ITAT allows appeal, cancels penalty under section 271(1)(c) for AY 2007-08.

The ITAT allowed the appeal, directing the deletion of the penalty imposed under section 271(1)(c) for the assessment year 2007-08. The ITAT held that the penalty was unjustified as the facts did not conclusively establish concealed income, emphasizing the consistent application of the percentage completion method by the assessee in previous years without penalty imposition.

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Issues:
1. Levy of penalty under section 271(1)(c) for assessment year 2007-08.

Detailed Analysis:
The appeal was filed against the order of the Commissioner of Income Tax-(Appeals) confirming the penalty of Rs. 3,60,200 imposed on the assessee. The main issue in this case was the levy of penalty under section 271(1)(c) for the assessment year 2007-08. The assessing officer noted that the assessee, engaged in the business of 'builder and developer,' was following the percentage completion method of accounting, estimating gross profit on a work-done basis. The AO proposed an estimated gross profit rate of 14% due to inconsistencies in the previous years' results. The assessee did not appeal against the assessment order but offered additional income of Rs. 10.5 lakhs for voluntary tax payment only. However, the AO levied a penalty based on the view that the assessee was following an incorrect accounting system and disclosing lesser income.

The assessee contended before the CIT(A) that they were maintaining one consolidated account for two projects, and the penalty was unjustified as they did not conceal income. Despite the submissions, the CIT(A) upheld the penalty, stating that the disclosure of additional income was prompted by the AO's analysis, not voluntary. The ITAT observed that the AO's addition was based on estimation without concrete basis or defects in the books of accounts. The ITAT highlighted the consistent application of the percentage completion method by the assessee in previous years, where no additions were made. Referring to a Bombay High Court judgment, the ITAT emphasized that penalty cannot be imposed if the facts do not conclusively establish concealed income. Therefore, the ITAT concluded that the penalty was unjustified and ordered its deletion.

In light of the legal position and the facts presented, the ITAT allowed the appeal, directing the deletion of the penalty imposed under section 271(1)(c) for the assessment year 2007-08.

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