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Facts
The assessee deposited a significant amount of cash in their bank account. The Assessing Officer initiated penalty proceedings under Section 271(1)(c) of the Income Tax Act, 1961, for assessment years 2009-10, 2010-11, and 2011-12. The CIT(A) upheld these penalty orders.
Held
The Tribunal held that the penalties imposed under Section 271(1)(c) of the Act were unsustainable. This was based on earlier decisions in the assessee's own case where quantum additions were deleted, and consequently, the penalties based on those additions could not survive.
Key Issues
Whether penalties under Section 271(1)(c) are sustainable when the underlying additions to income have been deleted by the Tribunal in prior proceedings or by a co-ordinate bench.
Sections Cited
271(1)(c), 250, 147, 148, 143(3), 274, 271
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, DELHI BENCH “B”: NEW DELHI
Before: SHRI M BALAGANESH & SHRI VIMAL KUMAR
PER VIMAL KUMAR, JUDICIAL MEMBER:
The three appeals of Assessee are against separate orders dated 03.05.2019, 03.05.2019 and 15.07.2016 of Learned Commissioner of Income- Tax (Appeals)-15, Delhi (hereinafter referred as “the Ld. CIT(A)”) under Section 250 of the Income Tax Act, 1961 ( hereinafter referred as “the Act”) arising out of penalty orders dated 23.03.2018, 26.03.2018 and 30.03.2015 of the Income Tax Officer, Ward 45(3), New Delhi (hereinafter referred as “Ld.
AO") under Section 271(1)(c) of the Act for assessment years 2009-10, 2010-11 and 2011-12 respectively.
Since, all three appeals involve similar facts, grounds and issues were heard together for sake of convenience. are that as per information available with the department that assessee deposited cash amounting to Rs.62,59,940/- in his bank account with Punjab National Bank, Vikas Puri, New Delhi during financial year 2008-09. The assessment proceedings were started by issuing notice under Section 148 of the Act on 29.03.2014. Assessee had not filed ITR for financial year 2008-09 relevant to assessment year 2009-10. The assessee submitted before ITO (Inv.) Unir-II (3), New Delhi that cash deposits was the sale proceeds from his proprietorship concern “M/s. Pal Enterprises” but could not produce any documentary evidence to support his claim. In response to the notice under Section 148, the assessee filed ITR for assessment year 2009-10 on 06.08.2014 declaring income of Rs.1,84,800/-. The assessment proceedings under Section 147/143(3) of the Act were completed by Ld. AO vide order dated 30.03.2015 assessing income of Rs.64,44,740/-. Simultaneously, penalty proceedings under Section 271(1)(c) of the Act were initiated. Show-cause- notice for imposing penalty under Section 271(1)(c) of the Act was issued under Section 274 read with section 271 of the Act on 05.03.2018. The assessee has not complied with the notice. Ld. AO vide order dated 23.03.2018 imposed penalty of Rs.4,20,720/- for assessment year 2009-10.
& 5520/Del/2019, Ld. AO passed orders dated 26.03.2018 and 30.03.2015 for assessment years 2010-11 and 2011-12 under Section 271(1)(c) of the Act.
Against orders dated 23.03.2018, 26.03.2018 and 30.03.2015 of Ld. Assessing Officer, appellant/assessee preferred separate appeals before Ld. CIT(A) which were dismissed vide orders dated 03.05.2019, 03.05.2019 and 15.07.2016 respectively.
Being aggrieved, appellant/assessee preferred present appeals with following identical grounds of appeals:
“1. The learned CIT (Appeal) was not justified in confirming the penalty imposed u/s 271(1)(c) of Income Tax Act, 1961.
2. The penalty u/s 271(1)(c) deserves to be imposed where an amount of concealment is evident while in the instant case the income is determined on estimation which itself carries the different income assessed by the A.O. and later determined by CIT (Appeal).
That it is well settled law that where the income assessed itself is on estimation the proviso 271(1)(c) does not attracts.
That the appellant craves their right to amend, delete or add any grounds of appeal at or before the time of hearing.”
7. Learned Authorised Representative for the assessee submitted that the captioned appeals are related to penalty imposed under Section 271(1)(c) of the Act. The quantum’s appeals are still lying before the Hon’ble ITAT. However, it could have entertained as the appeals related to assessment years 2007-08 and 2008-09 have been decided and allowed in both quantum as well as for penalty. Assessment for the captioned appeals along with assessment years 2007-08 and 2008-09 were framed under Section 148/143(3) of the Act where the entire deposits were treated as income, thus, the appellant/assessee was assessed on income as reproduced below:
Asst. year 2007-08 Rs.16,99,648/- Asst. year 2008-09 Rs.35,13,139/- Asst. year 2009-10 Rs.64,44,740/- Asst. year 2010-11 Rs.1,24,10,838/- Asst. year 2011-12 Rs.1,03,38,790/- 7.1 Ld. CIT(A) reduced the income 25% and thus by effect the income was reduced as under:
Asst. year 2007-08 Rs.4,24,912/- That ITAT deleted the Asst. year 2008-09 Rs.8,55,442/- addition vide order dated 09.08.2024. Asst. year 2009-10 Rs.15,64,985/- Asst. year 2010-11 Rs.30,11,617/- Asst. year 2011-12 Rs.25,09,408/- 7.2 The appeal for the penalty was rejected by the Ld. CIT(A) giving the contention that “the appellant has concealed the particulars of its income and the rigorous of penal provisions of section 271(1)(c) are squarely applicable.” The appellant/assessee preferred quantum appeal before Hon’ble ITAT where all the appeals for assessment years 2007-08 to 2011-12 were rejected due to non- compliance of the hearing. However, such dismissal order was bifurcated in 2 parts, one for assessment years 2007-08 and 2008-09 in consolidated manner and other for assessment years 2009-10 to 2011-12 in consolidated manner. Miscellaneous application in this behalf was also preferred before the Hon’ble ITAT in the same manner for assessment years 2007-08 and 2008-09 and for assessment years 2009-10 to 2011-12. The Hon’ble ITAT vide their order dated 09.08.2024 allowed an appeal for assessment years 2007-08 and 2008-09 deleting the penalty for these years.
Learned Authorised Representative for the Department of Revenue submitted that penalty appeals may be heard with quantum appeals.
From examination of record in light of aforesaid rival contentions, it is crystal clear that these appeals are against orders of Ld. CIT(A) upholding penalty orders of Ld. AO for assessment years 2009-10, 2010-11 and 2011-12 respectively.
A Co-ordinate Bench in assessee’s case in 4396/Del/2016, 5516/Del/2016 and 5517/Del/2019 for assessment years 2007- 08 and 2008-09 has observed as under:
“9. We have considered rival submissions and perused materials on record. The fact that the cash deposits appearing in assessee’s bank account in different assessment years are receipts from his business activity has been accepted by the learned first appellate authority. However, he has estimated the income at 25% of the receipts. From the materials placed before us, it is observed that the assessee had not filed any return of income for assessment year 2007-08 to 2011-12. When the cash deposits were found in his bank account, the assessee came forward to disclose income from the profit derived from his business. However, by that time, the limitation for filing return of income had expired for assessment years 2007-08 to 2010-11. Therefore, the assessee offered the entire income for assessment years 2007-08 to 2011-12 by offering income of `5,49,320/- computed by applying 3% net profit rate on the receipts appearing in the bank account. The assessee had also discharged tax liability for the income declared by paying tax of `45,180/-. This is clearly discernible from the copy of the bank challan and chart showing computation of profit placed in the paper book. Thus, the contention of the assessee that it has offered the profit from business to tax is believable. Once the assessee has offered the income to tax in a consolidated manner in assessment year 2011-12, no further addition can be made in the respective assessment years. Accordingly, the additions sustained by learned first appellate authority are hereby deleted.
& 5517/Del/2019 (Appeals arising out of penalty proceedings) 10. Since, while deciding the quantum appeals (supra) we have decided the issues in favour of the assessee and deleted the additions based on which penalties under Section 271(1)(c) of the Act were imposed, the penalties so imposed cannot survive. Accordingly, the penalties imposed are deleted.”
In view of above material facts, respectfully following the judicial precedents in assessee’s own case, it is held that the penalties under Section 271(1)(c) of the Act imposed are unsustainable and are set aside. Accordingly, ground of appeals nos. 1 to 3 are allowed. Ground no.4 is consequential.