2015 (10) TMI 2556 - AT - Income Tax

Penalty levied u/s 271(1)(c) - Estimation of income on the basis of the material seized during the search conducted by the Excise authorities - Held that - On the basis of admission made by the assessee the income was estimated on the basis of past history of the assessee and that was based on the material found referred herein above . The addition made by the AO though was challenged before ld. CIT (A) and before the ITAT but the Tribunal sustained the addition on the basis of the material admitted by the assessee in the proceedings initiated by the Excise Department. In our view the ld. Counsel for the assessee is not right in his contention that whenever an assessment is made on the basis of flat rate of profit on estimation basis no inference can be made that the assessee has concealed the income. In the present case the AO has estimated the income on the basis of the material seized during the search conducted by the Excise authorities and admission made by the assessee. Therefore it is not a case of mere estimation but was a case of deriving income based on undisclosed investment/purchases and undisclosed sales of the product. In our view assessee has concealed the particulars of income and therefore the assessee is liable for imposition of penalty on account of concealed income. Therefore we find no infirmity in the order of ld. CIT (A) which is confirmed. - Decided against assessee.

Summary

Issues:
1. Appeal against penalty under section 271(1)(c) of the Income Tax Act, 1961 for the A.Ys. 2006-07.

Analysis:
The appeal was filed against the penalty imposed by the ld. CIT (A) for concealing income under section 271(1)(c) of the Income Tax Act, 1961. The assessee had declared Nil income initially but was later assessed at a total income of &8377;1,72,64,760, including profit earned on unrecorded sales and investment in unrecorded purchases. The AO issued a show cause notice for concealing income, and the assessee's submissions were recorded. The AO concluded that the assessee willfully concealed income and imposed the penalty.

The assessee contended that the additions were made on estimation without corroborative evidence, thus penalty imposition was not justified. Various judgments were cited to support this argument. However, the authorities upheld the penalty citing the admission made by the assessee before the Excise Settlement Commission regarding unrecorded sales and purchases. The Tribunal confirmed the additions based on material found during the search by the Excise Department and the admission by the assessee.

The Tribunal rejected the argument that the additions were solely based on estimation, emphasizing the incriminating material gathered during the search. The Tribunal found that the assessee had concealed income by not disclosing sales in the regular books of account. The Tribunal upheld the penalty imposition based on the material admitted by the assessee and the estimation of income derived from undisclosed investments and sales. The Tribunal distinguished the cited judgments and dismissed the appeal, confirming the penalty.

The judgment highlighted that the assessment was not solely based on estimation but on material seized during the search and admission by the assessee. The Tribunal found the assessee liable for penalty due to concealed income. The decision was based on the incriminating material and admission by the assessee, leading to the confirmation of the penalty imposed by the ld. CIT (A).

In conclusion, the appeal against the penalty under section 271(1)(c) of the Income Tax Act, 1961 for the A.Ys. 2006-07 was dismissed, upholding the penalty imposition for concealed income.