2006 (1) TMI 202 - AT - Income Tax

Summary

Issues:
- Appeal against penalty under section 271(1)(c) of the Income Tax Act based on unexplained deposits and additions to income.

Analysis:
1. Background: The appellant filed a return of income declaring a loss, but the Assessing Officer (AO) completed the assessment with an income addition due to unexplained deposits. A penalty of Rs. 1,00,000 was levied under section 271(1)(c) of the Act, which was confirmed by the CIT(A).

2. Arguments: The appellant contended that since the return of loss remained a loss even after computation, penalty under section 271(1)(c) should not apply. The Departmental Representative relied on the penalty order and the appellate order, emphasizing the unexplained nature of the deposits as the basis for the penalty.

3. Judgment: After reviewing the submissions and evidence, the Tribunal found merit in the appellant's argument. It was noted that the AO and CIT(A) based their decisions on incorrect assumptions regarding the income computation. The Tribunal referenced a previous order to support the position that no penalty could be imposed when a return of loss resulted in an actual loss.

4. Conclusion: The Tribunal held that the unexplained deposits alone did not establish concealment of income by the appellant. Notably, there was no evidence of intentional concealment. The Tribunal consistently held that unexplained deposits, if not accepted as explained, do not automatically lead to penalty under section 271(1)(c). Consequently, the penalty was deleted, and the appeal was allowed.