ITAT: Penalty Under Section 271(1)(c) Cannot be Imposed

The Delhi Income Tax Tribunal has ruled in the case of Sushila Goyal vs ITO that when an addition is made on an estimated basis, no penalty under section 271(1)(c) of the Act can be imposed. This is because, in order to levy a penalty under section 271(1)(c) of the Act, the Assessing Officer (AO) must provide clear evidence that the taxpayer has concealed their income or provided inaccurate details of their income.

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The present issue revolves around the imposition of a penalty under section 271(1)(c) of the Act. It is not disputed that during the relevant year, the taxpayer had received loans and advances from various parties (mentioned on page 2 of the assessment order).

The Assessing Officer (AO), in the absence of satisfactory details, calculated the income at 0.5% of the aggregate loans and advances, resulting in an income from other sources of Rs. 5,54,725/-. Subsequently, the AO levied a penalty under section 271(1)(c) of the Act based on these additions.

Taking into account the acknowledged fact that the addition, which formed the basis for imposing the penalty, was made on an estimated basis, the Income Tax Appellate Tribunal (ITAT) concluded that the Assessing Officer (AO) was not justified in levying the penalty under section 271(1)(c) of the Act.

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As a result, the ITAT directed the AO to remove the penalty imposed under section 271(1)(c) of the Act. Consequently, the taxpayer's claim was accepted by the ITAT.

Also, Read: "Big news! Changes In Income tax exemption rule".

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