2016 (5) TMI 759

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...., ghee etc. He carries on business under the name and style M/s N.R.Trading Co. He filed return of income for the A.Y. 2009-10 on 30.9.2009 declaring net profit of Rs. 87,713/-. The A.O. completed the assessment u/s 143(3) of the Act on 27.12.2011 determining the total income at Rs. 90,06,406/-. He made an addition of Rs. 89,18,693/- u/s 69 of the Act. The assessee carried the matter in appeal. Penalty proceedings u/s 271(1)(c ) of the Act were initiated by the AO and there after a show cause notice was issued to the assessee. No penalty was levied by the AO thereafter. Hence the proceedings for levy of penalty were dropped by the A.O. 2.1. The Ld.CIT(A), Muzaffarnagar in his order dt. 16.1.2013 deleted the addition of Rs. 89,18,693/-. H....

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....1) (c) ,which is not payable under the Income Tax Act. 2. That in any case and in any view of the matter Ld.CIT(A) has erred in law in imposing the penalty, while the appellant was in bona fide belief about the income taxable in the name of Rajeev kumar and sons and Smt. Satya Wati, mother of the appellant which the CIT(Appeal ) sustained in the income of the appellant on estimate basis and impose the penalty thereon @300% and, as the assessment order is not sustainable on various legal and factual grounds and more so by recording incorrect facts and finding. 3. That the penalty u/s 271 (1) (c) has been wrongly imposed where the addition was made on estimate basis in the income of the appellant. 4. That having regard to the facts a....

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....s not lead to the inference that the said addition is on account of concealment if the assessee has offered an explanation which is not found to be false. The mere fact that the assessee agreed to pay tax and did not challenge the assessment order does not mean that his conduct is mala fide. The following principles apply: (a) Penalty under Section 271(1)(c) is a civil liability. (b) Mens rea is not an essential element for imposing penalty for breach of civil obligations or liabilities. (c) Wilful concealment is not an essential ingredient for attracting civil liability. (d) Existence of conditions stipulated in Section 271(1)(c) is a sine qua non for initiation of penalty proceedings under Section 271. (e) The existence of ....

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....ng Officer in the assessment order. (l) Only when no explanation is offered or the explanation offered is found to be false or when the assessee fails to prove that the explanation offered is not 'bonafide, an order imposing penalty could be passed. (m) If the explanation offered, even though not substantiated by the assessee, but is found to be bonafide and all facts relating to the same and material to the computation of his total income have been disclosed by him, no penalty could be imposed. (n) The direction referred to in Explanation IB to Section 271 of the Act should be clear and without any ambiguity. (o) If the Assessing Officer has not recorded any satisfaction or has not issued any direction to initiate penalty p....