2010 (2) TMI 993 - AT - Income Tax

Summary

Issues Involved:
The judgment involves issues related to penalty levied u/s 271(1)(c) of the Income-tax Act, 1961 based on discrepancies in accounts of suppliers M/s. Daya Synthetics and M/s. Daya Rayons Pvt. Ltd.

Assessment of M/s. Daya Synthetics:
The Assessing Officer noted a difference in closing stock balance in the accounts of M/s. Daya Synthetics and M/s. Daya Rayons Pvt. Ltd. The assessee acknowledged the liability to M/s. Daya Synthetics but disputed purchases from M/s. Daya Rayons Pvt. Ltd. The Assessing Officer treated the liability to M/s. Daya Synthetics as deemed income u/s 41(1) of the Act.

Assessment of M/s. Daya Rayons Pvt. Ltd.:
The Assessing Officer added the difference in the account of M/s. Daya Rayons Pvt. Ltd. to the total income of the assessee u/s 69C of the Act. Subsequently, penalty proceedings u/s 271(1)(c) were initiated based on alleged inaccurate particulars/concealed income.

Confirmation of Penalty by Commissioner of Income-tax (Appeals):
The Commissioner confirmed the penalty, stating that the assessee failed to substantiate the explanation provided and establish the genuineness of the explanation. The penalty was upheld based on the presumption of concealed income.

Appellate Tribunal Decision:
The Tribunal considered the explanation provided by the assessee that no purchases were made from M/s. Daya Rayons Pvt. Ltd. and no payment was rendered. The Tribunal emphasized that penalty and assessment proceedings are distinct, and the burden to prove concealment lies with the Assessing Officer. As the explanation was not proven false, the penalty u/s 271(1)(c) was deemed not sustainable. The Tribunal also highlighted the absence of a clear finding on whether the penalty was for concealment or furnishing inaccurate particulars of income.

Conclusion:
The Tribunal allowed the appeal of the assessee, deleting the penalty levied u/s 271(1)(c) of the Income-tax Act, 1961. The decision was based on the assessee's explanation being found not false and the lack of a clear finding on the nature of the penalty. The judgment was pronounced on February 12, 2010.