1990 (2) TMI 104 - AT - Income Tax

Summary

Issues:
Penalty under section 271(1)(c) of the IT Act, 1961 imposed and confirmed by the CIT(A).
Applicability of Explanation 1 to section 271(1)(c) in the penalty proceedings.

Analysis:
The appeal was against the penalty of Rs. 14,370 imposed under section 271(1)(c) by the ITO, with the invocation of Explanation 1 to the same section. The Tribunal found that the penalty imposed could not be sustained due to various reasons. The assessee, a firm engaged in the brick kiln business, had declared income in the return filed on 8th Aug., 1977. The ITO, during assessment, made additions to the income based on estimates. The AAC reduced some of these additions, and the ITO finalized the total income at Rs. 36,040. In the penalty proceedings, the ITO considered the difference between the returned income and the finally assessed income as concealed income, leading to the penalty of Rs. 14,370.

The assessee argued that the additions made during assessment were estimates upheld by the AAC, and penalty cannot be levied based on such estimates. The assessee contended that it had disclosed all necessary facts for income computation, including bricks lying in the kiln, and penalty under section 271(1)(c) was not justified. The Revenue, however, argued that the penalty was rightly imposed as the assessee failed to disclose all material facts necessary for assessment, invoking Explanation 1 to section 271(1)(c).

The Tribunal noted that the AAC had accepted the reductions in the additions made by the ITO, indicating no concealment of income. It was observed that the assessee had explained the factors contributing to the discrepancies in income calculation, such as the quality of coal and new vessel for coal consumption. The Tribunal concluded that there was no gross neglect on the part of the assessee and that the initial burden placed by Explanation 1 had been discharged. Therefore, the penalty under section 271(1)(c) or Explanation 1 was not applicable in this case, leading to the cancellation of the penalty.

In conclusion, the Tribunal allowed the appeal, finding that the penalty imposed under section 271(1)(c) was not sustainable based on the facts and circumstances of the case.