2010 (4) TMI 846 - AT - Income Tax

Unaccounted stock - penalty main business of assessee developing housing plots and selling them - assessee was obtaining power of attorney and was never getting itself registered as the owner of the land - assessee not made the payment of the full cost and also having not got itself registered as the owner Held that - no comments in the tax audit reports regarding any discrepancy in the valuation of stock of land for any of the years, the assessee had agreed to an addition out of compulsion in search proceedings, it would not be sufficient enough to come to a conclusion that there was concealment or furnishing of inaccurate particulars, there is nothing that the assessee-company had failed to disclose, regarding its stock, in the original return, these were not fit cases for levy of penalty under section 271(1)(c) of Act, penalties are deleted and the appeals of the assessee allowed

Summary

Issues:
Appeals against penalty levied for undisclosed stock of land valuation.

Analysis:
1. Assessment Years and Penalty: Appeals filed against penalty orders for assessment years 2000-01 to 2005-06. Penalty proceedings initiated under section 271(1)(c) of the Act for each year. Assessee admitted undisclosed stock value, leading to penalty imposition.

2. Assessee's Contentions: Assessee argued that stock valuation at nil was justified based on consistent policy. Unsold stock reflected in books, discrepancy in valuation method only. Cited a High Court decision in support. Director admitted undisclosed income, emphasizing fluctuating figures. Assessee claimed Assessing Officer's valuation was an estimate, lacking specifics.

3. Commissioner's Decision: Commissioner upheld penalty, stating burden on assessee to justify lower valuation of unsold plots. Dismissed High Court precedent relevance, concluding Assessing Officer's valuation was correct.

4. Appellate Tribunal's Analysis: Tribunal noted assessee's business model of acquiring land through powers of attorney, not as owner. Assessing Officer's valuation method questioned as estimate, not scientific. Assessee's belief in nil valuation deemed bona fide. Lack of disclosure failure in original return noted. No revenue loss due to correct sales proceeds reporting. Tribunal referenced Supreme Court decisions to support assessee's position.

5. Final Verdict: Tribunal found no grounds for penalty imposition under section 271(1)(c) for all assessment years. Penalties revoked, appeals allowed in favor of the assessee.