2010-11, 2011-12 & 2012-13.- Legal grounds and merits of the impugned penalty.- Whether penalty justified for concealment of income or furnishing inaccurate particulars.- Effect of Tribunal's quantum order on penalty proceedings.- Adequacy of show-cause notices and objections raised by the assessee.Analysis:Issue 1: Challenge to PenaltyThe appeals by the assessee for the mentioned Assessment Years arose from orders confirming penalty under section 271(1)(c) by the Commissioner of Income Tax (Appeals). The assessee contested the penalty on both legal grounds and merits.Issue 2: Legal Grounds and MeritsThe assessee's representative argued against the penalty, citing legal grounds and questioning the absence of specific charges in the show-cause notice. The representative contended that since the additions were based on estimates, penalty imposition was unjustified. The Senior Departmental Representative opposed these arguments, emphasizing the quantum additions upheld by the Tribunal.Issue 3: Justification of PenaltyThe Tribunal reviewed the proceedings before the lower authorities, noting that the assessee, engaged in real estate, had no maintained books of accounts. The Tribunal observed that the quantum additions were estimated and that significant relief was granted in the quantum appeal. The Tribunal referred to a High Court decision and held that penalties cannot be imposed solely on estimated income, deleting the penalties for all three years.Issue 4: Tribunal's Quantum OrderThe Tribunal considered the impact of its quantum order on the penalty proceedings, emphasizing that penalties could not be sustained based on estimated additions. The Tribunal relied on legal precedents to support its decision to delete the penalties.Issue 5: Adequacy of Show-Cause NoticesThe Tribunal addressed the adequacy of the show-cause notices issued to the assessee, noting that despite multiple opportunities, the assessee failed to provide a satisfactory explanation or raise objections effectively. Consequently, the Tribunal did not find merit in the legal grounds raised by the assessee regarding the show-cause notices.In conclusion, the Tribunal partly allowed all three appeals, deleting the penalties imposed under section 271(1)(c) for the mentioned Assessment Years. The Tribunal's decision was based on the principle that penalties cannot be levied solely on estimated income and the inadequacy of objections raised by the assessee during the proceedings.