2000 (12) TMI 220 - AT - Income Tax

Issues Involved:
1. Justification of CIT(A) in directing AO to amend the penalty order treating only Rs. 85,000 as concealed income.
2. Justification of CIT(A) in directing AO to levy penalty in respect of concealed income of Rs. 85,000.
3. Addition of Rs. 1 lac made by AO on account of estimated value of work-in-progress.
4. Imposition of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income.

Summary:

Issue 1: Justification of CIT(A) in directing AO to amend the penalty order treating only Rs. 85,000 as concealed income
The Revenue contended that CIT(A) was not justified in reducing the quantum of concealed income to Rs. 85,000 and reducing the penalty rate from 200% to 100% of the tax sought to be evaded. The Tribunal upheld CIT(A)'s decision, noting that the assessee had debited Rs. 85,000 in miscellaneous receipts with the narration 'To security deposit', which was not a genuine transaction. The Tribunal agreed with CIT(A) that the explanation provided by the assessee was not bona fide and confirmed the penalty for the concealed income of Rs. 85,000.

Issue 2: Justification of CIT(A) in directing AO to levy penalty in respect of concealed income of Rs. 85,000
The assessee argued that the entry of Rs. 85,000 was made in a bona fide belief that it was allowable due to a penalty imposed by the contracting authority. However, the Tribunal found that the assessee had already claimed and adjusted the entire penalty amount of Rs. 1,75,800 in the previous assessment year (1990-91). Therefore, there was no scope for making a further debit of Rs. 85,000 for the assessment year 1991-92. The Tribunal upheld CIT(A)'s finding that the entry was made to conceal income and confirmed the penalty.

Issue 3: Addition of Rs. 1 lac made by AO on account of estimated value of work-in-progress
The assessee contended that it had consistently followed the same method of accounting, which was accepted by AO in the previous year (1990-91). CIT(A) and the Tribunal agreed that the addition was made by AO due to a change in the method of accounting. If the method was changed, similar adjustments were required for the opening value of work-in-progress, which would offset the addition. The Tribunal held that no penalty was leviable for this addition, confirming CIT(A)'s decision.

Issue 4: Imposition of penalty u/s 271(1)(c) for furnishing inaccurate particulars of income
The Tribunal examined whether the assessee had concealed its income based on the material and evidence on record. It found that the assessee had debited Rs. 85,000 in miscellaneous receipts with a false narration and had not provided a bona fide explanation. The Tribunal upheld the penalty imposed by AO and confirmed by CIT(A) for the concealed income of Rs. 85,000. However, it agreed with CIT(A) that the penalty rate should be reduced to 100% of the tax sought to be evaded.

Conclusion:
Both the cross-appeals by the Revenue and the assessee were dismissed. The Tribunal confirmed CIT(A)'s order to treat only Rs. 85,000 as concealed income and to levy a penalty at 100% of the tax sought to be evaded for this amount. The addition of Rs. 1 lac on account of work-in-progress was not considered for penalty.

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