The Delhi bench of Income Tax Appellate Tribunal ( ITAT ) recently held that penalty cannot be levied when difference found in the declared income and assessed income is only on the basis of assumption and estimation.
The assessee in the present case is an individual duly filed his return of income for the relevant assessment year and declared a total income of Rs.6,34,886.
During the course of assessment proceedings, the Assessing Officer (AO) noticed that the total receipt as per the Tax Deductible at Source certificate was Rs.48,11,562 which are not matching with the receipts declared in the profit & loss account of the Assessee. Accordingly, the AO imposed the penalty on the said amount on the amount of gross receipt of Rs. 60,88,285 under section 271B of the Income Tax Act 1961 for concealing the true particulars of income and completed the assessment under section 143 (3) of the Act.
On appeal, CIT(A) upheld the action of the AO and confirmed the penalty imposed by him. Thereafter, the Assessee carried the matter before the Tribunal.
After deeply analyzing the facts and circumstances, the Tribunal bench consists of President G.D.Agarwal and Judicial Member Kuldip Singh observed that “notice under section 148 of the Act was issued after about seven years of the end of the financial year which is patently time-barred and as much such, assessment on the basis of which penalty proceedings were initiated, was not sustainable. The division bench further observed that as per law when there is a difference on account of net profit disclosed by the assessee vis-à-vis net profit estimated by the Revenue authorities, no penalty can be imposed and if levy the penalty under section 271(1)(c) of the Act, then the Revenue has to bring on record that there is a concealment of income or furnishing of inaccurate particulars of income”.
The bench further analyzed that, while perusing the available materials on records it can be concluded that the AO has failed to make out the case for initiating the penalty proceedings under the aforementioned section particularly when difference in the declared income and assessed income is on the basis of assumption and estimation only and he merely recorded the standard language that the Assessee has concealed true particulars of income. Consequently, the bench ordered to delete the penalty imposed by the lower authorities and allowed the appeal filed by the Assessee.
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