2003 (6) TMI 438 - AT - Income Tax

Summary

Issues:
1. Validity of penalty order under section 271(1)(c) and Explanation 3.
2. Assessment of penalty on concealed income.
3. Disclosure of income and penalty imposition.
4. Limitation period for penalty order.

Issue 1: Validity of penalty order under section 271(1)(c) and Explanation 3:
The appellant contested the order of the CIT(A) upholding the penalty under section 271(1)(c) despite acknowledging that the case was not covered by Explanation 3 to section 271(1)(c). The appellant argued that the penalty order was illegal and should be quashed due to being beyond the limitation period. The appellant emphasized that the penalty order passed in December 1999 was barred by limitation, as the action should have been taken before September 1996. The Tribunal agreed with the appellant, holding that the penalty order was without jurisdiction and should be quashed.

Issue 2: Assessment of penalty on concealed income:
The appellant objected to the direction by the CIT(A) to levy a penalty on the concealed income determined at Rs. 61,260 instead of Rs. 1,60,320 assessed by the AO. The appellant argued that no penalty should be imposed on the income of Rs. 61,260, which was voluntarily disclosed within the prescribed time under section 153(1) of the Act. The Tribunal concurred with the appellant, stating that no penalty was leviable on the disclosed income of Rs. 61,260 and directed the deletion of the penalty imposed by the CIT(A).

Issue 3: Disclosure of income and penalty imposition:
The appellant contended that the disclosure of income amounting to Rs. 61,260 was made voluntarily before any detection of concealment by the Assessing Officer. The appellant maintained that the disclosure was to avoid litigation and should not attract a penalty. The Tribunal agreed with the appellant, noting that the disclosure was voluntary and not a result of detection of concealed income by the Assessing Officer. Therefore, the Tribunal set aside the penalty imposed on the disclosed income of Rs. 61,260.

Issue 4: Limitation period for penalty order:
The appellant raised concerns regarding the limitation period for the penalty order, arguing that the order passed in December 1999 was beyond the prescribed time limit. The Tribunal acknowledged the appellant's argument and held that the penalty order passed after the limitation period was invalid and should be quashed. Consequently, the Tribunal allowed the appellant's appeal, setting aside the penalty imposed on the disclosed income of Rs. 61,260.

This judgment highlights the importance of adherence to legal provisions, such as limitation periods for penalty orders, and emphasizes the voluntary disclosure of income to avoid penalties.