2002 (6) TMI 159 - AT - Income Tax

Summary

Issues:
- Appeal filing fees for penalty appeals
- Relationship between penalty imposed and assessed income
- Validity of penalties imposed for concealment of income
- Application of the project completion method for construction business

Issue 1: Appeal filing fees for penalty appeals
The case involved a dispute regarding the appropriate appeal filing fees for penalty appeals before the Appellate Tribunal. The assessee had filed appeals challenging penalties imposed under section 271(1)(c) and paid Rs. 500 each as filing fees. However, the Registry doubted the correct fee payment under section 253(6) of the Income Tax Act. The issue was whether the fee paid was sufficient or if there was a shortfall.

Issue 2: Relationship between penalty imposed and assessed income
The contention put forth was that the penalty imposed under section 271(1)(c) was not directly linked to the total income assessed but was based on the tax sought to be evaded. The argument highlighted that the penalty proceedings were separate from the assessment proceedings and referred to relevant provisions and a High Court case to support the claim that the penalty was not based on the quantum of income assessed.

Issue 3: Validity of penalties imposed for concealment of income
After determining the correct appeal filing fees, the Tribunal proceeded to evaluate the merits of the penalties imposed for concealment of income. The Assessing Officer had levied penalties due to the assessee declaring 'Nil' income while showing substantial work-in-progress in the Profit and Loss Account. The Tribunal reviewed the facts, including the method of accounting used by the assessee and relevant judicial decisions, to conclude that no penalty for concealment should have been imposed.

Issue 4: Application of the project completion method for construction business
The Tribunal considered the assessee's use of the project completion method for accounting in the construction business. It was noted that the method had been accepted in previous judicial pronouncements. The Tribunal found that the assessee had legitimate reasons for declaring 'Nil' income, and following a previous order in a similar case, decided that no penalty for concealment should have been imposed. As a result, all four appeals of the assessee were allowed, overturning the penalties imposed for concealment of income.