ITO, WARD - 3(2), THANE vs. RAMMANGAL S.GUPTA, MUMBAI

Brief facts are, the assessee for the year under consideration has filed its return of income on 10th September 2009, declaring total income of ` 2,55,220. Thereafter, scrutiny assessment was made under section 143(3) of the Act assessing income at ` 6,18,610. Subsequently, the case was re–opened under section 148 of the Act and the assessment was completed under section 143(3) r/w section 147 of the Act computing assessed income at ` 68,08,234, after making ad–hoc addition of ` 63,53,010 on account of bogus purchases made from six parties. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Act, for furnishing inaccurate particulars of income. The assessee being aggrieved by the quantum assessment order passed by the Assessing Officer filed appeal before the first appellate authority, wherein the learned Commissioner (Appeals) confirmed the addition of ` 6,19,007, out of the total hawala purchases of ` 61,90,074, and deleted the addition of ` 55,71,067. Accordingly, assessee’s income was revised to ` 12,37,173. The Revenue being aggrieved by this order of the learned Commissioner (Appeals), filed appeal before the Tribunal, wherein the Co–ordinate Bench upholding the order of the learned Commissioner (Appeals) dismissed the Revenue’s appeal.

Now, during the penalty proceedings, the Assessing Officer called sought explanation from the assessee as to why penalty should not be 3 Rammangal S. Gupta imposed under section 271(1)(c) of the Act for filing inaccurate particulars of income. In response, the assessee filed submissions vide her letter dated 31st May 2018, and also in support of her submissions relied upon various case laws. The Assessing Officer carefully perused the submissions and case laws relied upon by the assessee and found that the same is unacceptable as the case laws relied upon by the assessee are distinguishable in nature. From the submissions filed by the assessee, the Assessing Officer was of the view that the ass has filed in accurate particulars of income by making a wrong claim. The Assessing Officer accordingly relying upon the decision of the Hon’ble Orrisa High Court in CIT v/s Indian Metals & Ferro Alloys Ltd., [2994] 117 CTR (Ori.) 378, imposed penalty to the extent of ` 6,19,007, under section 271(1)(c) of the Act. The assessee being aggrieved, is in appeal before the first appellate authority.

The learned Commissioner (Appeals) deleted the penalty so imposed by the Assessing Officer under section 271(1)(c) of the Act. The relevant observations of the learned Commissioner (Appeals) deleting the penalty are as follows:–

In the case of CIT v. Reliance Petro Products (P) Ltd. (2010) 322 ITR 158 (SC) it was held as under:- "'We do not agree, as the assessee had furnished all the details of its expenditure as well as income in its Return, which details, in themselves, were not found to be inaccurate nor could be viewed as the concealment of income on its part. It was up to the authorities to accept its claim in the Return or not. Merely because the assessee had claimed the expenditure, which claim was not accepted or was not acceptable to the Revenue, that by itself would not, in our opinion, attract the penalty under section 271(1)(c). If we accept the contention of the Revenue then in case of every Return where the claim made is not accepted by ao for any reason, the ass will invite penalty u/s 271(1)(c). That is clearly not the intendment of the Legislature.”

The levy of penalty is merely on disallowance of a percentage of purchases and not finding of concealment to reduce taxable

The Revenue being aggrieved by the aforesaid order of the learned Commissioner (Appeals) filed appeal before the Tribunal.

Considered the submissions of the learned Departmental Authorities and perused the material on record. We find The Assessing Officer imposed penalty under section 271(1)(c) of the Act on estimation basis without adducing any evidence on record for concealment of income. Penalty under section 271(1)(c) of the Act is liable to be imposed only where the assessee has concealed its particulars of income or furnished inaccurate particulars. Action of making addition on ad–hoc basis does not result into imposition of penalty u/s 271(1)(c) of the Act and hence cannot be termed as either concealment or furnishing of inaccurate particulars of income. We find

Even the learned Departmental Authorities has not brought any cogent material to prove otherwise warranting interference at the instance of the Revenue. In this view of the matter, we are of the considered view that the learned Commissioner (Appeals) was indeed justified in directing the Assessing Officer to delete the penalty, as there was no concealment of income on the part of the assessee have been proved by the Revenue and additions made on estimation by the Assessing Officer do not call for initiation of penalty. Consequently, we uphold the order passed by the learned Commissioner (Appeals) by dismissing the grounds of appeal raised by the Revenue.