1996 (7) TMI 574 - AT - Income Tax

Summary

Issues Involved:
1. Penalty for concealment under section 271(1)(c).
2. Penalty for shortfall in payment of advance tax under section 273(2)(aa).
3. Levy of additional tax for non-distribution of dividends under section 104.

Detailed Analysis:

1. Penalty for Concealment under Section 271(1)(c):
The central point in this appeal revolves around a Rs. 5 lakh donation made by the assessee-company to M/s. Sigma Medical Aid & Research Society (the donee institution) on 29-6-1982. The assessee claimed a deduction under section 35CCA, but the Assessing Officer (AO) disallowed it, suspecting the donation was returned to the assessee. The AO initiated penalty proceedings under section 271(1)(c) for concealment. The assessee withdrew its claim for deduction under the Amnesty Scheme and paid the tax. The CIT(A) found that penalizing the assessee for the donee institution's fraudulent use of funds was unjust unless it was proven that the institution was a conduit-pipe for the assessee to reclaim the funds. The CIT(A) canceled the penalty, and the department appealed.

The Tribunal upheld the CIT(A)'s order, stating that the AO's suspicion alone did not constitute proof of concealment. The Tribunal emphasized that the deduction under section 35CCA was valid as the donee institution was approved at the time of donation, and there was no evidence of collusion between the assessee and the donee institution. The Tribunal also considered the applicability of the Amnesty Scheme, concluding that the assessee was entitled to a lenient view but not complete exoneration from penalty.

2. Penalty for Shortfall in Payment of Advance Tax under Section 273(2)(aa):
The assessee filed an estimate of advance tax, which was later found to be significantly lower than the assessed income. The shortfall was attributed to the disallowance of the Rs. 5 lakh donation. The AO imposed a minimum penalty under section 273(2)(aa). The CIT(A) reduced the penalty, excluding the Rs. 5 lakh donation from the computation, as the donation was genuine and deductible under section 35CCA.

The Tribunal upheld the CIT(A)'s decision, stating that the donation was genuine and should not be considered while imposing the penalty for shortfall in advance tax payment.

3. Levy of Additional Tax for Non-Distribution of Dividends under Section 104:
The AO computed a distributable income of Rs. 5,26,068 and levied additional tax for non-distribution of dividends. The assessee argued that the distributable profits were reduced to nil after considering various deductions, including the Rs. 5 lakh donation. The CIT(A) agreed with the assessee, stating that the donation was genuine and deductible under section 35CCA, and thus, the provisions of section 104 were not applicable.

The Tribunal upheld the CIT(A)'s order, emphasizing that the donation was genuine and deductible under section 35CCA. The Tribunal also noted that the shipping and clearing refund of Rs. 4,35,160 was deleted in the first appeal, further reducing the distributable income.

Conclusion:
The Tribunal dismissed all three appeals by the department, confirming the CIT(A)'s orders in favor of the assessee. The Tribunal emphasized the genuineness of the donation and the applicability of deductions under section 35CCA, thereby negating the penalties and additional tax imposed by the AO.