2009 (6) TMI 117 - AT - Income Tax

Summary

Issues involved: Appeal against penalty levied u/s 271(1)(c) for three assessment years.

Summary:
1. The assessee's bank transactions were flagged due to large cash deposits and withdrawals, leading to suspicion of hawala transactions.
- AO estimated income based on alleged hawala activities and unexplained cash movements.
- CIT(A) reduced commission rate on sales to 1% for fair assessment.
- Penalty u/s 271(1)(c) imposed by AO at 100% of tax evaded.

2. Assessee's defense included maintaining audited accounts, being registered with sales-tax authorities, and challenging hawala allegations.
- CIT(A) upheld penalty imposition, leading to appeal before the Tribunal.
- Assessee argued against penalty citing estimation of income and presented legal precedents.

3. Tribunal analyzed the case, noting lack of direct evidence for hawala transactions and acceptance of sales and purchases shown in accounts.
- AO's estimation based on commission rates, rejecting expenses claimed in P&L account.
- Tribunal found no concrete evidence of concealed income or inaccurate particulars, hence canceled the penalty and allowed the appeals.

Conclusion: The Tribunal allowed the appeals, canceling the penalty imposed by the lower authorities for all three assessment years.