1980 (11) TMI 80 - AT - Income Tax

Summary

Issues:
1. Penalty imposed by the ITO and upheld by the ld. AAC on the assessee for inflated purchases in the assessment year 1975-76.

Detailed Analysis:
The appeal before the Appellate Tribunal ITAT Delhi-D centered around the penalty of Rs. 3,900 imposed by the Income Tax Officer (ITO) and upheld by the ld. AAC on the assessee for inflated purchases in the assessment year 1975-76. The ITO found that the purchases had been inflated by the assessee by Rs. 3,900, specifically noting an item of purchase of cloth at Rs. 2,657.20 that was accounted for at Rs. 6,557.20. The ITO treated this amount as concealed income of the assessee, leading to the imposition of the penalty. The assessee contended that the inflation in purchases was due to oversight, as the amount was mistakenly credited in the cloth account at a higher figure. The assessee also highlighted a debit balance of Rs. 3,950 in another account that was not accounted for, resulting in a discrepancy in the balance sheet. The revised balance sheet was submitted to the ITO, demonstrating the correction made to reduce the difference to Rs. 6.45. The explanation provided by the assessee was not considered by the ITO or the ld. AAC during the penalty proceedings, leading to the appeal before the Tribunal.

The Tribunal considered the facts and the provisions of section 271(1)(c) regarding the levy of penalties for concealment of income. It was noted that for a penalty to be imposed, there must be conscious concealment of income by the assessee with the intention to defraud the Revenue. In this case, although there was an inflation in purchases, the explanation provided by the assessee appeared plausible. The Tribunal acknowledged the possibility of oversight in recording the purchase amount and the omission of the debit balance of Rs. 3,950, which affected the balance sheet presentation. The Tribunal highlighted two possibilities: intentional inflation by the assessee or a genuine mistake due to oversight. Considering the clean past record of the assessee and the overall circumstances, the Tribunal concluded that the Revenue had not established a deliberate attempt by the assessee to suppress income consciously. Therefore, the Tribunal held that it was not a suitable case for the imposition of the penalty, leading to the deletion of the penalty imposed by the ITO and upheld by the ld. AAC.