1998 (6) TMI 5 - HC - Income Tax

No Penalty u/s 271(1)(c) for Estimated Construction Cost Difference Without Proof of Intentional Income Concealment

HC upheld the Tribunal's cancellation of penalty u/s 271(1)(c) for alleged concealment of income arising from understatement of cost of construction. The ... Cancellation of a penalty u/s 271(1)(c) - Concealment Of Income - Whether, the Tribunal was right in cancelling the penalty levied u/s 271(1)(c), for the reason that the addition had only been sustained on the basis of some estimate ? - HELD THAT:- This court followed its earlier decision in the case of CIT v. Apsara Talkies [1981 (11) TMI 2 - MADRAS HIGH COURT] and held that concealment must be deliberate and there being no proof of such deliberate concealment, the imposition of penalty was not warranted. The facts of this case are similar. There is no evidence to show that the assessee had deliberately concealed the cost of construction. The assessee had reported the cost of construction. The assessee was not required to report the progress of the construction as the return did not require him to do so. The figure given by the assessee as the cost of construction was revised by the assessing authorities on the basis of the report of the valuer and addition made to the assessee's assessable income. Such addition in the context cannot be regarded as addition of income concealed which would attract the levy of penalty under section 271(1)(c) of the Act. The Tribunal has recorded a finding that there is no material on record to show that the assessee concealed any of its income for the assessment year under appeal so as to attract the provisions of section 271(1)(c) of the Act. Issues Involved: The issue involves the cancellation of a penalty u/s 271(1)(c) of the Income-tax Act, 1961, based on an estimate made by the Assessing Officer regarding the cost of construction of a factory building reported by the assessee.Judgment Details:1. Assessment of Construction Cost:The Tribunal found that the assessee reported an expenditure of Rs. 70,000 for the construction of a factory building, which was later estimated at a higher figure by the Assessing Officer based on a valuer's report. The Tribunal limited the addition to Rs. 40,000 as an estimate of income from undisclosed sources, without evidence of deliberate concealment.2. Initiation of Penalty Proceedings:Penalty proceedings were initiated post finalization of assessment, alleging concealment by the assessee for not reporting the construction in progress or maintaining proper accounts. However, the Tribunal rightly held that the assessee fulfilled reporting requirements and could not be faulted for not mentioning the ongoing construction in the return.3. Concealment of Income:The Tribunal concluded that there was no concealment as the addition to income was solely based on the valuer's report, without proof of deliberate concealment by the assessee. The Tribunal emphasized the necessity of a definite finding of concealment before imposing any penalty u/s 271(1)(c).4. Legal Precedents:Citing legal precedents, the Court highlighted that concealment must be deliberate, and in the absence of proof of such deliberate concealment, the imposition of penalty is not warranted. The Court referred to a similar case where penalty imposition was set aside due to lack of evidence of deliberate concealment.5. Final Decision:The Court answered the reference in favor of the assessee, stating there was no evidence of deliberate concealment of income by the assessee. The Tribunal's finding that no income was concealed for the assessment year under appeal led to the decision against the Revenue, with no costs imposed on the assessee.