2012 (7) TMI 131 - AT - Income Tax

Penalty u/s. 271(1)(c) of the IT Act AO determined the profit from sale of country liquor in the absence of sale bills - assessee submitted before the AO that all expenses except freight in the trading account are paid to Excise Department and are verifiable and stock register and sale price are checked by the Excise Authorities - estimate of income by applying higher sales and higher gross profit by the AO Held that - When the income of the assessee is estimated, there cannot be a case of concealment of income or filing inaccurate particulars of income - assessee disclosed all particulars in the return of income and at the assessment stage, therefore, merely on estimate of income, penalty is not leviable In favor of assessee

Summary

Issues involved:
Challenge against levy of penalty under section 271(1)(c) of the IT Act for assessment year 1997-98 based on determination of profits from sale of country liquor in absence of sale bills.

Detailed Analysis:

1. Challenge against Penalty Levy:
The appeal was filed by the assessee against the order of the ld. CIT(A) challenging the penalty imposed under section 271(1)(c) of the IT Act. The Assessing Officer (AO) determined the business income of the assessee based on estimates due to the absence of sale bills for the financial year. The AO applied a higher amount of license fees and gross profit rate to estimate the income. The penalty was levied by the AO based on the confirmed quantum by the ld. CIT(A) and the Tribunal.

2. Submissions by the Assessee:
The assessee contended before the ld. CIT(A) that sales were estimated at a lower amount by the ld. CIT(A) compared to the AO's estimation. The assessee argued that all income particulars were disclosed in the return of income and no concealment was intended. The assessee cited various legal precedents to support the argument that penalty is not leviable when income is estimated based on valid grounds.

3. Arguments by the Counsel:
The counsel for the assessee reiterated that when income additions are made based on estimates, it does not constitute concealment of income. Legal references were provided to support the argument that penalty should not be levied solely on estimated income. The counsel relied on decisions from different High Courts to emphasize that mere estimation of income does not imply concealment.

4. Department's Position:
The ld. DR supported the penalty imposition based on the confirmed quantum by the Tribunal. The department argued that when part of the quantum addition is confirmed, it justifies the levy of penalty.

5. Tribunal's Decision:
After considering the submissions and findings of the authorities, the Tribunal observed that the assessee dealt in the sale of country liquor and maintained verifiable records of purchases and expenses. The Tribunal noted that the absence of verifiable sales bills did not necessarily indicate concealment of income. The Tribunal emphasized that when income is estimated based on valid grounds, it does not amount to concealment. Citing legal precedents, the Tribunal concluded that penalty should not be imposed solely on estimated income. Therefore, the Tribunal set aside the penalty imposed by the authorities and ruled in favor of the assessee.

6. Conclusion:
The Tribunal allowed the appeal of the assessee, canceling the penalty imposed under section 271(1)(c) of the IT Act for the assessment year 1997-98. The decision was based on the understanding that estimating income does not automatically imply concealment, especially when all income particulars were disclosed.