Recently, the Delhi bench of the ITAT ruled that penalty proceedings under section 271(1)(c) cannot be invoked in case of protective assessment under the provisions of the Income Tax Act, 1961.
In the instant case, the Assessing Officer carried out protective assessment against which the assessee had not filed appeal. Subsequently, penalty u/s 271(1)(c) was initiated against the assessee. The assessee contended before the ITAT that penalty cannot be proceeded against a protective assessment.
The Judicial Member found that it is well settled law that the assessmen tproceedings and penalty proceedings are separate and distinct as held by the Hon’ble Supreme Court in the case of Anatharam Veerasinghaiah & Co. vs. CIT. Relying on the decision of the Apex Court in the case of Sir Shadilal Sugar & General Mills Ltd, the Learned Member found that merely because an addition has not been contested, it cannot be presumed that the addition represents concealed income.
It was further noted that the imposition of penalty in connection with a protected assessment/addition on estimated basis is against the law laid down by the Gujarat High Court in the case of M/s Bahilal Manilal Patel vs. CIT.
“I further find that section 271(1)(c) postulates imposition of penalty for furnishing of inaccurate particulars and concealment of income. On the facts and circumstances of this case the assessee’s conduct cannot be said to be contumacious so as to warrant levy of penalty.” The Judicial Member said.Accordingly, the penalty proceedings were quashed.
Read the full text of the Order below.
