2005 (3) TMI 71 - HC - Income Tax

Penalty u/s 271(1)(c) - a loss return was shown by reason of the alleged concealment. The loss remained static and there was no change on the loss - If a loss is shown and no tax is payable on account of alleged furnishing of inaccurate particulars of income, in that event, no penalty could be imposed in the absence of the unit on the basis of which the penalty can be imposed in terms of section 271(1)(c)(iii) - No substantial question of law is involved. The appeal by revenue is, therefore, dismissed.

Summary

Issues:
Delay in filing the appeal, applicability of penalty under section 271(1)(c) of the Income-tax Act, 1961.

Delay in filing the appeal:
The application for condonation of delay was contested by the respondent's advocate, citing unexplained time gaps. However, the appellant's advocate argued that the delay was sufficiently explained. Upon hearing both sides, the court found the delay adequately explained and allowed the application for condonation of delay under section 5 of the Limitation Act. The appeal was then registered.

Applicability of penalty under section 271(1)(c) of the Income-tax Act, 1961:
The main issue in the case was whether the penalty imposed under section 271(1)(c) could be canceled by the Tribunal or the appellate authority. The court referred to the decision in CIT v. Prithipal Singh and Co. [1990] 183 ITR 69 (P & H) affirmed by the apex court in CIT v. Prithipal Singh and Co. [2001] 249 ITR 670. It was noted that for the assessment year 1996-97, penalty could be imposed under section 271(1)(c) if tax was evaded due to inaccurate accounts furnished by the assessee. The law specified that the penalty should not be less than but not exceeding three times the amount of tax evaded. In this case, it was found that no tax was evaded as the loss remained static and there was no concealment. Therefore, the court concluded that no substantial question of law was involved, and the appeal was dismissed.

Conclusion:
The court dismissed the appeal as it found no substantial question of law involved in the case. It was clarified that unless tax is evaded due to inaccurate particulars of income, no penalty can be imposed under section 271(1)(c). The judgment highlighted the importance of accurate financial reporting to avoid penalties under the Income-tax Act, 1961.