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Issues involved: Appeal filed u/s 260A of the Income-tax Act, 1961 regarding deletion of penalty u/s 271(1)(c) based on addition made u/r 145(1) of the Act.
Summary: The appeal was filed by the Revenue to determine whether the penalty of Rs.72,370 imposed u/s 271(1)(c) of the Income-tax Act, 1961 should be deleted based on the addition made u/r 145(1) of the Act. The assessee's income tax return for the assessment year 1989-90 showed an income of Rs.63,310, but the Assessing Officer made additions totaling Rs.1,49,294. The Commissioner of Income-tax (Appeals) confirmed the additions, leading to the imposition of the penalty. However, the Commissioner of Income-tax (Appeals) and the Income-tax Appellate Tribunal both ruled in favor of the assessee, stating that no concealment of income was established, and the addition made u/r 145(1) could not be the basis for imposing the penalty u/s 271(1)(c). The Commissioner of Income-tax (Appeals) accepted the assessee's plea that there was no concealment of income, as the addition was made on an estimate basis u/r 145(1) without evidence of fraud or neglect. The High Court's decision in the case of Metal Products of India [1984] 150 ITR 714 was cited to support this view. The Tribunal agreed with this position and dismissed the Revenue's appeal based on the same legal reasoning. The High Court upheld the decisions of the Commissioner of Income-tax (Appeals) and the Tribunal, stating that no substantial question of law arose in the appeal. The court found that the penalty was not applicable in this case, as the addition made u/r 145(1) did not indicate fraud or neglect in the assessee's reporting of income. Therefore, the appeal was dismissed, affirming the deletion of the penalty.
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