1995 (4) TMI 91 - AT - Income Tax

Construction companies win appeal against IT penalties for income discrepancies, emphasizing need for concrete evidence.

RIPUDAMAN SINGAL. Versus INCOME TAX OFFICER.

RIPUDAMAN SINGAL. Versus INCOME TAX OFFICER. - TTJ 055, 396, Issues:Challenge to penalty under section 271(1)(c) of the IT Act based on discrepancy between returned and assessed income, contention of concealment of income by the assessees, reliance on judicial pronouncements regarding concealment, rejection of book results due to lack of proper vouchers, imposition of penalty by the Assessing Officer (AO) based on suspicion.Analysis:The judgment involves two appeals by two assessees, both sister concerns, challenging the penalty under section 271(1)(c) of the IT Act for assessment year 1988-89. The assessees, engaged in contract work as building contractors, faced penalties of Rs. 3,13,825 and Rs. 2,38,265 in separate appeals for discrepancies between returned and assessed income. The Assessing Officer (AO) raised penalties based on the difference in income figures and rejection of book results due to lack of proper vouchers.The assessees argued that the rejection of book results was not indicative of income concealment, as no deliberate act was committed. They contended that the higher gross profit rate applied did not prove concealment, especially since similar profits were shown in previous years and the accounts were audited. The Departmental Representative supported the penalty imposition by asserting that the assessees did not reflect true profits in their returns.The assessees' counsel emphasized that the absence of vouchers did not imply fictitious claims, citing judicial precedents where honest maintenance of accounts was considered sufficient. They argued that applying a higher profit rate did not establish fraud or wilful neglect. Various High Court decisions were cited to support the contention that suspicion alone could not justify a charge of concealment without concrete evidence.After considering the arguments and judicial pronouncements, the Tribunal concluded that no case of concealment was established. The rejection of book results due to unverifiable expenses did not amount to concealment, especially since the assessees had maintained accounts and undergone audits. The consistent profit rates shown in previous years further supported the lack of concealment. The Tribunal emphasized that suspicion alone could not warrant a concealment charge, leading to the deletion of both penalties.In conclusion, both appeals were allowed, and the penalties under section 271(1)(c) of the IT Act were deleted. The judgment highlighted the importance of concrete evidence rather than mere suspicion in establishing charges of income concealment.