2005 (2) TMI 75 - HC - Income Tax

Penalty - Whether Tribunal was right in holding that the official liquidator of the assessee-company in liquidation, who is an officer of the court and is a public servant , while filing the return of income of the assessee-company in liquidation acted in a bona fide manner and in good faith, which necessarily implies the absence of any fraud, gross or wilful negligence and was right in holding that there is no justification in sustaining the penalty levied u/s 271(1)(c) on the basis of such return of income furnished by the official liquidator? - In fact, in the penalty order, the Assessing Officer observes Thus, the managing director has cheated not only Government, but the public shareholders also. Once this finding was recorded in the light of the facts on record, it was not open to the Assessing Officer to impose penalty for concealment and/or furnishing inaccurate particulars of income by resorting to the Explanation to section 271(1)(c) on the official liquidator of the company in liquidation penalty rightly deleted

Summary

Issues:
1. Interpretation of section 271(1)(c) of the Income-tax Act, 1961 regarding penalty imposition.
2. Determining the liability of the official liquidator of a company in liquidation for filing the return of income.
3. Assessment of penalty under section 271(1)(c) based on the actions of the official liquidator.

Analysis:

1. The primary issue in this case revolved around the interpretation of section 271(1)(c) of the Income-tax Act, 1961, concerning the imposition of penalties. The Tribunal assessed the date of default for penalty levy as the day the return of income was submitted. It was crucial to determine if there was any concealment or furnishing of inaccurate particulars of income due to fraud, gross negligence, or wilful neglect.

2. The liability of the official liquidator of a company in liquidation for filing the return of income was a significant point of contention. The official liquidator, being an officer of the court and considered a 'public servant,' raised questions about his responsibility in signing and verifying the company's income tax return. The Tribunal evaluated whether the official liquidator acted in good faith and bona fide while filing the return, considering the absence of fraud or negligence.

3. The assessment of penalty under section 271(1)(c) based on the actions of the official liquidator was crucial. The Assessing Officer imposed a substantial penalty, which the Tribunal later canceled. The Tribunal considered the conduct of the official liquidator, the circumstances of the case, and the absence of fraudulent intent or negligence. It concluded that the penalty imposition was unjustified due to the official liquidator's lack of involvement in the clandestine removal of goods by the erstwhile management.

In conclusion, the Tribunal's decision to cancel the penalty under section 271(1)(c) was upheld, emphasizing the official liquidator's good faith and lack of fraudulent intent. The judgment highlighted the distinction between the liability of the company in liquidation and the official liquidator, ultimately ruling in favor of the assessee and against the Revenue.