2018 (1) TMI 1082 - AT - Income Tax

Penalty u/s 271(1)(c) - unaccounted production/unaccounted sales - estimated additions based on the electricity consumption - Held that - DR s argument that the profit relatable to the unaccounted production constitutes concealed income and therefore the penalty is leviable stands rejected for the reason that the unaccounted sales as well as quantification of the related profits/concealed income/additional income has reduced in estimations despite the fact of unaccounted production and clandestine removal of the goods-cum-unaccounted sales the concealment is unsustainable in law, if the estimation of profits involved and no specific relatable income is precisely quantified. Therefore, we are of the opinion that the orders of the CIT(A) in these 4 appeals are fair in deleting the penalty. See Bhagyalaxmi Steel Alloys Pvt. Ltd. 2018 (1) TMI 1081 - ITAT PUNE and Shree Om Rolling Mills Pvt. Ltd 2018 (1) TMI 1073 - ITAT PUNE - Decided in favour of assessee

Summary

Issues:
Four appeals filed by Revenue involving three different assessees for Assessment Years 2004-05 & 2009-10; sustainability of penalty based on estimated additions; concealment of facts in unaccounted production and sales; applicability of penalty in cases of unaccounted income; comparison with previous Tribunal decisions.

Analysis:
The judgment involves four appeals filed by the Revenue concerning three different assessees for the Assessment Years 2004-05 & 2009-10. These appeals are against the separate orders of CIT(A)-1, Aurangabad. Despite the absence of representation from the assessees, the Tribunal proceeded to adjudicate the appeals with the assistance of the Ld. DR for the Revenue, considering the covered nature of the issues raised. The cases involved unaccounted production and sales of goods, with the assessees offering additional income related to the unaccounted production. The AOs rejected these offers and proceeded to estimate the unaccounted production based on electricity consumption, applying a flat rate of 4% to estimate profits. However, the First Appellate authorities deleted these additions, retaining the offer of additional income made by the assessees.

The Ld. DR for the Revenue acknowledged the unsustainability of the penalty based on estimated additions from electricity consumption. However, he argued that the concealment of facts in unaccounted production and sales constitutes concealed income, warranting the sustenance of penalty. The Tribunal compared the issues raised in these appeals with previous decisions in favor of the assessee, where penalties were deleted. The Tribunal noted that the profits related to unaccounted production and sales were reduced to estimations, making the concealment unsustainable in law without precise quantification of related income.

The Tribunal referred to specific Tribunal decisions where penalties were deleted due to the estimative nature of the unaccounted income. The Tribunal rejected the argument that profit from unaccounted production constitutes concealed income, as the quantification was based on estimations without specific relatable income being precisely quantified. Consequently, the Tribunal found the orders of the CIT(A) fair in deleting the penalty in these appeals. As a result, all four appeals filed by the Revenue were dismissed, affirming the decisions of the CIT(A) in favor of the assessees.