2001 (5) TMI 816 - AT - Income Tax

Summary

Issues:
- Appeal against cancellation of penalty under section 271(1)(c) of Income-tax Act

Analysis:
1. The case involved an appeal by the Revenue against the cancellation of a penalty of Rs. 71,830 levied under section 271(1)(c) of the Income-tax Act by the CIT(A). The penalty was imposed due to a shortfall in stock found during a survey at the assessee's premises, leading to the rejection of books of account and estimation of sales by the Assessing Officer.

2. The survey revealed a significant discrepancy in stock, with the assessee providing explanations for the difference, including sending goods for dying and consignment sales. However, the Assessing Officer rejected these explanations, estimating sales at a higher figure and applying a flat rate of profit. The CIT(A) considered the explanations and deleted the penalty, emphasizing that the rejection of books and estimation of sales alone cannot warrant a penalty for concealment of income.

3. The CIT(A) noted that all sales, including consignment sales, were reflected in the trading account, and any discrepancies did not amount to concealment as the profits were duly accounted for. The delay in providing explanations was justified by the appellant, and the CIT(A) concluded that no penalty could be levied under section 271(1)(c) based on the facts presented.

4. Upon review, the Tribunal upheld the CIT(A)'s decision to cancel the penalty, highlighting that the addition to income was made by rejecting the books of account and applying a flat rate of profit on estimated sales. The Tribunal emphasized that discrepancies in stock or rejected explanations do not automatically imply concealment of income or furnishing inaccurate particulars.

5. The Tribunal dismissed the appeal, affirming the cancellation of the penalty. Additionally, it clarified that the cases cited by the Revenue were not applicable due to factual distinctions, further supporting the decision to uphold the CIT(A)'s order.

In conclusion, the Tribunal affirmed the cancellation of the penalty under section 271(1)(c) by the CIT(A), emphasizing that discrepancies in stock, rejected explanations, and estimation of sales do not necessarily indicate concealment of income, especially when all transactions were reflected in the accounts and profits were duly reported.