1993 (4) TMI 106 - AT - Income Tax

Tribunal cancels penalty for income concealment, citing genuine errors and beliefs

GODHWANI BROTHERS. Versus ASSISTANT COMMISSIONER OF INCOME TAX.

The Tribunal canceled the penalty of Rs. 54,686 imposed on the appellant under section 271(1)(c) for alleged concealment of income. The Tribunal found ... - Issues:1. Confirmation of penalty under section 271(1)(c) by the CIT(A).2. Assessment of under valuation of closing stock.3. Imposition of penalty based on alleged concealment of income.4. Arguments presented by the appellant challenging the penalty.5. Arguments presented by the Departmental Representative in support of the penalty.6. Analysis of the Tribunal on whether penal provisions are attracted.7. Decision to cancel the imposed penalty.The judgment involves an appeal against the confirmation of a penalty of Rs. 54,686 imposed on the assessee by the Assessing Officer under section 271(1)(c) as upheld by the CIT(A). The appellant, a registered firm engaged in various business activities, had its returned income computed differently by the Assessing Officer, leading to a reduction in the final assessed income. The Assessing Officer made additions to the closing stock inventory, which were partially deleted on appeal before the CIT(A). The penalty was imposed based on the alleged under valuation of closing stock, and the Assessing Officer concluded that there was a deliberate concealment of income by the assessee. The CIT(A) confirmed the penalty, leading to the appeal before the Tribunal.The appellant argued that the under valuation of closing stock was not deliberate, especially considering the minor nature of the additions in question compared to the overall stock inventory. The appellant contended that there was no motive to conceal income, especially given the substantial business transactions involved. It was highlighted that no such additions or penalties had been imposed in previous assessment years. The appellant also emphasized that the stock inventory was accurately maintained and submitted along with the return of income, indicating no intention to conceal information.The Departmental Representative supported the penalty, arguing that there was deliberate concealment on the part of the assessee, especially in the case of specific items like capacitors. The Representative emphasized that the past conduct of the assessee was not relevant, as there was a clear concealment of income in the assessment year under consideration. Reference was made to Explanation 1 to section 271(1)(c) to justify the penalty imposition.After examining the submissions and the material on record, the Tribunal concluded that the under valuation of closing stock was not deliberate but resulted from calculation errors and bona fide beliefs about the values attributed to the items. The Tribunal found no evidence of mala fide motives on the part of the assessee. In the case of each item in question, including capacitors, Rough Ophthalmic Blanks, and Wattle Extract, the Tribunal accepted the appellant's arguments regarding minor valuation differences and genuine mistakes in accounting.The Tribunal noted that the items in question were not part of the assessee's regular business activities and were possibly imported due to export licenses. Considering the substantial stock inventory and lack of apparent motives for under valuation, the Tribunal concluded that the penal provisions were not applicable. The Tribunal highlighted that the withdrawal of a relevant ground before the Tribunal was justified due to relief obtained in a previous assessment year. Ultimately, the Tribunal canceled the imposed penalty of Rs. 54,686 under section 271(1)(c) and allowed the appeal.