1989 (5) TMI 102 - AT - Income Tax

Partnership firm penalized for income understatement and tax non-compliance

The Tribunal upheld penalties under Sections 271(1)(c) and 273(1)(b) of the Income-tax Act, 1961 against a partnership firm in the liquor business for ... Assessment Year, Failure To Pay Advance Tax Issues Involved:1. Imposition of penalty under Section 271(1)(c) of the Income-tax Act, 1961.2. Imposition of penalty under Section 273(1)(b) of the Income-tax Act, 1961.Issue-wise Detailed Analysis:1. Imposition of Penalty under Section 271(1)(c) of the Income-tax Act, 1961:The assessee, a partnership firm engaged in the liquor business, filed a return declaring a loss of Rs. 14,27,810 for the assessment year in question. However, the Income-tax Officer (ITO) rejected the loss and estimated the income, leading to a total assessed income of Rs. 27,13,850. The ITO noted that the assessee had a history of filing loss returns, which were consistently disallowed, and income was estimated instead. The assessee failed to produce books of accounts despite several opportunities, and the Managing Partner admitted the inability to produce such details. The ITO found deliberate suppression of sales and non-disclosure of interest income amounting to Rs. 3,05,525. Consequently, a penalty of Rs. 14,02,112 was imposed under Section 271(1)(c) for concealment of income.The First Appellate Authority upheld the ITO's findings, confirming the rate of Rs. 2.50 per litre for arrack sales and the estimated income from Indian made foreign liquor based on comparable cases. The Commissioner (Appeals) also upheld the interest income estimation on advance kist amounts due to the lack of contrary evidence from the assessee.The Tribunal found that the assessee's consistent pattern of filing loss returns, non-production of books, and acceptance of estimated incomes suggested a clear intention to defraud the revenue. The Tribunal cited case laws, including A.K. Bashu Sahib v. CIT and Addl. CIT v. E. Bhoopathy, to support the imposition of penalty for deliberate understatement of income. The Tribunal concluded that the assessee's explanation for the loss was untenable and confirmed the penalty under Section 271(1)(c).2. Imposition of Penalty under Section 273(1)(b) of the Income-tax Act, 1961:The assessee was found liable to file a statement of advance tax under Section 209A(1) based on the latest completed assessment for the assessment year 1979-80. The ITO issued a demand of Rs. 1,55,234 due to the assessee's failure to file the statement. The assessee argued that since they returned a loss, there was no liability to pay advance tax. However, the ITO noted the assessee's habitual filing of loss returns and acceptance of estimated incomes, demonstrating a wide disparity between the returned and assessed incomes.The Tribunal observed that the assessee's failure to file the statement of advance tax was without reasonable cause, given their history of significant income assessments despite declared losses. The Tribunal held that the assessee's explanation lacked substance, especially since they were assessed to a positive income of Rs. 27,13,850 for the earlier year. Consequently, the penalty under Section 273(1)(b) was confirmed.Conclusion:The Tribunal dismissed both appeals, upholding the penalties under Sections 271(1)(c) and 273(1)(b) of the Income-tax Act, 1961. The Tribunal found that the assessee's consistent pattern of filing loss returns, non-production of books, and acceptance of estimated incomes indicated a deliberate intention to conceal income and evade tax, justifying the imposition of penalties.