1994 (12) TMI 129 - AT - Income Tax

Assessing Officer, Expenditure Incurred, Inaccurate Particulars, Levy Of Penalty, Liquor Business, Penalty For Concealment

Summary

Issues Involved:
1. Penalty under section 271(1)(c) of the IT Act, 1961.
2. Discrepancy in the empty bottles account.
3. Trading addition for low gross profit rate.
4. Disallowance of diesel and telephone expenses.

Detailed Analysis:

1. Penalty under section 271(1)(c) of the IT Act, 1961:
The primary issue revolves around the penalty of Rs. 1,23,062 levied under section 271(1)(c) of the IT Act, 1961 for alleged concealment of income. The Assessing Officer (A.O.) initiated penalty proceedings due to discrepancies in the empty bottles account. The assessee argued that the additions made were trading additions and not grounds for penalty. The CIT(A) upheld the penalty, concluding that the assessee furnished inaccurate particulars of income. However, the Tribunal emphasized that penalty proceedings are independent of assessment proceedings and require a different standard of proof. It concluded that the discrepancies did not amount to concealment of income and thus, the penalty was not justified.

2. Discrepancy in the empty bottles account:
The A.O. noted discrepancies in the empty bottles purchase account, particularly in March 1985, where the assessee showed purchases of 3,59,198 bottles but utilized only 1,75,165 bottles, leaving a balance of 2,19,065 bottles not reflected in the closing stock. The assessee explained that the salesmen received empty bottles from consumers of loose liquor, which were then purchased by the assessee. The Tribunal found this explanation plausible and noted that the overall position of purchases and utilization of empty bottles squared up at the end of the year, indicating no concealment of income.

3. Trading addition for low gross profit rate:
The A.O. made a trading addition of Rs. 12,501 due to a low gross profit rate declared by the assessee. The CIT(A) reduced this addition to Rs. 8,000. The Tribunal did not focus extensively on this issue but noted that trading additions based on estimates do not always justify penalties under section 271(1)(c).

4. Disallowance of diesel and telephone expenses:
The A.O. disallowed Rs. 15,000 out of diesel expenses and Rs. 3,000 out of telephone expenses. The CIT(A) confirmed these disallowances. The Tribunal did not delve into these disallowances in detail, as the primary focus was on the penalty under section 271(1)(c).

Conclusion:
The Tribunal concluded that the discrepancies in the empty bottles account did not amount to concealment of income. It emphasized that penalty proceedings require a different standard of proof and that honest or bona fide non-disclosure does not justify penalties. The Tribunal canceled the penalty of Rs. 1,23,062, allowing the assessee's appeal.