Penalty u/s 271(1)(c) cannot be made for Income Tax Additions made on ad-hoc basis: ITAT [Read Order]

The Income Tax Appellate Tribunal (ITAT), New Delhi Bench held that penalty under Section 271(1)(c) of the Income Tax Act, 1961 cannot be made for additions made on ad-hoc basis.

The assessee, Vinod Oberoi contended that the penalty notice issued under section 271(1)(c) is bad in law as the notice does not specify whether penalty is levied for concealment of income or for furnishing inaccurate particulars of income.

On perusal of the notice issued u/s 274 read with section 271(1)(c) of the Income Tax Act it was observed that the notice issued was stereotyped and the Assessing officer has not specified any limb or charge for which the notice was issued i.e., either for concealment of particulars of income or furnishing of inaccurate particulars of such income. It can be seen from the notice issued u/s 274 read with section 271(1)(c) of the Income Tax Act, Assessing Officer did not strike off irrelevant limb in the notice specifying the charge for which notice was issued.

A Division Bench consisting of G S Pannu, President and Challa Nagendra Prasad, Judicial Member observed that “The notice issued by the Assessing Officer was bad in law if it did not specify under which limb of section 271(1)(c ) of the Income Tax Act the penalty proceedings had been initiated i.e. whether for concealment of particulars of income or for furnishing of inaccurate particulars of income.”

“Even on merits penalty under section 271(1)(c ) of the Income Tax Act is not leviable since the addition made by the Assessing Officer is on account of ad-hoc estimation of net profit at 8% on the un-reconciled turnover as per books and as per Form 26AS and the addition is only of Rs.98,863/-. Additions made on ad-hoc basis on estimation does not attract penalty under section 271(1)(c) of the Income Tax Act as there is no conclusive proof of concealment of income or furnishing of inaccurate particulars of income. Therefore, even on merits penalty is liable to be deleted.”

To Read the full text of the Order CLICK HERE

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