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2012 (6) TMI 628 - AT - Income TaxPenalty under section 271(1)(c) - unaccounted sale of raw-material - addition was made on estimate basis - Held that - It is well settled that the addition made purely by way of estimate should not be made the basis for levy of penalty for concealment of income. It is not the case of the revenue that the assessee has not disclosed the material facts relevant to the assessment. The issue of burning loss and consequential consumption of raw-material was worked out on estimation only to determine the unaccounted sale of raw material and the estimation differed at different levels of the revenue authorities. Assessing Officer has not pin-pointed any discrepancy or irregularity in the records. The possibility of sale of raw material outside the books was not based upon any material evidence but on suspicion which was created on account of non-availability of certain specific record. Mere possibility or suspicion or difference of opinion on some issue is not sufficient to impose penalty for concealment of income or filing of inaccurate particulars of income. No penalty under section 271(1)(c) was leviable on addition made on account of unaccounted sale of raw-material. Regarding penalty levied for diversion of income by sale to sister concern - addition was made due to the reason that the assessee-firm had disclosed lower profit on sale made to sister concern - Held that - There is no definite finding that the transaction of sale made to ME was a sham transaction. The figures of sale made to ME (sister concern) were disclosed in the accounts statement and those figures had not been disputed by the department. The conduct of the assessee was bona fide. Material particulars with regard to the sale made to ME were disclosed by the assessee, at the time of filing of its return of income with the department. Facts of the case may justify the addition made on account of low rate of profit on sale made to the sister concern but were not sufficient to sustain the penalty imposed under section 271(1)(c).
Issues Involved:
1. Justification of levy of concealment penalty under Section 271(1)(c) of the Income Tax Act, 1961. Detailed Analysis: 1. Justification of Levy of Concealment Penalty Under Section 271(1)(c) of the Income Tax Act, 1961: Case of M/s. Vikram Plastics: The appellant challenged the confirmation of a penalty of Rs. 4,79,478 under Section 271(1)(c) of the Income Tax Act, 1961. The penalty arose from an assessment order dated 21/03/1996 and a penalty order dated 28/06/2007. The firm, engaged in manufacturing Thermoware Articles, faced penalties due to two additions: unaccounted sale of raw material of Rs. 7,53,362 and diversion of income by sale to M/s. Milton Exports of Rs. 7,02,950. The CIT (Appeals) revised these amounts to Rs. 5,84,500 and Rs. 4,18,965, respectively. The Tribunal restored the matter to the Assessing Officer (AO), who reassessed the income at the same figures and initiated penalty proceedings, concluding that the appellant failed to provide a satisfactory explanation. The appellant argued that the additions were based on estimates and should not justify a concealment penalty. The CIT (Appeals) upheld the penalty, stating that the revised additions were not mere estimates but concealed income. The Tribunal, upon review, noted that the quantum appeal relied on the Tribunal's decision for the assessment year 1992-93. The Tribunal found that the burning loss and consumption of raw material were to be re-adjudicated by the AO, and the diversion of income to M/s. Milton Exports was to be reworked as per the Tribunal's findings for the previous year. The Tribunal observed that the penalty was not justified as the additions were based on estimations and differences of opinion regarding the burning loss. The Tribunal also noted that no incriminating material was found during the search, and the stock records were maintained. The Tribunal concluded that the facts and figures were disclosed by the assessee, and the addition was due to a difference in opinion, not concealment. Therefore, the Tribunal directed to delete the penalty. Case of M/s. Panorama Plastics: The appellant challenged the confirmation of a penalty of Rs. 13 lacs. The penalty arose from two additions: excess consumption of raw material and diversion of profit to M/s. Milton Exports. The CIT (Appeals) and the Tribunal upheld these additions based on the findings for the assessment year 1992-93. The Tribunal, following the same reasoning as in the case of M/s. Vikram Plastics, directed to delete the penalty. Separate Judgment by Accountant Member: The Accountant Member disagreed with the Judicial Member's findings, emphasizing that the penalty was justified due to the assessee's failure to produce relevant records and explanations during the assessment and penalty proceedings. The Accountant Member highlighted that the assessee's conduct indicated an intention to evade tax, and the penalty was warranted under Explanation 1 to Section 271(1)(c) of the Act. Third Member Decision: The Third Member, Vice President (AZ), concurred with the Judicial Member, finding that the penalty was not justified as the additions were based on estimates and differences of opinion. The Third Member concluded that the assessee's conduct was bona fide, and the facts did not support the imposition of a concealment penalty. Final Order: In accordance with the majority view, the appeals of the assessees were allowed, and the penalties under Section 271(1)(c) were deleted.
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