2014 (6) TMI 937 - AT - Income Tax

Penalty u/s 271(1)(c) - bogus expenditure - CIT(A) deleted the addition - Held that - A clear finding is given by CIT(A) that no positive material is brought by the Assessing Officer on record to indicate that the said expenditure claimed by the assessee was bogus and/or the assessee had concealed its income or had furnished inaccurate particular of the income. These findings of the CIT(A) could not be controverted by learned D.R. of the Revenue. We also find that it is noted by the Assessing Officer in the penalty order that in the course of assessment proceedings the assessee has filed details of various expenses but was unable to furnish complete vouchers in respect of expenses claimed. It is also noted by the Assessing Officer in the penalty order that the books of account of the assessee were rejected by the Assessing Officer u/s 145(3) of the Act and the Assessing Officer estimated the income by allowing expenses on estimate basis. Under these facts the judgment of Naresh Chand Agarwal vs. CIT 2013 (6) TMI 68 - ALLAHABAD HIGH COURT by Learned A.R. of the assessee is squarely applicable. In that case also the income was assessed by the Assessing Officer by applying the net profit rate of 8% and it was held by Hon ble High Court that when the addition is made on estimate basis no penalty u/s 271(1)(c) can be imposed. In the present case also the disallowance is made on estimate basis and respectfully following this judgment we are of the considered opinion that there is no infirmity in the order of CIT(A) and therefore we decline to interfere in the order of CIT(A). - Decided in favour of assessee

Summary

Issues:
1. Penalty under section 271(1)(c) for assessment year 2008-2009.

Analysis:
The appeal before the Appellate Tribunal ITAT Lucknow concerned the Revenue's challenge against the order passed by the CIT (A) for the assessment year 2008-2009, specifically regarding the deletion of a penalty of Rs. 35,00,000 under section 271(1)(c). The grounds raised by the Revenue primarily focused on the alleged error in law and facts by the CIT (A) in deleting the penalty and the need to restore the Assessing Officer's order. The Revenue contended that the expenses were not verifiable due to the absence of bills and vouchers, leading to the conclusion that the assessee had filed inaccurate particulars of income. The Revenue's arguments were supported by the Departmental Representative, while the assessee's position was backed by reliance on a judgment of the Allahabad High Court.

Upon reviewing the submissions, the Tribunal analyzed the issue in detail. The CIT (A) had based the decision on various factors, emphasizing the distinction between quantum proceedings and penalty imposition under section 271(1)(c). The CIT (A) highlighted that the mere acceptance of an addition by the assessee in a previous year did not necessarily imply concealment of income or furnishing inaccurate particulars. The Tribunal noted that the Assessing Officer had not conducted further inquiries but relied on existing findings, lacking positive evidence of concealment or inaccurate particulars. The accounts were audited, expenses were recorded, and bills were available except for certain cases, which did not automatically warrant a penalty under section 271(1)(c).

Furthermore, the Tribunal referenced relevant case laws to support the position that penalties should not be imposed solely on estimate basis without substantial evidence. The discussion also touched upon the Explanation to section 271(1)(c), clarifying that penalties require more than just a lack of evidence but actual proof of malafide intent. In this case, the Tribunal found that the assessee had discharged its burden under the Explanation, reinforcing the decision to delete the penalty.

Ultimately, the Tribunal upheld the CIT (A)'s order, emphasizing the lack of concrete evidence of concealment or inaccurate particulars, the reliance on estimates for additions, and the absence of sufficient grounds for penalty imposition. The judgment aligned with precedents where penalties were not warranted solely on estimated additions, leading to the dismissal of the Revenue's appeal.