2000 (3) TMI 171 - AT - Income Tax

Summary

Issues:
Appeal against order of CIT(A) canceling penalty under section 271(1)(c) of Income-tax Act.

Analysis:
The department filed an appeal against the CIT(A) order canceling a penalty of Rs. 10,03,878 levied under section 271(1)(c) of the Income-tax Act. The CIT(A) had enhanced the assessed income and directed that the penalty notice issued earlier would apply to the concealed income based on the enhanced income. The department objected to the levy of the penalty after the detection of alleged concealment of income by the CIT(A). The CIT(A) held that penalties could only be levied by the authority that initiated the penalty proceedings. The department argued that sales reflected in three bill books found during a search were not shown in regular books of account. The Tribunal upheld certain additions but reduced others, finding merit in the contention that the Assessing Officer could not impose a penalty for concealment based on the enhanced income. The Tribunal observed that the penalty order was flawed and supported the decision to cancel the penalty.

The Assessing Officer estimated total sales and profit earned based on discrepancies in expenditure under various heads. The CIT(A) found the explanation offered by the assessee acceptable and deleted the penalty. The department argued for sustaining the penalty, but the Tribunal found that the penalty had been rightly deleted by the CIT(A) as the explanation offered by the assessee was not proven false. The Tribunal concluded that there was no reason to interfere with the CIT(A)'s decision to cancel the penalty.

The Tribunal considered the orders of the tax authorities and case law cited by the parties. It noted that while certain additions were upheld, others were substantially reduced. The Tribunal agreed with the contention that the Assessing Officer could not have imposed a penalty based on the enhanced income determined by the CIT(A). The Tribunal found that the penalty order was flawed and supported the CIT(A)'s decision to cancel the penalty. Ultimately, the Tribunal dismissed the appeal, upholding the cancellation of the penalty under section 271(1)(c) of the Income-tax Act.