Mere existence of Addition on Income during Assessment Proceedings does not attract Income Tax Penalty: ITAT [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) has held that the mere existence of addition on income during assessment proceedings does not attract Income Tax Penalty.

The appellant, Bhikhabhai Ambalal Patel, filed an income tax returns for the A.Y. 2008-09 and A.Y. 2013-14 declaring gross total income of Rs.2,85,560/- and Rs.14,72,744/-respectively.

The Assessing Officer in A.Y. 2008-09 made the addition of Rs.3,61,733/- on account of cash deficit and in A.Y. 2013-14 made the addition of Rs.9,89,864/- on account of depreciation, the disallowance under Section 40(a)(ia) of the Act as well as unexplained cash deposit and undisclosed interest income. The penalty under Section 271(1)(c) of the Act was imposed in both the assessment years by the Assessing Officer. The appeal before CIT (A) was dismissed and filed a second appeal before the ITAT.

The counsel for the assessee Mr. Harshadbhai Parmar, by relying the decision Apex Court in CIT vs. Reliance Petroproducts Pvt. Ltd., submitted that mere existence of addition during the assessment proceedings does not attract provisions of Section 271(1)(c) of the Act.

The Coram of Ms. Suchitra Kamble, Judicial Member and Mr. Waseem Ahmed, Accountant Member has held that “the CIT(A) has not pointed out as to on what basis the penalty was imposed. In fact, notice under

Section 274 read with Section 271(1)(c) of the Act has also not revealed the proper limb of invocation of Section 271(1)(c) penalty. Besides, the additions made by the Assessing Officer do not contemplate that there is the concealment of income or filing of inaccurate particulars of income on the part of the assessee. Therefore, the penalty does not survive. Hence, both the appeals of the assessee are allowed”.

Mr. R.R. Makwana appeared on behalf of the revenue.

To Read the full text of the Order CLICK HERE

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