This article provides an in-depth analysis of ITA No. 1432/DEL/2020, involving Sahdev Jewellers of New Delhi and the Assistant Commissioner of Income Tax (ACIT) Circle-51(1), New Delhi. The case pertains to the assessment year 2011-12 and was filed on July 22, 2020. The final tribunal order was pronounced on January 31, 2023.
Sahdev Jewellers, located at 2481/9, 2nd Floor, Gurudwara Road, Karol Bagh, New Delhi, filed an appeal against the assessment order dated January 30, 2014, passed under section 143(3) of the Income Tax Act, 1961. The appeal was heard by the Income Tax Appellate Tribunal (ITAT), Delhi Bench ‘G’, New Delhi, with Shri Anil Chaturvedi serving as the Accountant Member and Shri N.K. Choudhry as the Judicial Member. The appeal was related to the imposition of penalty under section 271(1)(c) of the Income Tax Act.
The appellant originally filed a return of income declaring a total income for the assessment year 2011-12. The return was processed under section 143(1) of the Income Tax Act. Subsequently, the case was selected for scrutiny, and the assessment was framed under section 143(3), resulting in several additions to the declared income.
The primary issues in this case were the following additions made by the Assessing Officer (AO):
The appellant, represented by Shri Rajiv Saxena, Shri Shyam Sunder, and Shri Dishant Sethi, argued that the additions were unjustified and the penalty imposed under section 271(1)(c) of the Income Tax Act was not warranted. They contended that the books of accounts were rejected arbitrarily and that the firm had been assessed under section 143(3) for several consecutive years with routine disallowances.
The Revenue Department, represented by Ms. Meenakshi Dohre, Senior Departmental Representative (DR), supported the orders of the authorities below and opposed the appellant’s submissions.
The ITAT bench, after considering the arguments and perusing the records, found inconsistencies in the orders of the authorities below. The tribunal noted that the satisfaction recorded by the AO for initiating penalty proceedings was not clear under which limb (concealment of particulars or furnishing inaccurate particulars) the penalty was being initiated.
The tribunal observed that the AO used a slash between “concealment of particulars” and “submission of inaccurate particulars” of income in the assessment order, indicating a lack of clarity. Furthermore, the penalty order and the impugned order by the CIT(A) were not in sync regarding the basis for the penalty.
The tribunal also noted that the income of the assessee was assessed on an estimated basis after rejecting the book results. Various courts have held that penalty under section 271(1)(c) is not attracted where income is assessed on an estimated basis unless there is cogent evidence of concealment or furnishing inaccurate particulars.
The ITAT concluded that the penalty imposed by the AO and affirmed by the CIT(A) was not justified due to the lack of clear satisfaction and the estimation basis of the assessment. The tribunal allowed the appeal and deleted the penalty.
This case highlights the importance of clear and specific satisfaction by the AO when initiating penalty proceedings under section 271(1)(c) of the Income Tax Act. It also emphasizes that penalties should not be imposed on income assessed on an estimated basis without clear evidence of concealment or inaccurate particulars.
For taxpayers, this case underscores the necessity of maintaining thorough records and ensuring clarity in all submissions to avoid unwarranted penalties. It also serves as a reminder of the importance of appealing against tax assessments and penalties that do not fully consider the legislative framework and judicial precedents.
In conclusion, the decision in ITA No. 1432/DEL/2020 reaffirms the need for clear satisfaction for penalty proceedings and highlights the tribunal’s role in ensuring fair application of tax laws and penalties.
Sahdev Jewellers, New Delhi Penalty Appeal for AY 2011-12: ITA 1432/DEL/2020
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