2009 (10) TMI 589 - HC - Income Tax

Penalty - Interest-tax Act, 1974 - provisions of section 13 - the assessment year 1992-93 the assessee filed no return under the Interest-tax Act, 1974 - Notice for assessment of penalty in terms of section 13 of the Interest-tax Act was issued to the assessee - Section 13 of the Act provides that penalty which shall not be less than the amount of tax sought to be evaded but shall not exceed three times the amount of tax sought to be evaded, can be levied in case the assessee has oncealed particulars of chargeable interest or has furnished inaccurate particulars of such interest - The provision of section 271(1)(c) which lays down a presumption against the assessee in case of non-filing of return within a particular time is not applicable to interest-tax proceedings- How- ever, de hors of section 271(1)(c), section 13 does provide the grounds and procedure for levy of penalty - In case the Assessing Officer is convinced that the assessee has concealed particulars of chargeable interest or has furnished inaccurate particulars penalty can be levied - accordingly decide the question in favour of the Revenue and remand the case to the Assessing Officer who shall determine the question as to whether the assessee is liable to pay penalty.

Summary

Issues:
1. Interpretation of absence of proviso to section 13 of the Interest-tax Act compared to Explanation 3 to section 271(1)(c) of the Income-tax Act.
2. Assessment and imposition of penalty under section 13 of the Interest-tax Act.

Issue 1: Interpretation of Absence of Proviso to Section 13 of the Interest-tax Act:
The case involved a question of law regarding the absence of the proviso to section 13 of the Interest-tax Act, 1974 in comparison to Explanation 3 to section 271(1)(c) of the Income-tax Act, 1961. The Assessing Officer imposed a penalty on the assessee for not filing a return of chargeable interest voluntarily by the due date. The penalty was based on the differential amount of tax sought to be evaded, which was the difference between the chargeable interest assessed by the Assessing Officer and the chargeable interest returned by the assessee. The Income-tax Appellate Tribunal set aside the penalty, stating that the basis for the penalty was not in accordance with the provisions of the Interest-tax Act, as there was no corresponding provision to Explanation 3 of the Income-tax Act in the Interest-tax Act. The Tribunal emphasized that the penalty was wrongly imposed, leading to the cancellation of the penalty.

Issue 2: Assessment and Imposition of Penalty under Section 13 of the Interest-tax Act:
The Assessing Officer had imposed a penalty equal to three times the interest-tax sought to be evaded, amounting to Rs. 1,49,67,486. The assessee appealed against this penalty, which was partially allowed by reducing the penalty to an amount equal to the tax evaded. Subsequently, the Income-tax Appellate Tribunal allowed the appeal and canceled the penalty entirely. The Tribunal highlighted that the provisions of section 271(1)(c) of the Income-tax Act could not be considered while imposing the penalty under the Interest-tax Act. It was noted that section 21 of the Interest-tax Act does not include section 271, making it clear that the penalty should be determined solely based on the provisions of section 13 of the Interest-tax Act. The Tribunal emphasized that the penalty should be levied strictly in accordance with the provisions of section 13, without being influenced by the provisions of section 271(1)(c) of the Income-tax Act.

In conclusion, the High Court decided in favor of the Revenue and remanded the case to the Assessing Officer to determine whether the assessee is liable to pay a penalty under section 13 of the Interest-tax Act, strictly following the provisions of the Act and without considering the provisions of section 271(1)(c) of the Income-tax Act. The judgment clarified the interpretation of the absence of the proviso to section 13 of the Interest-tax Act compared to Explanation 3 to section 271(1)(c) of the Income-tax Act and provided guidance on the assessment and imposition of penalties under the Interest-tax Act.