Law: Income Tax Act, 1961

Section: 260A,271(1)(c)

JUDGMENT P.P.S. Janarthana Raja, J. - The above tax case appeal is directed against the order of the Tribunal in ITA No. 182/Mad./2004, dated 27-1-2006, raising the following substantial question of law: "1. Whether, in the facts and circumstances of the case, the Tribunal was right in deleting the penalty under section 271(1)(c) when the assessee has undisputedly concealed the particulars of his income and furnished inaccurate particulars of such income? 2. Whether, in the facts and circumstances of the case, the Tribunal was right in holding that the explanation that the stock received in March were not included in their inventory as they remained unpacked is sufficient to avoid penal action under section 271(1)(c)?" 2.1 The revenue is the appellant. The relevant assessment year is 1996-97 and the corresponding year ended on 31-3-1996. The assessee is a firm engaged in the business of dealership in motorcycles mopeds and spares of TVS Suzuki Ltd. The assessee filed its return of income admitting total income as Rs. 6,19,370. During the course of scrutiny, the Assessing Officer found that, purchase of spares from M/s. TVS Suzuki Ltd. to the extent of Rs. 1,63,967 was not admitted either under sales or in the closing stock even though purchases were entered in the purchase ledger. The assessee agreed to the addition and the assessment was accordingly completed by adding the above amount towards closing stock. 2.2 Later, the Assessing Officer found that there were certain discrepancies in the quantitative particulars of stock in the invoices totalling Rs. 1,63,966.79 and also the same were not accounted for under sales or in the closing stock as on the last day of the accounting year. The Assessing Officer initiated penalty proceedings under section 271(1)(c) of the Income-tax Act (hereinafter referred to as 'the Act') and also issued notice under section 274 of the Act. On receipt of show-cause notice, the assessee has offered the following explanation: "1. Certain items of stock which were not loaded in the racks, were omitted to be included in the stock inventory. Some items, which were received during the month of March, remained unpacked and the manager,…

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