Poonam Sharma vs Addl. CIT: Penalty on Concealment of Income – ITA 6586/DEL/2019

Poonam Sharma vs Addl. CIT: A Case of Penalty on Alleged Concealment of Income – ITA 6586/DEL/2019

The case of Poonam Sharma vs Additional Commissioner of Income Tax (Addl. CIT), Special Range-5, New Delhi revolves around the imposition of a penalty for the alleged concealment of income under Section 271(1)(c) of the Income Tax Act, 1961. The appeal was filed by Poonam Sharma against the order passed by the CIT(A)-5, New Delhi, for the assessment year 2014-15. The final order, pronounced by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘F’, was delivered on November 30, 2022.

Background of the Case

In the assessment year 2014-15, Poonam Sharma, a resident of New Delhi, filed her income tax return. During the scrutiny assessment, the Assessing Officer (AO) made certain additions to her income, particularly disallowing her claim of agricultural income, which had been regularly declared and accepted in the past. Based on these additions, the AO initiated penalty proceedings under Section 271(1)(c) for alleged concealment of income and furnishing inaccurate particulars of income.

Poonam Sharma appealed against the penalty order to the CIT(A), arguing that the penalty was imposed in haste and without a justified case of concealment or furnishing of inaccurate particulars. She contended that the penalty proceedings were not automatic and that the mere addition or disallowance of income was not sufficient to warrant the imposition of a penalty. Despite these arguments, the CIT(A) upheld the penalty, leading to Poonam Sharma filing an appeal before the ITAT.

Grounds of Appeal

Poonam Sharma raised several grounds in her appeal before the ITAT, challenging the validity of the penalty imposed by the AO. The primary grounds of appeal were as follows:

• The penalty order was passed in haste during the pendency of the quantum appeal, without adequately considering the facts and circumstances of the case.
• The AO failed to make a justified case for the imposition of penalty, as the penalty proceedings are not automatic and require a clear demonstration of concealment or furnishing of inaccurate particulars.
• The additions made during the assessment were incorrect, particularly concerning the agricultural income, which had been consistently declared and accepted in previous years, including AY 2013-14.

ITAT’s Findings and Decision

During the hearing on November 28, 2022, the ITAT bench, comprising Dr. B. R. R. Kumar (Accountant Member) and Sh. Yogesh Kumar US (Judicial Member), examined the facts and circumstances of the case. It was brought to the Tribunal’s notice that the quantum addition, which formed the basis for the penalty, had already been deleted by the ITAT in a separate order (ITA No. 2619/Del/2018) dated November 23, 2021.

Given that the quantum addition had been deleted, the ITAT held that the penalty levied by the AO could not be sustained. The Tribunal emphasized that when the basis for the penalty no longer exists, the penalty itself must be annulled. The Tribunal, therefore, ruled in favor of Poonam Sharma, allowing her appeal and dismissing the penalty imposed by the revenue authorities.

Conclusion

The case of Poonam Sharma vs Addl. CIT highlights the importance of the underlying quantum addition in penalty proceedings under Section 271(1)(c). In this instance, the deletion of the quantum addition by the ITAT resulted in the annulment of the penalty, underscoring the principle that penalties cannot be sustained when the foundational addition is removed. The ITAT’s decision reaffirms the necessity of a thorough and fair assessment process, where penalties are imposed only when there is clear and undeniable evidence of concealment or furnishing of inaccurate particulars of income.

Poonam Sharma vs Addl. CIT: Penalty on Concealment of Income – ITA 6586/DEL/2019