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Issues involved:
Estimation of concealed income for imposition of penalty u/s 271(2) of the Income Tax Act, 1961 based on discrepancies in accounts and vouchers. Judgment Summary: The High Court of Allahabad was presented with a question regarding the estimation of concealed income for the purpose of imposing a penalty under section 271(2) of the Income Tax Act, 1961. The dispute arose for the assessment year 1970-71, where the assessee, engaged in the business of assembling pumping sets and manufacturing canal gates, initially declared an income of Rs. 14,768. However, discrepancies were found in the accounts, leading to the rejection of the book version and an estimation of income at Rs. 30,000. The Tribunal later reconciled some vouchers but found unaccounted transactions, estimating the concealed income at Rs. 3,000, resulting in a penalty of Rs. 4,500. The Department argued that the quantum appeal's findings should dictate the penalty amount, which the Tribunal rightly rejected, emphasizing the independent nature of penalty proceedings. Regarding the penalty provision u/s 271(1)(c)(iii), the court clarified that the assessed income exceeding 80% of the returned income triggers penalty considerations unless the assessee proves no fraud or negligence. The court highlighted that the penalty determination requires a fresh assessment of concealed income, not bound by the quantum appeal's findings. Any interpretation linking penalty solely to assessment proceedings was deemed contrary to the Act's scheme. The Revenue contended that the Tribunal overlooked additional irregularities in the accounts, suggesting a broader scope of concealed income beyond the estimated Rs. 3,000. However, the court's response was limited to the specific question of whether the Tribunal's estimation of concealed income at Rs. 3,000, amidst a total income of Rs. 25,000, was justified. The court ruled in favor of the assessee, affirming the Tribunal's decision on the concealed income estimation. The assessee was granted costs amounting to Rs. 200, with the counsel's fee set at the same figure.
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