2010 (6) TMI 836 - AT - Income Tax

Summary

Issues involved: The judgment involves the confirmation of income estimate by the Assessing Officer, disallowance of remuneration and interest to partner u/s.40b of the Act, and the levy of penalty u/s.271(1)(c) of the Income Tax Act.

Confirmation of Income Estimate:
The Assessing Officer estimated the income at 1% of total turnover due to suspicious purchases from non-existent parties, leading to the rejection of books of account. The CIT(A) upheld this decision based on inquiries and findings that purchases and sales were fictitious. The Tribunal found the estimate to be arbitrary and directed the net profit to be computed at 0.87% instead of 1%, allowing remuneration and interest to partners u/s.40b. The appeal on this issue was partly allowed.

Levy of Penalty u/s.271(1)(c):
The penalty was imposed at 20% of the tax sought to be evaded based on the estimated income. The Tribunal noted that the penalty was imposed on conjecture and surmises without concrete evidence of concealing income. As the penalty was solely based on estimates, it was deemed unjustified, and the levy of penalty was deleted. The appeal on this issue was allowed.

Conclusion:
The Tribunal partially allowed the appeal regarding the confirmation of income estimate, directing a lower net profit percentage and allowing remuneration and interest to partners. Additionally, the Tribunal allowed the appeal concerning the levy of penalty, finding it unjustified and deleting the penalty.