2005 (3) TMI 74 - HC - Income Tax

Penalty u/s 271B - before the levy of penalty under section 271B of the Act, the Assessing Officer has not obtained necessary approval from the Deputy Commissioner of Income-tax - Tribunal also noticed that the proceedings were not initiated for levy of penalty under section 271B of the Act, but the proceedings were initiated under section 271A and 271(2)(a)(sic) of the Act and on this ground also, the levy of penalty under section 271B of the Act is not sustainable - Further on materials it is found by the Appellate Tribunal that the accounts of the assessee were audited in accordance with the provisions of the company law and to that extent, the assessee is protected by the provisions of section 44AB - assessee was under the genuine impression and the assessee has shown reasonable cause against the levy of penalty under section 271B tribunal is justified in setting aside the penalty

Issues:
1. Appeal against the order of the Income-tax Appellate Tribunal under section 260A of the Income-tax Act, 1961.
2. Validity of penalty levied under section 271B of the Income-tax Act, 1961.
3. Requirement of approval from the Deputy Commissioner of Income-tax for penalty levy.
4. Nature of proceedings initiated under sections 271A and 271(2)(a) of the Act.
5. Protection under section 44AB of the Act for audited accounts.
6. Genuine impression and reasonable cause against penalty levy.

Analysis:

1. The appeal was filed against the Income-tax Appellate Tribunal's order under section 260A of the Income-tax Act, 1961. The main question raised was the correctness of confirming the cancellation of penalty under section 271B of the Act by the Commissioner (Appeals).

2. The Appellate Tribunal highlighted that the Assessing Officer did not obtain necessary approval from the Deputy Commissioner of Income-tax before levying the penalty under section 271B. The absence of this approval was deemed crucial as it is a prerequisite under section 275 of the Act, rendering the penalty order invalid.

3. It was observed that the penalty proceedings were initiated under sections 271A and 271(2)(a) of the Act, not under section 271B. This discrepancy further weakened the grounds for sustaining the penalty under section 271B.

4. The Appellate Tribunal noted that the assessee's accounts were audited in compliance with company law provisions, providing protection under section 44AB of the Act. This audit compliance served as a shield for the assessee against the penalty.

5. Additionally, the nature of the receipt was undisputed, as it was reflected in the balance-sheet. Based on these facts, the Appellate Tribunal concluded that there was no justification for imposing the penalty under section 271B of the Act.

6. The Tribunal found that the assessee had a genuine impression and reasonable cause to contest the penalty under section 271B. This determination was considered a factual finding, which was deemed reasonable and sustainable, thereby dismissing the appeal at the admission stage.

This detailed analysis of the judgment provides a comprehensive understanding of the issues raised and the reasoning behind the decision to dismiss the appeal against the cancellation of the penalty under section 271B of the Income-tax Act, 1961.

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