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2002 (2) TMI 44 - HC - Income TaxAccrual Of Income, Mercantile System Of Accounting, Concealment Of Income, Advance Tax, Penalty - the record shows that all the relevant particulars on the basis of which the income of the assessee could be computed were disclosed by the assessee and a claim was put up that the interest cannot be said to have accrued, - In fact, on the basis of disclosures already made during the proceedings, interest income was added in the total income in the quantum proceedings. - we are of the opinion that there was no justification for imposing penalty under section 271(1)(c) of the Act on the assessee for the assessment year 1979-80.
Issues Involved:
1. Accrual and taxability of interest income for assessment years 1979-80 and 1980-81. 2. Justification of levy of interest under section 215 of the Income-tax Act, 1961. 3. Justification of penalty under section 273(2)(a) of the Income-tax Act, 1961. 4. Justification of penalty under section 271(1)(c) of the Income-tax Act, 1961. Issue-wise Detailed Analysis: 1. Accrual and Taxability of Interest Income: - Assessment Year 1979-80: - The court examined the agreements and deed of assignment which stipulated that interest was payable on the deferred consideration amount from March 1, 1977. - The Tribunal held that interest accrued from day-to-day and was exigible to tax. - The assessee's resolution dated June 30, 1978, which purported to waive the accrued interest, was seen as an attempt to evade tax and not based on commercial expediency. - The Tribunal's decision that the interest of Rs. 66,29,236 accrued and was liable to tax on an accrual basis was upheld. - The court answered affirmatively, in favor of the Revenue, that the interest accrued and was rightly taxed. - Assessment Year 1980-81: - The court acknowledged the resolution dated June 30, 1978, which changed the mode of payment and stipulated that interest would start accruing from July 1, 1979. - Since no interest accrued during the accounting period from July 1, 1978, to June 30, 1979, the Tribunal's decision that no income accrued for the assessment year 1980-81 was upheld. - The court answered in favor of the assessee, confirming that no interest accrued during the relevant period. 2. Justification of Levy of Interest Under Section 215: - Assessment Year 1979-80: - The Tribunal had set aside the levy of interest under section 215, citing the complexity of determining accrual of income. - The court held that the levy of interest under section 215 was automatic when the advance tax paid was less than 75% of the assessed tax. - The court found that the Tribunal erred in deleting the interest levied under section 215. - The question was answered in favor of the Revenue, confirming the levy of interest under section 215. 3. Justification of Penalty Under Section 273(2)(a): - Assessment Year 1979-80: - The penalty was imposed for filing a "nil" estimate of advance tax, which was found to be untrue. - The court noted that the resolution dated June 30, 1978, which shifted the date of accrual of interest to July 1, 1979, was passed before the "nil" estimate was filed. - The court concluded that the assessee might have reasonably believed that the "nil" estimate was correct. - The imposition of penalty under section 273(2)(a) was not justified. - The question was answered in favor of the assessee, and the penalty was set aside. 4. Justification of Penalty Under Section 271(1)(c): - Assessment Year 1979-80: - The penalty was imposed for concealing particulars of income or furnishing inaccurate particulars. - The court observed that the assessee had disclosed all relevant particulars and provided an explanation based on the resolution dated June 30, 1978. - The court found that the explanation given by the assessee was bona fide, though not accepted in the quantum proceedings. - The presumption under Explanation 1 to section 271(1)(c) did not apply as the assessee had disclosed all material facts. - The imposition of penalty under section 271(1)(c) was not justified. - The question was answered in favor of the assessee, and the penalty was set aside. Summary: - Income-tax Reference No. 56 of 1986: - Assessment Year 1979-80: Questions answered in favor of the Revenue. - Assessment Year 1980-81: Questions answered in favor of the assessee. - Income-tax Reference No. 75 of 1987: - Question answered in favor of the Revenue. - Income-tax Reference No. 220 of 1995: - Question answered in favor of the assessee. - Income-tax Reference No. 58 of 1993: - Question answered in favor of the assessee.
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