1993 (1) TMI 116 - AT - Income Tax

Summary

Issues: Appeal against penalty under section 271(1)(c) of the IT Act, 1961 for discrepancies in stock account and cash credits.

Analysis:

1. Discrepancy in Stock Account:
The appeal was filed against a penalty imposed for a firm's discrepancy in the stock account. The firm dealt in gum, and the difference between the income returned and assessed arose due to an addition of Rs. 1,50,000. The Income Tax Officer (ITO) noted sales of gum without sufficient stocks on hand, leading to the addition. However, the Tribunal found that the purchases were accounted for, and the delay in making entries did not necessarily indicate unaccounted sales. The Tribunal concluded that there was no discrepancy warranting the addition, as all purchases were reflected in the stock tally.

2. Addition of Cash Credits:
The penalty was also based on cash transfers from the Delhi Office to Bombay without corresponding entries for travelling expenses. The ITO inferred that the cash was not sent to Bombay, leading to undisclosed income. The Tribunal, however, found that the cash withdrawals were for business purposes and were supported by entries in the cash book. The Tribunal concluded that the addition of cash credits did not indicate concealment of income, as the cash was legitimately withdrawn for business use. The Tribunal deemed the Department's judgment as a misjudgment, emphasizing the importance of primary evidence from the cash book.

Conclusion:
The Tribunal independently reviewed the evidence and material available to the Department and found little justification for treating the additions as undisclosed income or concealed income. The Tribunal ruled in favor of the appellant, stating that the conclusions drawn by the authorities below were not justified. Consequently, the penalty was deleted, and the appeal was allowed.